FINAL REPORT Power Project Financing

Project Appraisal and Integrated Project Rating of
Thermal Power Project at Power Finance Corporation Ltd.
A SUMMER PROJECT STUDY SUBMITTED IN PARTIAL

FULFILLMENT FOR THE REQUIREMENT OF THE TWO YEAR
POST GRADUATE DIPLOMA IN MANAGEMENT (FULL-TIME)
BY
SHYAM SUNDER GUPTA
PGDM-FINANCE-77/2008
LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT, DELHI
JUNE, 2009
Power Finance Corporation Ltd. 2009
Table of Contents
ACKNOWLEDGEMENT .........................................................................................................3
LIST OF ABBREVIATIONS....................................................................................................4
EXECUTIVE SUMMARY .......................................................................................................5
1: INDUSTRY PROFILE ..........................................................................................................6
2: COMPANY PROFILE ........................................................................................................17
3: OBJECTIVE AND METHODOLOGY ..............................................................................24
4: LITERATURE REVIEW ....................................................................................................25
5: GUIDING PRINCIPLE FOR PROJECT APPRAISAL AT PFC .......................................29
6: PROJECT APPRAISAL PROCESS AT PFC .....................................................................30
7: FINANCIAL MODEL: A TOOL FOR PROJECT APPRAISAL.......................................31
8: INTEGRATED PROJECT RATING ..................................................................................32
Categorization of Entities: ................................................................................................33
Preliminary Appraisal.......................................................................................................33
Detailed Appraisal: ...........................................................................................................33
Quantitative Factor Grade: ..............................................................................................37
Qualitative Factors............................................................................................................38
Final Output..........................................................................................................................40
9: CASE STUDY.....................................................................................................................46
9.1: PROJECT DETAILS........................................................................................................47
9.1.1 Project Structure..........................................................................................................47
9.1.2 Location of the Project ................................................................................................47
9.1.3 Land.............................................................................................................................48
9.1.4 Generation Process......................................................................................................48
9.1.5 Super Critical Technology ..........................................................................................50
9.1.6 Primary Fuel................................................................................................................51
9.1.8 Secondary Fuel............................................................................................................51
9.1.9 Water ...........................................................................................................................52
9.1.10 EPC Contract.............................................................................................................52
9.1.11 Operation & Maintenance Arrangements .................................................................53
9.1.12 Utilities ......................................................................................................................53
9.1.13Evacuation of power...................................................................................................53
1 Project Appraisal and Integrated Project Rating

9.1.14 Environmental Aspects .............................................................................................54

9.1.15 Schedule of Implementation......................................................................................55
9.2: COST OF THE PROJECT ...............................................................................................56
9.2.1 Components of Project Cost........................................................................................56
9.2.2 Capital Cost Comparison ............................................................................................60
9.3: MEANS OF FINANCE ....................................................................................................60
9.4: MARKET AND SELLING ARRANGEMENTS ............................................................61
Selling Arrangements...........................................................................................................61
9.5: STATUS OF APPROVALS / CLEARANCES ...............................................................62
9.6: PROFITABILITY PROJECTIONS .................................................................................63
9.6.1Financial Projections –Snapshot ..................................................................................63
9.6.2 Sensitivity Analysis.....................................................................................................64
9.7: RISK ANALYSIS AND SWOT ANALYSIS..................................................................65
9.7.1 Risk Analysis – Allocation & Mitigation....................................................................65
9.7.2 SWOT Analysis...........................................................................................................70
9.8: CONCLUSIONS ..............................................................................................................72
10: LIMITATIONS..................................................................................................................73
11: LEARNINGS.....................................................................................................................74
12: RECOMMENDATIONS...................................................................................................75
13: ANNEXURES ...................................................................................................................76
REFERENCES ......................................................................................................................105

ACKNOWLEDGEMENT
All successful work needs large number of hands to accomplish any work. I acquire this opportunity
with much pleasure to thank all the people who have helped me through the course of my journey
towards this project. I sincerely thank my project guide, Mr. P. K. Sinha (D.G.M. Projects, PFC), for
his guidance, help and motivation. Apart from the subject of my study, I learnt a lot from him, which I
am sure, will be useful in different stages of my life.
I would like to express my gratitude to Mr. Sanjeev Gupta (Officer, Project Appraisal) and Mr.
Mohit Anand (Officer, Entity Appraisal) for their help in understanding and formulating the model
design and methodology, and Mr. Nitin Garg (Officer, Project Appraisal) for his review and many
helpful comments.
I would like to thank Prof. G.L.Sharma of Lal Bahadur Shashtri Institute of Management,
NewDelhi and Dr. Ashok Gupta, Executive Director, Power Finance Corporation Ltd for providing
me an opportunity to undergo such a beneficial project in the organization. I would like to thank my
teachers for their assistance and useful comments. Their caring and supportive attitude gives me a lot
of support in doing my project.
I am especially grateful to my colleagues for their assistance, criticisms and useful insights. I am
thankful to all the other students (past and present) of LBSIM Delhi with whom I share tons of fond
memories. My sincere gratitude also goes to all those who instructed and taught me through the years.
Finally, this project would not have been possible without the confidence, endurance and support of
my family. My family has always been a source of inspiration and encouragement. I wish to thank my
family, whose love, teachings and support have brought me this far.
Shyam Sunder Gupta

PGDM-Finance

LIST OF ABBREVIATIONS
BTG Boiler, Turbine & Generator
BU Billion Units
CEA Central Electricity Authority
CERC Central Electricity Regulatory Commission
COD Commercial Operation Date
DPR Detailed Project Report
EPC Engineering, procurement & construction Contract
FSA Fuel Supply arrangement/agreement
FTA Fuel Transport Agreement
GCV Gross Calorific Value
GoI Government of India
IPP Independent Power Producer
Kcal Kilo Calories
KV Kilo Volts
KWh Kilo Watt Hour
LC Letter of Credit
MoP Ministry of Power
MoEF Ministry of Environment & Forest
NOC No Objection Certificate
O&M Operations & Maintenance
PFC Power Finance Corporation Ltd.
PGCIL Power Grid Corporation of India Limited
PLF Plant Load Factor
PPA Power Purchase Agreement
SPV Special Purpose Vehicle
TRA Trust and Retention Account

EXECUTIVE SUMMARY
Power projects are capital intensive and have long gestation period, therefore adequate long
term financing is a critical factor. Massive investment is needed for new projects,
expansions, undertaking of reforms and restructuring, debt refinancing and short term
working capital needs and to fulfill this capital needs, the companies generally raise money
from lending institutions. PFC is also a Non-Banking Financial Institution which provides
financial assistance for the power projects. Project analysis is an essential part of PFC. It
involves a thorough analysis of the ability of the project to fulfill the desired objectives.
This project report titled “Project Appraisal and Integrated Project Rating of Thermal Power
Projects at PFC”, studies the overall financing of project and the parameters and
methodology followed for examining the overall potential of the promoters and project.
Project Appraisal structure share common features but since every project is unique and
requires tailoring of particular circumstances and features of the project. The project is
examined to see if it meets the financial, economic and social criteria that must have been
set for investment expenditure. Thus, different parameters like requirement of permissions,
agreement & clearances, capital outlay, profitability, payback period, internal rate of return
(IRR) and other project related analysis is done. The study of the financial background of the
promoters and the project tells us about the ability of the promoter to handle the project
efficiently. A sensitivity analysis is made on the project to identify the key variables, which
determine its outcomes. For this, the accuracy of the available data is improved to the point
where an operational plan of action can be developed. The detailed project report is made
which involves setting down the basic programs, allocating tasks, determining the resources
and setting down in operational form from the functions to be carried out and their
priorities. The formal approval requires the acceptance of funding proposals and agreement
on contract document, including tenders and other contracts requiring the commitment of
resources. The project feasibility is checked assuming the worst case scenarios to analyze
the debt repayment capability of the company in these conditions. Integrated Project Rating
helps in evaluating the exposure limit, interest rate, and collateral securities against the loan
to individual borrower.
****************

1: INDUSTRY PROFILE
1. Indian Power Sector
Bullish economic growth story of any country depends on a robust power generation &
delivery model. A weak power infrastructure impedes the growth potential & thus pulls back
the growth initiative. The National Electricity Policy envisages “Power for all by 2012” and
the per capita availability of power to be increased to over 1000 units by that period, which
indicates an average consumption growth of about 13.81% every year. It is easy to make such
a rosy projection for the future, but very difficult to attain it, especially when the capacity
addition targets of every five year plan falls short of expectations. In this back droop, there
comes the need for increased private participation in the power sector & initiating policies by
more and more private companies to be self reliant on power front.
1.1 Introduction to the Power Sector in India
Electricity is one of the most vital infrastructure inputs for economic development of a
country. The demand of electricity in India is enormous and is growing steadily. The vast
Indian electricity market, today offers one of the highest growth opportunities for private
developers.
Since independence, the Indian electricity sector has grown many folds in size and capacity.
The generating capacity has increased from a meager 1,362 MW in 1947 to more than
148,265.4 MW by 2003, a gain of more than 110 times in capacity addition. India's per
capita energy consumption is projected to grow from 6.2 million Btu in 1980 to 18.2 million
Btu in 2010 -- a rise of almost 300 percent. Although, India's energy consumption per unit of
output is still rising, but it is expected to level off and to decline in the future. India consumes
two-thirds more energy per dollar of gross domestic product (GDP) as the world average.
India consumes only about 18 percent of the energy per person as the world average. Nearly
64.4 per cent of India's electricity is produced in thermal facilities using coal or petroleum
products. 25 per cent electricity is generated by hydroelectric facilities.
In its quest for increasing availability of electricity, the country has adopted a blend of
thermal, hydro and nuclear sources. Out of these, coal based thermal power plants and in
some regions, hydro power plants have been the mainstay of electricity generation. Of late,
emphasis is also being laid on non-conventional energy sources i.e. solar, wind and tidal.
India is one of the main manufacturers and users of energy. Globally, India is presently
positioned as the eleventh largest manufacturer of energy, representing roughly 2.4% of the
overall energy output per annum. It is also the world’s sixth largest energy user, comprising
about 3.3% of the overall global energy expenditure per year. In spite of its extensive yearly
energy output, Indian Power Sector is a regular importer of energy, because of the huge
disparity between oil production and utilization.

