Orissa Power Consortium Ltd. (OPCL), a power company promoted by VBC Ferro Alloys Ltd (see separate write-up), is contemplating the setting up of 3 (three) Hydro-Electric power plants in Orissa/Andhra Pradesh, India, namely, one at Samal, Orissa, with a Capacity of 2x9 (18 MW), one at Jalaput with a Capacity of 3x6 (18 MW), and the other at Balimela with a Capacity of 2x30 (60 Mw), the last two being common to the two states sharing the power equally.
Historical Perspective:
The Indian Electricity (Supply) Act, 1948, created the State Electricity Boards (SEB's), as statutory corporations, in the state sector, with monopoly rights to handle generation, transmission and distribution of power in the state concerned. They took over the all the then existing utilities in the private and public sectors and expanded enormously both in size and reach. These SEB's, though separate entities, are subject to the control of the state Govt. in all policy matters, including fixing tariff to consumers. This got mixed up with the politico - social objectives of the Govt. and over time, left them with limited surpluses to invest in the needed levels of additional generating capacities or transmission and distribution network to match the bludgeoning demand for power. To partly off-set this, Govt. of India stepped in to set up regional generating facilities, whose out-put is shared by the regional SEB's in a prescribed proportion. These regional generating facilities are put up by central Govt. companies like the National Thermal Power Corporation Ltd., the National Hydro Power Corporation Ltd, Nuclear Power Corporation Ltd. But the continued heavy growth in demand, particularly the explosion in the consumption of energy in the Agriculture (lift irrigation) sector fuelled by the skewed tariff policies of virtually free- of- cost supply to Agriculture, left the SEB's incapable of making investment to any significant level.To attract investment in this crucial infrastructure area, Govt. of India opened up this sector to private developers in 1992, to be followed, presently, by restructuring, through un-bundling the functions of SEB's into separate units for generation, transmission and distribution, and eventual privatisation to make for competitiveness and consequent efficiency, of course, coupled with effective and independent regulation.
Private Power Initiative:
Bringing in the IPP's was preceded by basic reforms in the legal frame work (Electricity laws), tariff structure for private power with norms, and an administrative facilitating mechanism. The frame work included:
- Total foreign equity permitted.
- Debt/Equity ratio upto 4:1 allowed.
- Promoters to contribute at least 11% of the project cost.
- Indian Fl's can fund only upto 40% of the project cost.
- Customs duty on power project imports reduced to 22%.
- Repatriability of dividends on Foreign Equity upto 16% of such equity.
Tax holiday for 5 years and tax concession for another 5 years.
These depend on the type of the project . Those for Hydro projects are:
1.Plant Availability to be 90%.
2.Normative generation (Design Energy) is based on 90% Dependability of water flows.
3.Levels of expenditure as pass through are:
a) Interest on Debt on actuals as per approved financial package.
b) Interest on Working capital ( 1 month O&M and 2 months receivables) at bank rate.
c) O&M and Insurance at 1.5% of project cost.
d) Depreciation at average 3.5% of project cost
e) Return on equity at 16% of equity.
f) Incentives at 0.7% of equity for Plant Availability above 90% and upto 10% on secondary energy.
g) Exchange rate cover for all foreign debt servicing (Repayment and interest) and return on foreign equity (upto 16% of such equity)
After the initial rush of MOU based projects, Govt. of India decided to go in exclusively for globally price bid projects except for those with project cost not exceeding 1000 MINR (Million Indian Rupees). But OPCL had obtained MOU's for these three projects (Samal, Jalaput and Balimela) from Govt. of Orissa prior to the dead line fixed by Govt, of India. The last two are interstate projects with Andhra Pradesh and the latter's approval is also since obtained. Besides, the anticipated project cost of each of these projects will not exceed 1000 MINR. Though the capacity of one of them (Balimela) is 60 MW, the cost will be low due to acquiring of the equipment purchased by APSEB much earlier at a very low price.
All these projects are at sites where dams / barrages already exist and only power house and minimal water conducting works are involved making for quick execution. As these are upstream or down stream of running power plants the water regimes are well established, and the hydrology risk is minimal.
Location and Capacity:
1. SAMAL Hydro Electric Scheme on Brahmani River having a potential of about 18 MW envisages utilisation of releases let out from Samal Barrage reservoir built on dyer Brahmani, Angul Dist., in the state of Orissa. The site for this Power Plant falls in the state of Orissa.
2. Jalaput is on Machkund River. The Machkund River rises in the Mudugal hills of Visakhapatnam District and nearby Ondra Gadda it becomes the boundary between AP and Orissa. for over 48 KM the river runs nearly north along a meandering course through the Padwa Valley. About 48 KM south of Jeypore, it winds westward along the edge of the Plateau and then suddenly tums at a short angle to the south-west down a steep descent popularly known as "Dumduma Falls". Jalaput Dam (and Reservoir) has already been constructed impounding 34.273 TMC of water under the Machkund Hydro-Electric Scheme (MHES), down stream, in operation since 1955. During the construction of the Jalaput Dam 3 power sluices each of 6'-6" (2.59m) dia were embedded. It is now proposed to utilise these in developing a power house at the toe of the Dam, with three Generating Units of 6 MW each.
