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SUMMER TRAINING PROJECT
POWER FINANCE CORPORATION
DVC THERMAL POWER PLANT
BOKARO
Presented by,
Ashwani kumar
(1205436)
BBA-5th
TABLE OF CONTENTS
INTRODUCTION
COMPANY PROFILE
OBJECTIVE AND SCOPE
PROJECT APPRAISAL & FINANCIAL
MODELLING
CASE STUDY
SWOT ANALYSIS
CONCLUSION & RECOMMENDATION
CHAPTER 1: INTRODUCTION
INDIAN POWER SECTOR
Electricity is one of the most vital infrastructure inputs
for economic development of a country.
At the time of independence in 1947, the country had
a power generating capacity of 1,362 MW. Prior to
independence the power sector was regulated by
“The Indian Electricity Act, 1910”
POWER SECTOR
REFORMS1. THE ELECTRICITY ACT 2003:
A REVOLUTION
2. NATIONAL ELECTRICITY POLICY
3. NATIONAL TARIFF POLICY
4. RURAL ELECTRIFICATION POLICY
CHAPTER 2: COMPANY PROFILE
1. BACKGROUND
PFC was established in July 1986 as a Development
Public Financial Institution (PFI) under Section 4A of the
Companies Act, 1956. It is dedicated to the Power Sector.
It is a wholly owned by Government of India
2. MISSION
PFC's mission is to excel as a pivotal developmental
financial institution in the power sector committed to the
integrated development of the power and associated
sectors by channelling the resources and providing
financial, technological and managerial services for
ensuring the development of economic, reliable and
efficient systems and institutions
OBJECTIVE OF PFC
To rise the resources from international and domestic
sources at the competitive rates and terms and
conditions and on-ward lend these funds on optimum
basis to the power projects in India.
To act as catalyst to bring institutional, managerial,
operational and financial improvement in the functioning
of the state power utilities
To assist state power sector in carrying out reforms and
to support the state power sector during transitional
period of reforms
CLIENTS OF PFC
State Electricity Boards
State Power Utilities
State Electricity/Power Departments
Other State Departments (like irrigation
Department) engaged in the development of the
power project
Central Power Utilities
Joint Sector Power Utilities and Co-operative
Societies
Municipal Bodies
Private Sector Power Utilities
FINANCIAL HIGHLIGHTS FOR THE YEAR 2011-12
Profit after Tax
Rs 3032 Crore
Loans and Grants Sanctioned
Rs 69024 Crore
Loans and Grants Disbursed
Rs 41418 Crore
Net Worth
Rs 19493 Crore
Reserves and Surplus
Rs 19388 Crore
No. of Employees
379
SWOT ANALYSIS
Strengths
Govt. of India’s undertaking.
Good quality management
Well established, long standing relations in the power industry Implementing agency for Mop’s schemes including AG &SP and APDRP Highest credit rating (due to government ownership)
Weaknesses
Poor asset quality with most of the lending to SEBs, whose loan repayment capabilities in the long run is doubtful.
Concentration risk attributed to lending in single sector
Opportunities
Power sector presents significant investment opportunities.
Providing investment gateways & consultancy for domestic and external financial agencies.
Having new business opportunities to cover the entire range of activities in the Power sector.
Threats
PFC has significant exposures entities which are loss making, financially weakan dare defaulting to most of their creditors. Delinquencies by these entities to PFC could impair the currently sound Balance Sheet of PFC.
With increasing exposure to SEB’s, their weak balance sheet may affect PFC’s creditworthiness.
OBJECTIVE AND SCOPE
OBJECTIVE OF THE PROJECT
The objective of the Project Report is:
1. Finding out the factors affecting a project’s capital
and operational expenditure which in turn have an
impact on the cash outlay and revenue flow of the
project and their study. Thus, performing Project
Appraisal of a 660 MW Coal Based Super-critical
Thermal Power Project.
2. A financial model of a 660 MW Coal Based Super-
critical Thermal Power Project so as to study the
effect of above factors on tariff and revenue flows.
SCOPE
Scope of project covers installation, commissioning,
operation and maintenance of 660 MW coal fired
Thermal Power Plant and associated systems.
Indian power sector wants to ramp up the installed
capacity to meet the growing demand. Large Power
Projects enjoy economics of scale and help in
lowering the tariff of supply.