India’s power market is growing faster than most of the other countries. With an installed
generation capacity of 141.5 GW, generation of more than 600 billion kWh, and a
transmission & distribution network of more than 6.3 million circuit Kms, India
India has today
emerged as the fifth largest power market in the world compared to its previous position of
eighth in the last decade.
Source:: powermin.gov.in
Usually energy, especially electricity, has a major contribution in speeding up the economic
development of the country. The existing production of per capita electricity in India is
around 600 kWh per annum. Ever since 1990s, India’s gross domestic product (GDP) has
been increasing very rapidly and it is estimated that it will maintain the pace ini the next
couple of decades. The rise in GDP should be followed by an increase in the expenditure of
key energy other than electricity.
The gross electricity production capability of Indian Power Sector is placed at around
148,265.4 MW. A key portion of this generated electricity i.e. 64.4 per cent is thermal
energy. Though, this is still not sufficient.
Installed Generation Capacities

Total installed capacity is 148,265.4 MW

Electricity generation mix is heavily dependent on thermal at around 64.4% with hydro
contributing to 25%
The following graph shows a near doubling of per capita consumption of electricity from
about 350 units in 1998 to over 600 units in 2005.
1.3 Structural and regulatory reform conducive to PSP
In the past, the power sector growth has not kept pace with the economic expansion and this
has resulted in India experiencing a 13 per cent shortage in peak capacity and 8 per cent in
energy terms, on an overall basis. Driven by the requirement to enhance the budgetary
allocations to social sectors to meet the emerging requirements of sustainable growth, the
Government has envisaged a manifold increase in the role of the private sector sec in the
financing and operations of the power sector. Significant structural and regulatory reforms
have paved the way for increased private sector participation in all aspects of the sector.
Many of the legal and regulatory requirements to enable this are in place, while the
operational provisions are in different stages of implementation in different states.
1.2 Opportunities of growth in the Indian power sector
The Government of India’s blueprint for the power sector envisages a capacity addition of
100,000 MW between 2002 & 2012, and another capacity addition of 100,000 MW between
2012-2017
2017 along with a required associated investment for the transmission and disdistribution
network. A similar substantial capital investment is required to develop the national grid, for
renovation and modernization of inefficient and ageing generation plants and network, for

electrification of rural areas, and to improve adequacy, reliability and the quality of power
supply.
1.5 Growth Blue-print of Ministry of Power:
• An investment requirement of US$ 90 billion in generation of which US$ 19 billion is

expected from the private sector
• An investment requirement of US$ 90 billion in transmission and distribution of
which nearly US$ 15 billion is needed for the National Grid
• An investment of US$ 6 billion for the National Grid is expected to come from the
private sector, the rest from the Central sector
• The rest of the investment in transmission and distribution will be financed through a
mix of the state and the private sector
• Implies at least US$ 25 billion of investments from the private sector. The large
capital and knowledge requirements cannot be met by the Government alone. Further, given
the magnitude of actual and opportunity loss, these investments and efforts must be brought
in at the earliest.
• In Generation, the development of the power market and deregulation of supply to
large consumers, presents options for the sale of power to distribution utilities and to
contestable consumers.
• In Transmission, competitive bidding guidelines are being finalized, and the Central
Transmission Utility has identified specific elements of interstate transmission systems. The
JV or BOT model may be adopted in the intra-state transmission segment as well.
• In Distribution, privatization continues to remain on the agenda of states (e.g. Uttar
Pradesh), though the actual timing of initiation of any privatization process remains
uncertain. The Act envisages the possibility of more than one distribution licensee in an area.
Some applications for such licenses have been made to the relevant SERCs, and the
guidelines for issue of such licenses (including minimum service obligations) are expected to
evolve.
• Power trading has been recognized as a separate activity, and a number of private
firms have obtained trading licenses. The trading volumes have increased manifold over the
last few years, and are expected to increase further as the national grid is strengthened and
inter-regional flows increase. The trading business offers opportunities as a stand-alone
business, as well as a strategic adjunct to investments in other segments.
• The “investment” required is not restricted to financial capital. The electricity sector
incurs a commercial loss of about Rs 20,000 crores (nearly US$ 4 billion) per annum; a
significant part of which is attributed to inefficient operation. To plug this, the power sector,
and specifically, the distribution companies must re-engineer their business processes, invest
in modern IT systems for billing, MIS, tracking, energy audit etc., train their operating staff
to improve their management, commercial and technical skills, and undertake other such
performance improvement measures. All of this provides significant business opportunities to
various service providers.

1.6 Ultra Mega Power Projects by Government of India
Reorganizing the fact that economies of scale leading to cheaper power could be secured
through large size power projects and for introducing the efficient super critical technology in
a big way, a unique initiative has been launched for development of Ultra Mega Power
Projects (UMPPs) under tariff based international competitive bidding route. 9 sites for
development of 4000 MW project each have been identified so far.
Government of India (GoI) has launched Ultra Mega Power Projects initiatives to step up
power generation capacity at rapid speed
Seven projects of capacity 4000 MW each identified to be allocated to the developers on
tariff based competitive bidding
Tariff determined in this manner to be accepted by the regulator under Electricity Act
GoI to acquire land, secure environment clearance, arrange water linkage and secure Captive
Coal Mine (for pit head plants) before handing over the projects
Payment Security Mechanism in terms of Letter of Credit, Escrow Arrangement and Third
Party Sale
1.7 Transmission: Policy Initiatives
1.7.1 Guidelines for encouraging competition in development of transmission projects

Policy was issued on 13th April, 2006.
Promote competitive procurement of transmission services.
Encourage private investment in transmission lines.
Facilitate transparency and fairness in procurement processes.
Facilitate reduction ‘of information asymmetries for various bidders’.
Protect consumer interests by facilitating competitive conditions in procurement of
transmission services of electricity.
Enhance standardization and reduce ambiguity and hence time for materializationof projects.
Ensure compliance with standards, norms and codes for transmission lines whileallowing
flexibility in operation to the transmission service providers.

High Voltage Transmission Capacity:
Capacity MVA Circuit KM
765/800 KV 1,500 439
400 6,170 7,390
220 7,863 4,927
HVDC 3,000 5,872
1.7.2 Distribution
In principle approval accorded for 90 projects with an outlay for Rs.1588 crore to strengthen
the distribution system in urban areas.
More than Rs.2030 crores utilized under APDRP for strengthening & up gradation of
electricity distribution network.
Incentive for cash loss reduction has been disbursed to Kerala, Punjab and West Bengal.
Andhra Pradesh, Goa, Himachal Pradesh, Punjab, Gujarat, Meghalaya, Chattisgarh and West
Bengal have reported profits during 2005-06. Jharkhand, Madhya Pradesh, Haryana,
Rajasthan, Uttaranchal, Karnataka, Kerala and Assam have reported reduction in losses
during 2005-06.
Andhra Pradesh, Goa and Tamil Nadu have AT&C losses below 20% during 2005-06.
Punjab and 2 DISCOMs of Gujarat (Madhya & Uttar) have AT&C losses below 25%
during 2005-06.
Action plan prepared for franchising in urban areas to reduce AT&C losses and improve
efficiency in distribution. Maharashtra, Rajasthan and Madhya Pradesh have invited tenders
for franchisee in urban areas. The first urban franchisee has been awarded by Maharashtra in
Bhiwandi town.
5304 engineers of State distribution utilities were trained under Distribution Reforms
capacity building program.
Started the Advanced Certificate Programme in Distribution Management in collaboration
with IGNOU, about 1212 have registered so far.
1.8 Privatization
Many countries facing high electricity demand growth favor privatizing their electric power
sectors and opening their markets to foreign firms. This approach can free up large amounts
of public capital, which can be used instead for social programs. In addition, private
ownership allows managerial accountability, market efficiency, and better customer service
while reducing government deficits and international debt. The reasons for electric utility
privatization are numerous and vary from country to country.