3. Down stream of the Machkund Project, the Balimela dam was built as a joint project of Orissa and AP and water impounded is diverted for power, 50% for Orissa (already in operation) and 50% for AP. AP's share is to be used by a dam toe power house of 2x30 MW at the site actually located in Orissa, for which APSEB prepared a project report and acquired equipment (Turbines and Generators etc.). But due certain problems this could not be proceeded with. Finally both Govts. have agreed to OPCL executing the project on BOO basis with power being shared by the two states equally.
Project Highlights - Technical :
| S.No | Particulars | Samal | Jalaput | Balimela |
| 1 | Capacity | 2*9=18 MW | 3*6=18 MW | 2*30=60 MW |
| 2 | Type of Turbines | Bulb | Kaplan | kaplan |
| 3 | Generator | with Brushless excitation | with Brushes excitation | with Brushes excitation |
| 4 | Controls | SCADA | SCADA | SCADA |
| 5 | Design Energy (Million kwh) | 121 | 67 | 163.5 |
| 6 | Power sharing | Orissa Only | Both Equal | Both Equal |
Project Highlights-Financial
Project Cost : The board details of the Project Cost, is as follows :
| S.No | Particulars | Samal | Jalaput | Balimela |
| 1 | Equipment & Works | 19.7 | 17.1 | 20.45 |
| 2 | IDC, Financing etc. | 4.99 | 2.58 | 4.47 |
| 3 | Total Cost | 24.69 | 19.68 | 24.92 |
| 4 | Cost per MW | 1.37 | 1.09 | 0.42 |
| 5 | Design Energy (Million kwh) | 121 | 67 | 163.5 |
| 6 | Tariff- Rs/kwh | 1.72 | 1.41 | 0.97 |
Means of Finance. It is proposed to have a Equity/Debt ratio of 30:70. Summary of financing proposed is given below:
| S.No | Particulars | Samal | Jalaput | Balimela |
| 1 | A. Equity | |||
| 2 | VBC Group | 2.59 | 1.77 | 3.05 |
| Others | 4.82 | 4.13 | 4.43 | |
| Total Equity | 7.41 | 5.9 | 5.9 | |
| B. Debt | ||||
| 1 | Foreign | 7.54 | 8.62 | 8.62 |
| 2 | Rupee (IF) | 9.74 | 5.16 | 5.16 |
| Total Debt | 17.28 | 13.78 | 17.44 | |
| Total Project Cost | 24.69 | 19.68 | 24.92 |
Note: The Dollar and rupee components of equity and debt can undergo change.
Profitability: Based on the projections, the IRR is expected to be upwards of 20%, and includes protection of Return on Foreign Investment in US$.
Power Purchase Agreements - Highlights:
- Samal is on energy basis and the others on Availability and energy basis. Thus in Samal all costs are recovered through unit energy price based on the Design Energy. In others, debt servicing and depreciation are recovered through 90% plant Availability and rest on Design Energy.
- For Jalaput and Balimela incentives will be on higher Availability and secondary energy as discussed earlier while for Samal, it is only on secondary energy (expected to be high).
- Provision for hydrology risk to SEB.
- Completion in 30 to 33 months.
Risk Allocation:
PRE- COMPLETION RISKS
1. Land , Water - These will be made available by the Govt at specified rates which will be added to the fixed costs as pass through
2. Permits - will be procured by OPCL. For Hydro projects these are fewer.
3. PPA - Under discussion and finalisation.
4. Financial Closing ( EPC and Q&M)EPC bids have been called for Samal and Jalaput and will be finalised shortly. For Balimela, as the original equipment was from BHEL, India, they have been approached for updating and providing balance equipment and EPC,
COMPLETION RISKS
Completion Delays
Force Majeure - to the account of SEB
Change in Law - to the account of SEB
Others to be handled by IPP and EPC
Cost Overrun
Force Majeure to the account of
SEB
Change in Law to the account of SEB
Others - to be handled by IPP and EPC
Equipment not meeting performance parameters - EPC
Equipment not meeting Efficiency Parameters - EPC
POST COMPLETION RISKS
EXCHANGE RISK
Exchange Rate Variation - To the account of SEB
OPERATIONAL RISK
Spares Availability-EPC / O&
M
Spares Consumption - O&M
Plant Availability - O&M
Plant Efficiency - O&M
Increased cost on change in law -SEB
PAYMENT AND COMFORTS
Letter of Credit
Escrow Account
Government of AP Guarantee
Buy Out
TERMINATION
Company DefaultIPP - Buy Out Price
(low)
Board Default SEB - Buy Out Price (high)
Force Majeure ( Specified Events ) IPP / SEB - Buy Out price (Medium)
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