APPRAISAL & FINANCIAL MODELLING
GUIDING PRINCIPAL FOR PROJECT APPRAISAL
AT PFC
1. ENTITY ELIGIBILITY CRITERIA
2. STATUTORY CLEARANCES
3. COST ESTIMATE
4. PROJECT COST-BENEFIT ANALYSIS
5. PROJECT ANALYSIS
FINANCIAL MODELING: A TOOL FOR
PROJECT APPRAISAL
1. STEPS TAKEN FOR DESIGNING A MODEL
Determining the scope of the project and the related EPC cost.
Determining other expenditure such as Development expense, Preliminary & Preoperative expenses, financial costs, etc.
Determine the total Cost of the project with interest during construction.
Assessment of tariff in order to determine revenue potential for the project.
Financial analysis to determine the most efficient means of financing.
2. PURPOSE AND USES OF FINANCIAL MODEL
Basic Project IRR
Debt service Coverage Ratios and other debt
ratios.
Establishing a financial structure that is sustainable
by the project.
An indication of tariff levels required for achieving
appropriate returns.
Preparation of sensitivity analysis
CASE STUDY
1 PROJECT PURPOSE AND SCOPE
PURPOSE
To bridge the nation’s energy deficit, both average
and peak load, by capacity addition of 660 MW by
setting-up Coal fired Thermal Power Project based on
super critical technology at Tamil Nadu, India.
SCOPE
Scope of this project covers installation, commissioning, operation and maintenance of 660 MW with Super critical & Pulverised Coal fired boiler and associated systems.
The Scope shall broadly cover:
660 MW power plant and associated systems.
Construction and commissioning of the Balance of Plants (BoP) required for efficient reliable and safe operation of the plant.
Construction of water intake system for the project site.
Transportation Arrangement for Coal to the Project site.
Power evacuation system including transmission lines.
Construction of facilitation infrastructure such as administration building.
2 PROJECT DETAILS
SNo
Geographic Items
Details
1
Location
Tamil Nadu State
2
Nearest Railway Station
Thoothukkudi
3
Road Approach
Madurai –Tiruchendur- Manapad
4
Altitude
+12 m above MSL
5
Nearest Airport
Thoothukkudi
6
Nearest Port
Thoothukkudi
7
Rainfall (Annual)
600 mm
8
Climatic Conditions
Tropical Climate
9
Latitude / Longitude
8o48’N / 78o10’E
10
Soil bearing capacity
25 T/M²
LAND
Specifications
Land area(Acres)
Plant area
260
Ash disposal
130
Colony
10
Green belt others
100
Others
100
Total
600
TECHNOLOGY
Thermodynamic cycle
Technical and performance parameters
Boiler Feed Pump
Condensate extraction pumps
Supercritical Boilers
Super critical steam turbine
TRANSPORTATION
Coal will be transported from the Indian Coal fields to the Paradeep Port by Rail and from the port to the Manappadu Port located near to the project site by ship. Coal unloaded from ship will be stored in a separate coal yard to be set up by prospective Coal sellers at Manappadu port and coal will be supplied at the plant boundary by conveyors. Calorific value of Indian F grade coal will be in the range of 3400 kcal/kg. Rail route already exists upto Tiruchendur. About 12 km of rail route from Tiruchendur to project site is under approval. For transportation of coal, the Company would enter into Coal Transportation Arrangement (CTA) with the Indian Railways.
INFRASTRUCTURAL REQUIREMENTS
Construction Power
The company has received approval for drawl of
construction power from nearby substation of Tamil Nadu
Power Distribution Company Ltd. (TNPDCL).
Construction Water
The total water requirement for the project is 2000 m3/day.
This water will be sourced from nearby desalination plant.
The requirement of construction water for potable and
service purposes will be met by the nearby desalination
plant located within the allotted land for the Project. The
Company has taken over the desalination plant along with
the auxiliary and paid about Rs. 50 Crore for the same.
PROJECT COST
COMPONENTS OF PROJECT COST
The Project is estimated to be set up at an aggregate
cost of Rs. 4251 Crore comprising of expenditure
towards Land, EPC Cost, Transmission Line, Coal
Transportation Arrangement, Water
Arrangement, Preliminary &
Preoperative Expenditure, Contingencies,
Interest During Construction Period and Margin
Money for Working Capital.
DEMAND AND SUPPLY
Inspite of 18,382 MW of installed capacity the state
of Tamil Nadu is struggling to fulfil its electricity
demand. The electricity demand in the State had
increased but the capacity of the generating
facilities had dropped due to inefficiencies resulting
in shortfall. Most of the districts in Tamil Nadu face
power cuts lasting over six hours. Between April
2012 and February 2013, the energy and peak
shortage of power in Tamil Nadu were 17.4 % and
12.3 % respectively of the demand.