Some of the more evident reasons include the following:

 Raising revenues for the state through asset sales
 Acquiring investment capital
 Improving managerial performance
 Moving toward market-determined prices
 Technology transfer
 Reducing the frequency of power shortages
 Reducing the cost of electricity to consumers through efficiency gain
 Taking advantage of creating national and regional power grids, and
 Re-thinking whether electric power generation in today's economy constitutes a
natural monopoly.
In 1991, the Government began to encourage private sector participation in the power
industry. Since this date, a total capacity of approximately 7,400 MW from 37 private power
plants has been commissioned. As of March 31, 2006 an additional capacity of around 4,500
MW from 12 projects is reported to be under construction. Orissa was the first state in the
country to privatize the state's electricity distribution. This was followed by the privatization
of Delhi Vidyut Board. Various other states including Uttar Pradesh, Haryana, Karnataka,
Andhra Pradesh, Madhya Pradesh, Delhi and Rajasthan have restructured their boards into
separate entities for generation, transmission and distribution. Some states are also attempting
to corporatize the former SEB entities.
 Reliance Energy Limited and Tata Power Limited dominate the private sector.
 Tata Power, with a generation capacity of 2278 MW. Tata Power recently bagged
4000 MW UMPP contract.
 Reliance Energy has a 933 MW of generation capacity.
 GMR Infrastructure Limited with a combined generation capacity of 420 MW and
an additional 389 MW plant to be commissioned in the near future is another
serious private sector participant.
Private investment in Power sector

Post Electricity Act 2003, private sector interest has revived.
100% FDI allowed in generation, transmission & distribution, 100% FDI also allowed in
power trading (License given to British Gas).
Inter Institutional Group (IIG) and Green Channel constituted to facilitate financial closure
of Independent Power Projects (IPPs).
11 IPPs of more than 4000 MW capacity have achieved financial closure.
Another 3 IPPs have been agreed in principle by FIs for financial closure.
Another 8 IPPs of about 9500 MW capacity are under active consideration.

1.9 Highlights of performance of Power sector in 2007
(i) Capacity Addition: 9050 MW (5093 MW)

(ii) Placement of Award (generation projects): 9354MW (9701 MW)
(iii) Growth in Power Generation: 6.9% (7.2%)
(iv) Plant Load Factor: 76.7% (75.77%)
(v) Villages Electrified: 39,383 villages
(vi) Ultra Mega Power Projects: LOI issued in case
(vii) Important policies notified:
Tariff Policy
Rural Electrification Policy
Policy for development of Merchant Plants
Guidelines for encouraging competition in development of Transmission projects.
1.10 Total Installed Capacity:

Sector Capacity MW %age
State Sector 76,115.77 52.5

48,970.99 34.0
Entral Sector
Private sector 22,628.75 13.5
1,47,715.51 100%
source:- ministry of power
1.11 Capacity Addition –Targets & Achievements
In India, the power sector is controlled by ministry of power; some targets are established to
minimize the electricity deficit and the future expectation of need of power. These plans are 5
yearly and some details of last 4 five years plan are summarized below?
Five Year Plan Year Target MU Achievement MU
Eighth Plan 1992-1997 30,538 16,423
Ninth Plan 1997-2002 40,245 19,015

21,180
Tenth Plan 2002-2007 41,110
Eleventh Plan 2007-2012 78,577 N.A.
Source: powermin.gov.in
Renewable energy sources include Small hydro project, Biomass project, Biomass power,
urban and industrial water power, renewable sources.

Type Generation Target MU
Thermal 6,48,479
Hydro 19,000
Nuclear 1,15,468
Bhutan Import 6,564
Total 7,89,511
1.12 Highlights of the XIth Five Year Plan

Capacity Addition Projections (as on 28 Feb. 2008)
Figures in MW Source:: powermin.gov.in
1.13 Power Situation:

Despite significant growth in electricity generation over the years, the shortage of power
continues to exist primarily on account of growth in demand for power outstripping the
growth in generation and capacity additions in power generation. The following table shows
the long-term
term projected energy requirement across various regions in the country.
Peak Peak Peak Energy Energy Energy

Period Demand Deficit Deficit Requiremen Deficit Deficit
(MW) (MW) (%) t (MU) (MU) (%)
84,574 9,508 11.2 5,59,264 39,866 7.1

2003-04
87,906 10,254 11.7 5,91,373 43,258 7.3
2004-05
93,255 11,463 12.3 6,31,757 52,938 8.4
2005-06
1,00,715 13,897 13.8 6,90,587 66,092 9.6
2006-07
1,07,791 19,998 15.8 6,08,053 63,862 9.5
2007-08
109,809 96,785 11.9 7,77,039 6,91,038 11.1
2008-09
2009-10* 1,18,794 1,03,816 12.6 8,40, 544 7,62,115 9.3

1.14 Region wise Power Supply Position
All the Regions in the Country namely Northern, Western, Southern, Eastern and North-
Eastern regions continued to experience energy as well as peak power shortage of varying
magnitude on an overall basis, although there were short-term surpluses depending on the
season or time of day. The energy shortage varied from 4.4% in the Eastern Region to 16.0%
in the Western Region. Region-wise picture in regard to actual power supply position in the
country during the year 2008 -09 in energy and peak terms is given below:
Energy Peak
Require Availabi Surplus/ Require Availab Surplus/
Region ment lity Deficit(-) ment ility Deficit (-)
MU MU MU % MU MU MU %
Northern 227,104 201,951 -25153 -11.1 33,034 29,504 -3,530 -10.7

254,475 213,715 -40760 -16 37,240 30,153 -7,087 -19
Western
Southern 204,012 188,794 -15,218 -7.5 28,958 26,245 -2,713 -9.4
Eastern 82,041 78,444 -3,597 -4.4 12,901 11,789 -1,112 -8.6
North- Eastern 9,407 8,134 -1,273 -13.5 1,820 1,358 -462 -25.4
1.15 Expected Surplus/Deficit in year 2009-10 (Region wise)
Energy Peak
Require Availabil Surplus/ Deficit(-) Requirem Availabi Surplus/ Deficit
Region ment ity ent lity (-)
MU MU MU % MU MU MU %
Northern 241,461 222,875 -18,586 -7.7 35,460 29,970 5,490 -15.5

276,827 234,819 -42,008 -15.2 37,330 34,276 -3,054 -8.2
Western
Southern 220,126 201,222 -18,904 -8.6 31,384 27,216 -4,168 -13.3
Eastern 91,386 93,613 2,227 2.4 15,110 14,165 -945 -6.3
North- 10,744 9,586 -1,158 -10.8 1,804 1,537 -267 -14.8

Eastern

1.16 Demand side Management Recommendations

 Encourage Non-conventional energy usage,
 Raising energy efficiency awareness
 Turning the Computer Monitors off when not in use
 There is a need to boost:
 Energy audits reports by energy managers – consumption of >1MVA
 Commercial buildings to use only energy efficient lighting and equipment.
 Energy efficient equipment manufacturing incentives.
 TOD tariff
 Buildings with natural ventilation and lighting – “Passive Houses”
 Penalty for power factor
 Evaluate the major facilities for interruptible load opportunities.
1.17 Supply side Management Recommendations

 There is a need to boost:
 Upgrading existing Supply
 Load Aggregation
 On-Site Generation
 Use of Captive Power Plants
 Peak Power development through Hydro
 Encourage capacity addition through various fuels
 Distributed Generation
 Setting up Big size – High efficiency plants
 Setting up Merchant Power Plants
***************

2: COMPANY PROFILE
2. Power Finance Corporation

2.1 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. A Nav-Ratna public Sector Undertaking. It has highest safety
ratings from domestic and international credit rating agencies and also ISO 9001-2000
Certification for the Project Appraisal System.
PFC provides financial assistance to all types of power projects like Generation, R&M,
Transmission, Distribution, system improvement, etc. PFC encourages optimal growth and
balance development of all segments of power sector through assigning priorities for
financing different categories of projects. The state sector utilities are the main beneficiary of
PFC’s financial assistance. PFC has also been funding private sector projects for last 5-6
years.
2.2 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 channeling
the resources and providing financial, technological and managerial services for ensuring the
development of economic, reliable and efficient systems and institutions. Received awards
from Hon'ble President, Hon'ble Vice President & Hon'ble Prime Minister for being in the
top ten Public Sector Undertakings of Government of India.
*Consistently rated ‘Excellent’ for its overall performance against the targets set in
Memorandum of Understanding (MoU) by the Government of India (GoI) since 1993-94.
*Nav-Ratna Public Sector Undertaking.
*Ranked among the top 10 PSUs for the last four years.
*Employee profit stands at Rs.3.9 crores per head.
2.3 Credit Ratings

Placed at Sovereign Rating by International Rating Agencies - Moody’s and Standard &
Poor’s for long term foreign currency debt.
Placed at the highest safety ratings by accredited rating agencies in India - CRISIL and ICRA
Domestic borrowings include term loans and bonds; External borrowings take the form of
Syndicated Loans, Fixed & Floating Notes.
Consistently rated ‘Excellent’ by the Government of India (GOI) for overall performance
against the targets set in Memorandum of Understanding (MoU) between GOI and PFC.

Different Rating by major rating agencies:
2.4 Objective of PFC:

PFC in its present role has the following main objectives: -
To rise the resources from international and domestic sources at the competitive rates and
terms and conditions and on-ward
ward lend these funds on optimum basis to the power projects in
India.
To act as catalyst to bring institutional, managerial, operational
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

2.5 Clients of PFC:

i. State Electricity Boards
ii. State Power Utilities
iii. State Electricity/Power Departments
iv. Other State Departments (like irrigation Department) engaged in the development of
power projects
v. Central Power Utilities
vi. Joint Sector Power Utilities and Co-operative Societies
vii. Municipal Bodies
viii. Private Sector Power Utilities
2.6 Range of Services

2.6.1 Fund Based
I. Rupee Term Loan
II. Foreign Currency Term Loan
III. Buyer’s Line of Credit
IV. Working Capital Loan
V. Loan to Equipment manufacturers
VI. Debt Restructuring/ Refinancing
VII. Take out Financing
VIII. Bridge Loan
IX. Lease Financing
X. Bill Discounting
2.6.2 Non-Fund Based

Guarantees
Exchange Risk Management
Consultancy Services

2.7 Institutional Development of Power Utilities

Formulation and Implementation of Operational and Financial Action Plan (OFAP) for its
borrowers - to achieve qualitative improvement in the functioning of the State Power
Utilities in managerial, technical and financial areas through: -
Participative approach in formulation of OFAPs - prepared in consultation and agreement
with the Utility and State Government concerned.
Organizing seminars, workshops and training for Power Sector personnel - in India and
abroad.
Studies and Consultancy Services
2.8 Reforms & Restructuring Initiatives

PFC has been actively persuading State Govts. to initiate reform and restructuring of their
power sector in order to make them commercially viable. In this regard following initiatives
have been taken:-
PFC is providing financial assistance to reform-minded States under relaxed lending
criteria/exposure limit norms
PFC has decided to provide technical/financial assistance to State Govts. / Power Utilities for
structural reforms of the State Power Sector.
Reform Group constituted in PFC to advice and assists the State Govt. /Power Utilities to
formulate suitable restructuring programmes.
2.9 Major Projects Funded by PFC:
Name of the Project Capacity (MW) Cost (Crs) Amount Funded by
Malwa TPS 2x500 4054 2730
Khaperkheda TPS Extn. 1x500 2191 1753
Kameng HEP 4x150 2485 1740
Koradi TPS 3x660 10019 6250
Mejia Extn. Unit 2x250 280 1456
Sagardighi TPS PH1 2x300 2754 1925
Chandrapura Extn. Unit 7&8 2x250 2053 1435
Panipat TPS Stage V 2x250 1785 1428

2.10 Financial Position

Financial Highlights for the year 2008-09 (Unaudited)
Profit After Tax Rs. 1,355 Crores

Rs. 57,030 Crores
Sanctions
Disbursements Rs. 21,054 Crores
Net Interest Margin 3.84 %
Resource Mobilization Rs. 52,421 Crores
Net Worth Rs. 9,065 Crores
Realization 99%
2.10 Resources as on 31 March, 2009
Networth
15000
8688 9605
10000 8043
5962 6466
5000 Networth
0
FY 05 FY 06 FY 07 FY 08 FY 09
Resources FY 09 FY 08
Amount % Amount %
Share holder's Fund 10329 16% 9330 18%
Reserve for bad & doubtful debts 724 642
Deferred Tax liability 1376 2% 1240 2%
interest subsidy Fund 909 1% 1067 2%
Bonds (Domestic) 35479 55% 23,543 45%
Ruppes Term loan 12691 20% 12,391 24%
Short tertm loan 1400 2% 2,480 5%
Foreign Currency loans 2589 4% 2,234 4%
Total 64775 100% 52,285 100%

2.13 Recent Initiatives:

 Exploring possibilities of faster capacity addition through Special Purpose Vehicles.
 Made a foray into renewable energy sector.
 Extended tenor of loans up to 20 years for Hydro and 15 years for other schemes.
 Policy for short term financial assistance for import of coal introduced
 Expense limit increased for reforming GENCOS.
 Short-term loan extended to TRANSCOS against receivable from DISCOMS.
 Aims to capture a share of 20-25% of the total investment to be made in the Power
Sector during the Xth and XIth Plan period.
2.13.1 Accomplishments:
First Developmental Financial Institution to introduce Operational and Financial Action
Plans to improve efficiency in the State Power Sector.
Long term financial resources to the power sector from multilateral agencies channeled
through PFC.
 Tapped international financial markets to raise ECBs, setting benchmark rates for
Indian corporate.
 Complementing the efforts of Govt. of India, for its sponsored programmes
Accelerated Generation & Supply Programme and Accelerated Power Development
& Reform Programme.
 Introduced new tailor-made products and services like debt re-financing, interest
restructuring, funding to equipment manufacturers, short term loans, buyers' line of
credit and loans for asset acquisition.
2.13.2 Future Plans:

 Aims to capture a share of 20-25% of the total investment to be made in the Power
Sector during the 11th Plan period.
 To consolidate and expand present business.
 To introduce new financial initiatives such as Universal Banking Services, Insurance,
Equity Participation and Merchant Banking.
 To spread into allied sectors.
 To make a foray into global markets.
 Diversification in terms of forward or backward integration in the power sector
(financing for fuel tie ups and laying down of gas pipelines).

2.14 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 repaymentcapabilities 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 weak andare
defaulting to most of their creditors. Delinquencies by these entities to PFC could
impair the currently sound Balance Sheet of PFC.
Under the Tenth Five-year Plan, REC has been allowed to disburse funds through AG & SP.
Since this scheme gave a price advantage to PFC, its competitive edge is diluted.
With increasing exposure to SEB’s, their weak balance sheet may affect PFC’s
creditworthiness.
Currently, borrowers of PFC are unable to attract other sources of funding. If the reform
programme is successful, and these entities become creditworthy, PFC’s ability to lend
against quality assets would be weakened.
***********

3: OBJECTIVE AND METHODOLOGY

3.1 Objectives of the project:
 Project Appraisal of thermal power project: 2x660 MW Coal Based Super critical
Thermal Power Project.
 Assigning Integrated Project Rating to the project.
3.2 Methodology:
 Project Appraisal: To evaluate the project rating and conducting the feasibility report
of a project based on the DPR/information memorandum/application form and other
related materials submitted by the borrower.
 Assesses the capital needs of the business project and how these needs will be
met.
 Calculation of DSCR, IRR and sensitivity analysis.
 Calculating the cost of generation and relevance.
 Entity Appraisal: To assess the financial health of organizations that approach PFC
for credit for power projects. This would entail undertaking of the following procedures:
 Analysis of past and present financial statements
 Examination of Profitability statements
 Integrated Rating: Financial feasibility of the project is checked by the calculation of

IRR and DSCR, various cost estimates, tariff calculation, Interest during Construction,
working capital requirement, levellised tariff, etc. On the basis of above data, sensitivity
analysis is done at different input conditions. With the help of these data project is rated
and then composite with entity rating to reach at Integrated project rating.
 To assess the suitability of the company for disbursement of credit. This would
involve the following actions:
 Quantification & Assessment of risks
 Determination of interest rate, exposure limit and collateral security.
*************

44: LITERATURE REVIEW
4.1 Project Finance: Project financing is an innovative and timely financing technique
that has been used on many high-profile
high profile corporate projects, including infrastructural and
power. Employing a carefully engineered financing mix, it has long been used to fund large large-
scale natural
tural resource projects, from pipelines and refineries to electric
electric-generating
generating facilities
and hydro-electric
electric projects. Increasingly, project financing is emerging as the preferred
alternative to conventional methods of financing infrastructure and other lar
large--scale projects
worldwide.
Project Financing discipline includes understanding the rationale for project financing, how
to prepare the financial plan, assess the risks, design the financing mix, and raise the funds. In
addition, one must understand the cogent analyses of why some project financing plans have
succeeded while others have failed. A knowledge
knowledge-base
base is required regarding the design of
contractual arrangements to support project financing; issues for the host government
legislative provisions, public/private infrastructure partnerships, public/private financing
structures; credit requirements of lenders, and how to determine the project's borrowing
capacity; how to analyze cash flow projections and use them to measure expected rates of
return; tax
ax and accounting considerations; and analytical techniques to validate the project's
feasibility.
Project finance is different from traditional forms of finance because the credit risk associated
with the borrower is not as important as in an ordinary lloan oan transaction; what are most
important are the identification, analysis, allocation and management of every risk associated
with the project.
Project finance is the financing of long-term
long infrastructure and industrial projects based upon
a complex financial structure where project debt and equity are used to finance
nance the project.
Usually, a project financing scheme involves a number of equity investors, known as
sponsors, as well as a syndicate of banks which provide loans to the operation. The loans are

most commonly non-recourse loans, which are secured by the project itself and paid entirely
from its cash flow, rather than from the general assets or creditworthiness of the project
sponsors. The financing is typically secured by all of the project assets, including the
revenue-producing contracts. Project lenders are given a lien on all of these assets, and are
able to assume control of a project if the project company has difficulties complying with the
loan terms.
Generally, a special purpose entity is created for each project, thereby shielding other assets
owned by a project sponsor from the detrimental effects of a project failure. As a special
purpose entity, the project company has no assets other than the project. Capital contribution
commitments by the owners of the project company are sometimes necessary to ensure that
the project is financially sound. Project finance is often more complicated than alternative
financing methods. It is most commonly used in the mining, transportation,
telecommunication and public utility industries.
Risk identification and allocation is a key component of project finance. A project may be
subject to a number of technical, environmental, economic and political risks, particularly in
developing countries and emerging markets. Financial institutions and project sponsors may
conclude that the risks inherent in project development and operation are unacceptable
(unfinanced able). To cope with these risks, project sponsors in these industries (such as
power plants or railway lines) are generally completed by a number of specialist companies
operating in a contractual network with each other that allocates risk in a way that allows
financing to take place. The various patterns of implementation are sometimes referred to as
"project delivery methods." The financing of these projects must also be distributed among
multiple parties, so as to distribute the risk associated with the project while simultaneously
ensuring profits for each party involved.
4.2 Project Appraisal: It is an assessment of a project in terms of its economic, social