COST BENEFIT ANALYSISNo. of units
1
Capacity per unit
660
MW
Total project capacity
660
MW
Without IDC
3595
Rs Crore
IDC
656
Rs Crore
With IDC
4251
Rs Crore
Equity (25%)
1062.80
Rs Crore
Debt (75%)
3188.40
Rs Crore
Upfront Equity (51.5%)
547.34
Rs Crore
Interest Rate pre COD
13.25%
p.a.
Interest rate post COD
13.25%
p.a.
Working Capital
13%
p.a.
Repayment Period
12
Years
Moratorium Period
6
Months
Principle Repayment Start Date
01-Jul-14
Date
Principle Repayment End Date
01-Jan-26
Date
Interest Repayment Start Date
01-Jan-14
Date
Interest Repayment End Date
01-Jan-26
Date
MOU with PTC (including all units)
% of total capacity
70%
PPA Tariff
As per CERC
based tariff
Rs/unit
No. of years
25
years
Selling through Merchant Basis (including all
units)
% of total capacity
30%
PPA Tariff
3.5
Rs/unit
No. of years
25
years
Escalation per year
5%
Corporate Tax
33.99%
MAT
20.96%
GSHR
2392
kCal/kwh
Auxiliary Consumption
7%
%
Plant Load Factor
85%
%
O&M Escalation
5.72%
%
O&M Expense
0.155
crore/MW
Fuel Price
900
Rs/tonne Price Escalation
5%
p.a.
Gross Calorific Value
3400
kCal/kg
Secondary Fuel Price
50
Rs/kg
Gross Calorific Value
10280
kCal/kg
Secondary Fuel Consumption
1
ml/kwh
Specific Gravity value of Secondary Fuel
0.95
Price Escalation
4%
p.a.
Transportation & Handling Charges
Escalation
Coal Stock
2
Months
Secondary Fuel
2
Months
O&M Expenses
1
Month
Maintenance Spares (20% of O&M Expense)
1
Year
Receivables from Energy Sales
2
Months
Rate For Tariff Calculation
5.28%
Land
0%
Civil Works & Building
3.34%
Plant & Machinery
5.28%
Max Depreciable Value
90%
Machinery
15%
Building
10%
Discount Rate
13.10%
% Return on Equity
15.50%
%
Return on Equity pre tax (first 12 years)
19.38%
%
Return on Equity pre tax (last 13 years)
22.95%
%
Project Life
25
years
Total units generated
4914.36
MU
SWOT ANALYSIS
STRENGTH
The Project has long term fuel supply agreement
with Coal India Limited of Coal for use in the
Project.
The Project is located in severe power shortage
region. State itself has been facing severe power
shortage and the power deficit is likely to continue
in short and medium term.
The Company has already acquired 600 Ha land
which is adequate for the main power plant block.
The work on site may start immediately without any
delay.
WEAKNESS
Company shall be selling 30% of power on Merchant
Basis and may get lower return than the levelised
cost of generation.
Environment and Forest Clearances still to be
obtained.
OPPORTUNITY
The Electricity Act 2003 and subsequent National Electricity Policy and Tariff Policy have opened up several opportunities for the power sector. The Act allows the IPPs and captive power producers open access to transmission system
With the advent of the era of competitive bidding for tariff for procurement of power, the new capacities would not be subject to regulated tariff and regulated return of equity and thus provide investment opportunities to Developers in the power sector where returns would be market determined.
THREATS
A part of power generated will be sold on Merchant
basis and may get lower return than the levelised
cost of generation.
Fuel supply agreement with Coal India Limited may
result in delay
CONCLUSION
Company has proposed to set-up 660 MW Coal
fired Thermal Power Project based on Super
Critical Technology. State Government has
supported this Project and has issued letter of
support to provide all kind of administrative support
required.
The Proposed Project will be implemented by way
of a turnkey Engineering, Procurement and
Construction (EPC) contract to be awarded on
Competitive Bidding Process
RECOMMENDATIONS
To minimize the risk, the extent of financing to a
single project should be proportionate; it will also
affect the exposure limit for borrower or utilities and
chance to fund in more projects rather in some.
With the deficit of electricity in our country, there is
need of many projects and the exposure limit
should be increased to effectively assist the new
projects. The exposure limit of some utility is going
to reached, which resist PFC to fund