and financial viability. A lending financial institution makes an independent and objective
assessment of various aspects of an investment proposition. It is defined as taking a second
look critically and carefully at a project by a person who is in no way involved or connected
with its preparation. He is able to take independent, dispassionate and objective view of the
project in totality, along with its various components. There are some steps for Project
appraisal.
4.2.1 Management Appraisal: Management appraisal is related to the technical and

managerial competence, integrity, knowledge of the project, managerial competence
of the promoters etc. The promoters should have the knowledge and ability to plan,
implement and operate the entire project effectively. The past record of the promoters
is to be appraised to clarify their ability in handling the projects.
4.2.2 Technical Feasibility: Technical feasibility analysis is the systematic gathering and
analysis of the data pertaining to the technical inputs required and formation of
conclusion there from. The availability of the raw materials, power, sanitary and
sewerage services, transportation facility, skilled man power, engineering facilities,

maintenance, local people etc are coming under technical analysis. This feasibility
analysis is very important since its significance lies in planning the exercises,
documentation process, and risk minimization process and to get approval.
4.2.3 Financial feasibility: One of the very important factors that a project team should
meticulously prepare is the financial viability of the entire project. This involves the
preparation of cost estimates, means of financing, financial institutions, financial
projections, break-even point, ratio analysis etc. The cost of project includes the land
and sight development, building, plant and machinery, technical know-how fees, pre-
operative expenses, contingency expenses etc. The means of finance includes the
share capital, term loan, special capital assistance, investment subsidy, margin money
loan etc. The financial projections include the profitability estimates, cash flow and
projected balance sheet. The ratio analysis will be made on debt equity ration and
current ratio.
4.2.4 Commercial Appraisal: In the commercial appraisal many factors are coming. The
scope of the project in market or the beneficiaries, customer friendly process and
preferences, future demand of the supply, effectiveness of the selling arrangement,
latest information availability an all areas, government control measures, etc. The
appraisal involves the assessment of the current market scenario, which enables the
project to get adequate demand. Estimation, distribution and advertisement scenario
also to be here considered into.

4.2.5 Economic Appraisal: How far the project contributes to the development of the
sector; industrial development, social development, maximizing the growth of
employment, etc. are kept in view while evaluating the economic feasibility of the
project.
4.2.6 Environmental Analysis: Environmental appraisal concerns with the impact of

environment on the project. The factors include the water, air, land, sound,
geographical location etc.
4.3 Calculation of tariff: The tariff for supply of electricity from a thermal generating
station shall comprise two parts, namely, capacity charge (for recovery of annual fixed
cost consisting of the components) and energy charge (for recovery of primary fuel cost
and limestone cost where applicable).
4.3.1 Annual Fixed Cost: The annual fixed cost (AFC) of a generating station or a
transmission system shall consist of the following components
 Return on equity: 15.5% tax free return on total equity. Only 30% of the project cost
can be treated as equity.
 Interest on loan capital: Year to year loan interest is calculated on full debt amount
by weightage average rate of interest.
 Depreciation: Depreciation up to 90% of the capital cost of asset is
allowed.Depreciation shall be calculated annually based on Straight Line Method and
rate defined in CERC guidelines.
 Interest on working capital: Working capital shall include
 Cost of coal or lignite and limestone, if applicable, for 1½ months for pit-head
generating stations and two months for non-pit-head generating stations.
 Cost of secondary fuel oil for two months.
 Maintenance spares @ 20% of operation and maintenance expenses.
 Receivables equivalent to two months of capacity charges and energy charges for
sale of electricity.
 Operation and maintenance expenses for one month.
4.3.2 Energy Cost: It is also calculated on norms of CERC, the yearly consumption of
primary fuel and secondary fuel is taken for the calculation
** Other parameters like escalation, discounting, exchange rate are taken as per latest
CERC norms.
********

5: GUIDING PRINCIPLE FOR PROJECT APPRAISAL AT PFC
“Offering credit is an operation fraught with risk. Before offering credit to an organization,
its financial health must be analyzed. Credit should be disbursed only after ascertaining
satisfactory financial performance. Based on the financial health of an organization, PFC
assigns credit ratings. These credit ratings are used to fix the interest rate, exposure limit and
security criteria.”
5.1 Entity Eligibility Criteria: While considering the eligibility of an entity, last two year
Auditor’s report and notes to annual accounts along with Income tax assessment order for
last three years be also examined. Type of securities and mode of repayments is also to be
suggested by the help of entity rating.
5.2 Statutory Clearances: All statutory clearances requires at Central/State level for the
implementation of the project are to be ensured. Depending on the cost of project, techno
economic clearances of CEA/SEB may be asked.
Clearances/Agreements required for implementation of project:

1. Land Acquisition
2. Water Availability
3. Stack Height: Airport Authority of India
4. Forest Clearance: Such that no sanctuary, reserve, national park within the project
5. No defense establishment
6. Ministry of environment and Forest
7. Fuel Supply Arrangement/Agreement through various coal linkages
8. Fuel Transportation Arrangement
9. PPA for selling Electricity
10. Transmission agreement with Transmission agency
11. Pollution Control Board
5.3 Cost Estimate: The base date for estimation of cost shall not be more than six month old
at the time of talking up the project for appraisal. Physical contingencies shall be limited
to 3% of the base cost and the price contingencies provision of 7%, 12%, 16%, 19% and
22% shall be made depending on the project completion period of 1,2,3,4 and 5 years as
per PFC guidelines. Also IDC, to be considered to arrive at project cost.
5.4 Project Cost-Benefit Analysis: Calculate FIRR and EIRR. Techno-economically sound
with FIRR and EIRR not less than 12%. Sensitivity analysis is also done.
5.5 Integrated project Rating: The project is evaluated on various parameters and then
ranked according to the PFC guidelines. The method is explained later on.
***********

6: PROJECT APPRAISAL PROCESS AT PFC
Submit the application in prescribed format and replicate for financial assistance
One copy---Project Appraisal (PA) division;

one copy---Entity Appraisal (EA) division;
one copy---finance division
Scrutinize the application for PA & EA division;

List all the additional information required;
collect the additional information for the applicant
Preparation of preliminary appraisal note by PA & EA division for consideration of task

force
Task force meeting – PA and EA division and minute’s preparation
Preliminary appraisal note for consideration for screening committee;

Screening committee shortlist the proposal for consideration of financial assistance
If shortlisted; detailed PA will be prepared by PA division;

detailed entity report by EA division;
Pre-commitment- pre-disbursement, other condition will be decided
Detailed Appraisal Report for approval
Sanction of term loan
Constant monitoring the activities
Get project to completion by providing any consultancy if required

7: FINANCIAL MODEL: A TOOL FOR PROJECT APPRAISAL
In every project finance deal, where everyone’s financial security rests on the future
performance of a new undertaking, a thorough analysis of the project’s finances under a
arrange of assumptions is prerequisite for arranging debt and equity funding, financial model
play a crucial role in decision-making.
6.1 Steps taken for designing a model: The essential steps to be taken for designing a
financial model for any infrastructure project financing through private participation are
as follow:
 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.
 Determine O&M cost through the concession period.
 Calculating the fixed and variable cost relating to the project.
 Financial analysis to determine the most efficient means of financing.
6.2 Purpose and uses of financial model: The financial model provide a basic analysis,
usually based on relatively raw, preliminary data and simplified financing assumptions, to
establish weather a given project is worth pursuing further. The required output may be:
 Basic Project IRR
 Debt service Coverage Ratios and other debt ratios.
 Establishing a financial structure that is sustainable by the project.
 Reassuring lenders and investors as to the attractiveness of the deal as a home for
their funds.
 An indication of tariff levels required for achieving appropriate returns.
 Preparation of sensitivity analysis.
************

8: INTEGRATED PROJECT RATING
The integrated rating exercise is carried out at the end of the detailed appraisal of projects.
The integrated rating model is intended for arriving at a relative measure of merit for the
project. The integrated rating model involves:
1. Entity rating
2. Project rating
3. Integrated rating: Through combination of above two.
8.1 Appraisal Methodology:
Analysis and critical comments on the strength and weakness of organization, management,
its working result, financial position etc. are made on the basis of organization set up,
capital/financial structure, operating/working results, credit worthiness, financial result, entity
related risks and mitigation measures proposed. Power Sector entities are evaluated with
reference to a set of qualitative and quantitative factors to arrive at the Aggregate Entity
Score. In addition to the performance parameters, milestones giving weightage to core reform
activities have also been included in the overall grading mechanism. Both the public and
private entities are evaluated separately on different set of measures.
8.1.1 Policy of State/Central Sector Entities: These entities are ranked on the basis of
following parameters
EXTERNAL FACTORS:
 State Government support (equity, subsidy, etc.)
 Formulation of Business Plan/FRP
 Implementation of Electricity Act 2003 – Corporatization of entities
 Regulatory safeguards of SERC
 Investment support from State government (equity)
INTERNAL FACTORS:
 Reduction trend between Average Revenue and Average Cost of supply
 DSCR, Net worth
 Receivables, AT&C Losses
 Debt servicing record
 PLF/Plant Availability
 Availability of Audited Annual Accounts
 Capacity Addition / Increase in Capital expenditures
 Metering (DISCOMS), Payables (DISCOMS)
These milestones/parameters have been classified as External and Internal Factors with
following score allocation:

Factors Scores
External Factors (State Sector) 30
Internal Factor (Entity Specific) 70
Total 100
Categorization of Entities:
The Aggregate Entity Score is used for categorization of entities. For this purpose the
prescribed score is as under:
Category Prescribed Score
Category A+ Not less than 75
Category A Less than 75 but 50 or above
Category B Less than 50 but 25 or above
Category C Less than 25 or those not submitting the details
The assessment of the score is done through the detail study of the entity and evaluating the
score with the help of some set of standards as per the model. Some set of parameters are
DSCR>1, Subsidy by government, Payment mechanism, PLF>80%, AT&C losses<20%,
Average cost of supply<1.50 RS. Then the further allocation is done on pro-rata basis.
8.1.2 Policy of Private Power Projects Appraisal

It is a two-stage process i.e. preliminary evaluation and detailed evaluation in which all the
promoters are evaluated for their ability to contribute equity, carry the project to completion
and operate the project as per the contracts.
Preliminary Appraisal
The promoter, prior to approaching PFC should identify 50% of equity to be eligible for
preliminary evaluation. In this, the scrutiny is based on the analysis of quantitative
parameters and qualitative parameters, so as to access the financial strength of the promoters,
track record of the project implementation and the credit worthiness.
Detailed Appraisal:
The detailed appraisal is taken up subject to the promoters identifying 76% of equity in the
project tying up 50% equity so as to be in a position to achieve financial closure as early as
possible. The scoring for the promoters is based on an analysis of the promoters in the
descending order of equity contribution (up to 76% of equity).The final scores of the
promoters by aggregating the scores of each of the equity contributors weighted by their
equity contribution. Additionally the equity contributors are broadly analyzed with respect to
their performance on the following parameters:

 Credit rating obtained in the past

 Capital structure and shareholding pattern
 Profitability trends and Cash flows
 Market conditions in the present business and any synergies for the project
 Track record in project implementation
 Commitment of foreign promoters to the project
 Selling arrangements for the power produced
Any current default with Banks/ FIs has an override over any rating obtained through the
above procedure.
8.2 Scoring
Quantitative Factors:
The scoring of all the factors is on a six- point scale, with 6 being the best and 1 being the
worst. It involves analysis under 2 categories:
 Business analysis
 Financial flexibility
Business Analysis:
Business analysis evaluates the performance of the present business of the promoters. The
analysis involves evaluation of the market position and financial position of the company
along with a view on management expertise and integrity of the promoters.
The parameters and factors used in business analysis have been enumerated below:
Market Position (20%)
Here relative market share of the company is determined. It is calculated as the ratio of the
turnover of the promoting company divided by the turnover of the market leader in the
business. In case of diversified companies the same process is repeated for each division.
Financial Risk (80%)
Means of Attribute
Ratios Wt
Scoring
Return on
Return on Capital Employed 20% Quantitative Investment
Profitability of
Operating margin 20% Quantitative the Business
20% Quantitative Coverage Ratio

Debt Service Coverage
20% Quantitative Gearing
Total Debt to Net Worth
Cash Flow
Cash flow from Operation to Total Debt 20% Quantitative

It evaluates the past financial performance of the promoting companies. Performance of at

least the last three years is evaluated. Financial risk parameter is represented by 5 ratios,
which cover various aspects of company’s financial performance:
Return on Capital Employed (ROCE)
ROCE = PBIT/ Opening capital employed
Here, Capital Employed = (Capital + Reserves + Short term debt + Long term debt –
Revaluation reserves –Capital work in progress)
ROCE is scored as a simple average of the last three years but if the latest ROCE is lower
than one for the preceding year then the latest ROCE should be used for calculation instead of
the average.
Operating Margin
OM = Operating Profit before Depreciation, Interest and Taxes/ Income from operations
Debt Service Coverage Ratio (DSCR)

DSCR = (PBIT – Taxes)/ (Repayment due to Long term Loan + Interest on long term and
Short term loans)
Total Debt/Total Net Worth

Total debt/ total net worth = (Long term loans + Short term loans + Working Capital loans)/
(Capital + Reserves – Revaluation reserve – Loss brought forward – Intangible Assets)
Cash Flow from Operation / Total Debt

Cash flow from operations/ Total debt = Cash flow from Operations/ (Long term loans +
Short term loans + Working Capital Loans from Banks)
Detailed Entity Appraisal:
After preliminary appraisal, a detailed appraisal is taken place according to the following
process:
Risk Parameters Weightage Means of Scoring
Industry Risk 10% Qualitative
Market Position 10% Quantitative
Financial Risk 80% Quantitative

Business Analysis: In addition to the risk parameters included in preliminary evaluation,

detailed evaluation also included industry risk score.
Industry Risk: The industry risk score measures the competitiveness of the industry in
which the promoting company is operating. The industry factor would be a qualitative factor
to be scored on a six-point scale. The industry expertise for scoring the industry risk factor
can be developed internally or alternatively the score for the industry risk can be outsourced
from an independent agency.
Financial Risk: In detailed evaluation, the projections of future financial performance are
also evaluated with past financial performance. The projections for the next two years are
taken into account. The above five ratios are keeping same in both the cases. But the ratio in
their past and future is as follow:
Ratios Weightage
Past financial Performance 70%
Future Financial Performance 30%
Accounting Quality: This factor is use to penalize companies with poor accounting quality.
Accounting Quality Score
Good Quality 2
Average Quality 1
Poor Quality 0
Financial Flexibility: It is used to judge the ability of promoters to financially manage the
project. Thus, key points evaluated are:
 Ability to contribute equity to the project
 Ability to bring the project to financial closure
 Ability to fund temporarily funding mismatches
Ratio Wt Means of Scoring Attribute being evaluated
Equity funding potential 50% Quantitative Equity Raising Potential

Quarterly cash surpluses from
Bridge finance ability 15% Quantitative operations
Track record of funds 20% Quantitative Funds raised in last 10 years

raised
Aggregate project cost 15% Projects established in the last 10
Quantitative years
handled

Equity Funding Potential: A Promoting company can contribute equity to the project by
raising debt on its books or raising equity or through cash surpluses in the books.
The equity funding potential is the aggregate of:

 Ability of company to raise debt up to certain debt-equity ratio (1.5:1) and DSCR of
1.5
 Ability to raise equity from the markets by diluting the equity of the promoting
company. Up to 10% of the average market capitalization of the company may be
diluted. (the average market capitalization is calculated as the average of last 1year)
 Ability to use marketable securities to raise equity for the project
 Any other source of injecting funds to contribute equity to the project
The aggregate amount that can be raised by the above methods as a percentage of the equity
contribution of the company is compared to the benchmark to arrive at a score on a six-point
scale.
Bridge Financing Ability: This parameter basically judges the ability of company to fund
short term cash flow imbalances in the project. This attribute is useful to prevent delay in
project implementation due to small disbursals from the institutions.
Cash surplus = cash flow from operation + marketable securities
Here, Cash flow from Operations = PAT + Depreciation + Non Cash Expenses in Working
Capital Requirements.
In this quarterly cash surplus of the promoting company is calculated as a proportion of the
project cost of the company and comparing it with the benchmark to arrive at a score on the
six point scale.
Track Record of Fund Raised: This technique is basically used to judge the promoter’s
ability to achieve financial closure and tie up funds for the project. This factor is scored by
comparing the aggregate fund raised in the last ten years as a proportion of the project cost
with the benchmark, to arrive at a score.
Aggregate Project Cost: This factor evaluates the ability of the promoters to manage new
project. Scoring is done by comparing the aggregate cost of the project implemented by the
promoting group in the last years as a proportion of the cost of the present projects with the
benchmark, to arrive at a score.
Quantitative Factor Grade: Thus various scores obtained from various parameters are
multiplied by their respective weights (weights are predefined by the scoring authority) to
come at final score. The benchmark of scores for the different grades is given below:

FINAL SCORE GRADES RANK
1.0 –2.00 VI Worst
2.0 –2.75 V
2.75 – 3.50 IV
3.50 – 4.25 III
4.25 – 5.00 II
5.00 – 6.00 I Best
Qualitative Factors
The scoring of all the factors is on a four-point scale, with 4 being the best and 1 being the
worst. The factors are judgmental and the model provides broad guidelines for the evaluation
for the same. It involves analysis under two categories:
 Management risk (40%)
 Management past experience (60%)
Management risk: It evaluates two factors:
Attribute being
Ratio Wt Means of Scoring evaluated
Competency in running
Managerial competency 20% Qualitative the business
Business and financial policy 20% Qualitative Risk propensity
Management Competency: It is based on the quality of past decision making as well as the
general efficiency of company’s system and procedures. Educational qualifications may serve
as one of the tool.
Business and Financial Policy: It is based on past business and financial policies. These are
indicative of possible future strategies, and have a bearing on future debt bearing levels.
Expansion strategies of company in comparison to existing size of the firm are used as a
measure of risk taking ability of the company. Moreover large one time expansion is seen as
less favorable option and that too in diversified businesses.
All other factors of experience in power sector and experience in setting up projects, is
evaluated at an aggregate level in the management experience category.
Management experience of the promoting group: The key factors evaluated are:
Experience in Power Sector: Companies having past experiences in power generation,
transmission, power generating equipment supply and other associated activities of powers

sector would be considered eligible for being accorded marks under this head. Other issues
like period of experience, management teams, and depth of expertise will also make an
impact. The exact marks are left to the discretion of the appraising officer.
Expertise in Setting up Projects: Here due weightage will be given to:
 Managing projects of like size should be given higher weightage
 Core sector projects include infrastructure projects and projects in other industries like
cement, steel etc should be accorded higher weightage than in non-core project.
 Experience of past ten years will be taken into account while scoring.
Experience in India/Developing Countries: This factor is used to evaluate the exposure of
promoting company in developing countries and specifically in India. As previous experience
of working in Indian conditions and dealing with various regulatory and government entities
helps in getting project clearances faster and also helps in managing various other stake
holders in the project.
Project Preparedness of the Promoting Group: This is promoter’s preparedness to execute
the project while approaching PFC. The progress of the project, clearance from various
regulatory authorities etc parameters are taken in consideration. This factor is again
subjective.
There is a model used for measuring the score and categorizing the entity on their score, the
benchmarking is fixed on the basis of practical knowledge and it is reviewed from time to
time. The benchmarking includes various ranges of input parameters and their relative score,
which are helpful in summation of total score.
The past track record, company’s ability to raise fund, the operating profit and market
position are assessed through the various score and then the relative score are assigned. The
quantification of various parameters is done by some set of standard ratios. The score are
then passed on the two legs qualitative factors and quantitative factors.
The various scores are summed up and grading from A to D is done on qualitative factors.
Means of Attribute being evaluated
Ratio Wt
Scoring
Experience in the power sector 30% Qualitative Power sector experience
Experience in setting up project size in Project management

relation to the size of the project being 10% Qualitative capability
set-up
Experience in dealing with
Experience in India/ Developing countries 10% Qualitative developing economies
Project preparedness of the promoting 10% Preparedness of the group

Qualitative to execute the project
group

Qualitative Factor Grade:
FINAL SCORE GRADE
WORST D
C
B
BEST A
Final Output
A matrix having two legs of qualitative and quantitative parameters is formed and based on
their score and grade, entities are ranked from 1 to 6. In this the qualitative grade is then
combined with the risk grade (Grade I to Grade VI) obtained from the quantitative analysis
by way of a matrix to give the final grade.
The matrix formed is as follows:
RISK QUALITATIVE GRADING

GRADES
A B C D
I 1 1 2 3
QUANTITATIVE
II 1 2 3 5
GRADING
III 2 3 4 6
IV 2 4 5 6
V 5 5 6 6
VI 6 6 6 6
Here, IA, IB, IC, IIA, IIB, IIC, IIIA, IIIB, IIIC, IVA and IVB are considered as investment
grade, while other grade combinations are considered as speculative grade.
The degree of safety with reference to the above rating is given in Annexure-I.

8.2 Project rating:
The project is rated against a set of qualitative and quantitative parameters. The qualitative
parameters being Cost/MW, first full year of generation, levellised cost of generation and
DSCR. The qualitative parameters are type of implementation structure, security of fuel,
power sale agreement and satisfactory operation and maintenance.
The weightage of parameter in calculating the score of qualitative and quantitative parameters
is assigned on the company norms and policies.
The upper and lower limits of qualitative and quantitative parameters are fixed and then on
basis of pro-rata basis, assigning of rank is done. The parameter’s point and their allocation
are also discussed on the set of standards.
Quantitative Parameters:
 First full year cost of generation w/o RoE: A range of 1.9-2.75 is taken as standard
and then allocation of score is done on that basis.
 Levellised tariff/ cost of generation with RoE and tax: 2.35-3.50 is a set of standard
range and then scoring is further allocated.
 Average DSCR: Less than 1.0 is taken as bad condition of loan recovery while the
value greater than 1.0 is rated high.
Qualitative Parameters:
 Power off take
o IPP- Status of PPA & PSM and/or Captive- Payment Security Mechanism
o Buyers rating
 Fuel supply
o Long term agreement
o Short term agreement
o Captive Coal mine
o Transportation facility
 Construction Contract
o Warranty
o Market standard
o Performance
 Type of contract and bidding
o Competitive Bidding
o Equipment Supplies
 Experience of the EPC contractor
 Commercial terms of Contract
 O&M
o Past Experience
o Management Team and efforts

Weightage to different parameters are placed in Annexure-II. The criteria of two parameters
are evaluated, assessed and quantified on the above factors, there is a set of scoring range
and on the basis of that model project is ranked.
The quantitative parameters are quantified on the basis of type and quality of contract and
their competitiveness. The past experience in the same sector and their present status helps in
evaluating these parameters. There is a fixed set of standards and on the basis of them the
score is measured. The contractor and terms and conditions of the contract is also one part of
standard.
The qualitative and quantitative parameters form two axes of a matrix and depending on the
score in each parameter. The above project rating model enables rating of the project from P1
to P6. P1 being the best and P6 the worst (rejection grade). The entity rating procedure which
rates the promoter/s of entity from E1 to E6, is then combined with the project rating model
to produce the integrated rating from 1 to 6, 1 being the best and 6 the worst (rejection level).
Project Rating Matrix

Quantitative parameters
Range of 0-19
>44 38-44 32-37 26-31 20-25
scores
45-50 P1 P1 P2 P3 P4 P6
Qualitative Parameters
39-44 P1 P2 P2 P3 P5 P6
33-38 P2 P2 P3 P4 P5 P6
27-32 P3 P3 P4 P4 P5 P6
20-26 P4 P4 P5 P5 P5 P6
0-19 P6 P6 P6 P6 P6 P6

8.3 Integrated Composite Rating:
With the help of detailed analysis of the entity and project parameters, these two scores are
combined with their corresponding ranking (the project rating is combined with entity rating)
to arrive at the integrated matrix. With project rating and entity rating forming the two arms
of the integrated rating is assigned based on the relative position of a project proposal in the
matrix.
Integrated Rating Matrix

Entity Rating
Rating E1 E2 E3 E4 E5 E6
P1 1 1 2 3 3 6
P2 1 2 2 3 4 6
Project Rating
P3 2 2 3 3 4 6
P4 3 3 3 4 5 6
P5 3 4 4 5 5 6
P6 6 6 6 6 6 6
Any loan proposal getting a composite rating of 6 is proposed to be rejected. All other rating
(i.e. 1-5) is sought to be suitably captured in an exposure/interest rate matrix as placed below,
and financial support will be considered accordingly. Terms and conditions for the sanction
and disbursement are decided on the basis of integrated composite rating.
8.4 Linkages of integrated rating with interest rate, exposure limit and security with
reference to PFC policies:
The following methodology is proposed for linkages Interest rate, exposure limit and
requirement of collateral securities to integrated rating model.
8.4.1 Interest rate: At present interest rate is decided by entity rating.
Integrated rating Interest rate
1-4 As applicable to Entity Grade 1-4
5 As applicable to Entity Grade 5
6 Rejection, as applicable to Entity Grade 6

8.4.2 Exposure Limit:
Project exposure is primarily decided by the category of the project in the line with OPS. As
per the existing policy, additional project exposure is allowed based on the entity grading.
Integrated rating Additional project exposure in addition to

basic exposure, as per OPS
1-2 30% of project cost
3-4 15% of project cost
5 Nil
Rejection
6
The exposure in single project should not be more than 50% of the project cost.
8.4.3 Collateral Securities:
The policy guideline for requirement of Collateral Securities depends upon the PFC condition
as a lead FI or not. In case of lead FI the detail is placed in Annexure-III. In case of PFC is
not leading FI, the collateral securities requirement would be considered on case to case
basis, prescribed by Lead FI/Bank.
The detail about the interest rate, exposure limits and collateral securities under OPS norms
and prudential norms for different entities are discussed in Annexure-IV.

Case Study: Appraisal of loan proposal for financial assistance to

2 X 660 MW Supercritical Thermal Power Project

9: CASE STUDY
Project Purpose and Scope

Purpose
To bridge the nation’s energy deficit, both average and peak load, by capacity addition of
1320 (2x660) MW by setting-up Coal fired Thermal Power Project based on super critical
technology.
Scope
Scope of project covers installation, commissioning, operation and maintenance of 2X660
MW coal fired Thermal Power Project based on super-critical technology. The project will be
implemented by way of a turnkey EPC Contract finalised through International Competitive
Bidding process. The scope shall broadly cover:
 1320 MW (1x660MW) power plant and associated systems.

 Development of ash disposal area
 Township
 Development of the Green Belt
 Transportation Arrangement for Coal to the Project site.
 Barrage/Dam on near River, pump house, water reservoir and raw water pipeline
 Power evacuation system including transmission lines
 Coal Mining Facility at aggrieved coal blocks.
46 Project Appraisal & Integrated Project Rating

9.1: PROJECT DETAILS
9.1.1 Project Structure

The Company proposes to implement the Project as per following structure.
9.1.2 Location of the Project

The site was selected considering the followings:
 Availability of adequate habitation-free, non-agriculture land which is partially

developed and above flood level.
 The location is not in environmentally fragile area. The closest airport is about
150 kms far from site thus reducing any flight hazard because of chimney
height
 Near round availability of water from the perennial river which is located
about 20 km from the site.
 The site is well connected to coal mines, Port and Airport by Railways and by
State/National Highways.

9.1.3 Land
The land requirement of the Proposed Project is about 305 Ha. The break up of the land
requirements is as follows:
Description Area (Ha)
Main Power Plant 65
Ash Dyke 70
Water Reservoir 40
Railway Siding 30
Housing Colony 50
Green Belt 50
Total requirements 305
The site identified for the Project is primarily industrial corporation land with some areas of
agriculture land (Single crop) and other of forest land. The land will be on lease from MIDC
for 95 years, renewable for further term of 95 years. The Company has paid Rs. 8.53 Crore
towards allotment of land and development works.
The Company proposes to use the allotted land for setting up Main Power Plant, water
reservoir and Ash Dyke requiring about 175 Ha. The remaining allotted land, about 29 Ha,
would be used for Green Belt development.
The balance land of about 101 Ha, required for Township (50 Ha), Railway Siding (30 Ha)
and balance green belt (21 Ha), would be acquired by the Company in due course. The
balance land would be acquired at an estimated cost of Rs. 5.44 Crore.
The site development for the Proposed Project site, covering levelling, boundary wall,
internal and approach roads and other miscellaneous requirements, is estimated to cost about
Rs. 25.50 Crore.
9.1.4 Generation Process

The process of generation of power from coal (water steam cycle) essentially entails two
main stages. In the first stage, the chemical energy stored in coal is converted into heat
energy in the coal-fired boilers. In the second stage, the high-pressure steam, which is
generated in the boilers, is passed through turbines (conversion of heat energy into

mechanical energy) which in turn is coupled to generators (conversion of mechanical energy

into electrical energy), thereby generating electricity.
The water steam cycle essentially contains the coal fired steam generator, the steam turbine
with condenser, feed-water tank, low-pressure (LP) heaters and high-pressure (HP) heaters
and the connecting pipelines. The superheated steam produced in the steam generator is
supplied to the steam turbine, which drives the three-phase AC generator. After leaving the
HP turbine, the steam is reheated in the steam generator and fed to the Intermediate Pressure
(IP) turbine. In the LP turbine the steam coming directly from the IP turbine expands to
condenser pressure and is condensed in the condenser.
Closed cycle water system is used for cooling of the condenser. The condensate collected in
the condenser hot well is discharged by the condensate pumps and supplied via the LP
condensate heaters into the feed water tank. The feedwater is further heated by bled steam
from turbine and dissolved gases from the feed-water are liberated. The boiler feed pumps
discharge feed water from the feed-water tank via the HP heaters to the economizer.
Steaming starts from this point onwards. The high temperature steam-water mix is further
converted into steam in water walls and finally passed through the superheaters sections for
converting the saturated steam into superheated steam.
The power station would be designed with two power generating units of 660 MW each,
along with the auxiliaries and common utility services like plant water system, coal handling
system, ash handling plant, and switchyard for power evacuation, plant electrical system and
workshop.
The main sections of the power generating unit include Steam Generator along with milling
system and electrostatic precipitator, integral piping, integral control system, turbine and
generator unit, boiler feed pump, regenerative heaters, condensate extraction pump,
circulating and auxiliary cooling water pumps and the generator transformer with bus duct.
The main sections of the utility system are the coal handling system, ash handling system,
fire fighting system, AC & Ventilation system, switchyard and the plant water system.
The main generating equipment will consist of two Steam Turbo Generators (STG) and two
Pulverized Coal Fired Boilers (PCFB.). The power generated at lower voltage would be
stepped up to 400 KV and will be connected to the proposed 400 KV switchyard for dispatch.

9.1.5 Super Critical Technology

The Proposed Project is based on Super Critical Boiler Technology instead of more prevalent
Sub-Critical Boiler Technology in India. The basic difference between the two technologies
is the steam pressure at which the boiler is operated. In case of Sub Critical Technology the
operating pressure in boiler is less than 19 MPa as against 24 MPa in typical subcritical
power plant. The supercritical power plant can achieve considerably higher cycle efficiencies
with resulting savings in fuel costs and reductions in CO2 and other emissions.
Plant costs are comparable for both the technologies. However, overall economics for super
critical technology are more favorable because of the increase in cycle efficiency. Economic
performance is also influenced by other factors, including plant availability, flexibility of
operation and auxiliary power consumption. The once-through boiler design used in super
critical technology based plants is inherently more flexible than drum designs used in sub-
critical technology based plant, due to fewer thick section components allowing increased
load change rates. Typical average availability of super critical technology based power
plants is about 85%. However, with appropriate design and materials, a plant availability of
>90% is achievable. Efficiencies of supercritical power generation are also less affected by
part load operation, with efficiency reductions less than half those experienced in subcritical
plant.
The major environmental benefit of supercritical power generation is from reduced coal
consumption per unit of electricity generated, leading to lower CO2 and other emissions. CO2
emissions for supercritical plant would be 17% lower than for a typical subcritical plant.
Similarly, all other emissions e.g. NOx and SOx, would also be reduced pro-rata with the
reduction in coal consumption.
However, for optimum environmental performance, supercritical power generation
technology can benefit from advanced emissions-control technologies to minimize harmful
emissions. These include flue gas desulphurization (FGD), low-NOx combustion, selective
catalytic reduction (SCR), selective non-catalytic reduction (SNCR), air staging and reburn
technologies.
The lower CO2 emissions from super critical plants are quantifiable and the project can be
registered as a CDM project for accruing CERs which can be traded with international
markets. This can potentially work as an additional revenue stream for the project.

9.1.6 Primary Fuel

The primary fuel for the Proposed Project would be domestic coal. The Company proposes to
use coal available from mines.
Ministry of Coal has allotted the Coal Blocks to the company for use in the Proposed Project.
The Company is in process of finalizing the mining plan. These blocks are expected to have
extractable coal reserves of 169.832 MT and the break-up is given as below.
The average calorific value of the coal is expected to be about 4895 kcal/kg. Considering this
Gross Calorific Value and PLF of 85% the coal requirement of the Project works out to be
about 4.12 MTPA.
The cost of mining of coal is estimated to be Rs. 750 per ton (in the year 2011-12) including
Royalty, Stowing Excise Duty and Local Area & Environment Cess. The coal cost is
escalated at 5% p.a. to account for inflation for the input factors for mining of coal. The
Company proposes to carry out the mining by itself. Therefore, any savings in the cost of coal
will get reflected in lower cost of generation of power from the Project.
The Company has estimated the capital investment of Rs. 400 Crore for open cast mine
development and the same has been incorporated in the overall Project Cost.
9.1.7 Coal Transportation
The distance of Coal Blocks from site is about 260 km. The coal will be transported from
mines by rail in rake loads in Box/Box-N wagons through rail network to Project site. Coal at
mines end would be loaded from bunkers / silos to the wagons through flash loading system
and unloaded at the plant by wagon tipplers to optimize on turn around time.
For transportation of coal, the Company would enter into Coal Transportation Arrangement
(CTA) with the Indian Railways. The transportation cost as estimated by the Company is Rs.
250 per ton of coal (in the year 2011-12), which includes the loading, unloading and handling
cost. Further, escalation of 5% has been assumed on the transportation cost of coal from
2011-12 onwards.
9.1.8 Secondary Fuel

Secondary fuel in the form of LDO / HFO would be required primarily for start up operations
and for stabilization. The annual requirement of secondary fuel - LDO/HFO is estimated at
about 9,251 KL per annum. The secondary fuel would be sourced from the nearby depot of
Oil Marketing Companies to be transported through road tankers.

9.1.9 Water
The total consumptive water requirement is estimated to be 5000 m3 per hour for the
Proposed Project. The Company has already received Letter of Intent from Water Resources
Department (WRD), for allocation of 2.5 Lacs m3/day (10,417 m3 per hour) of water from
River. To ensure year-round availability of water to Project, the Company proposes to build
barrage/dam, where the adequate quantity of water will be stored.
The overall cost of water arrangement as estimated by the Company is about Rs. 205.83
Crore and has been considered in the Project cost.
9.1.10 EPC Contract

The Company proposes to implement the Project by way of a turnkey Engineering
Procurement and Construction (EPC) contract to be awarded by way of International
Competitive Bidding process.
The scope of the EPC contract would cover the following:
 Complete design and execution of the Civil, Structural and Architectural work
of the Main Power Block, including Cooling towers, RCC chimney, Various
Pump house building, storage tanks, CHP, AHP, internal roads and drains etc.
along with some general facilities.
 Complete design, supply of equipments, transportation, loading, unloading,

storage, erection and commissioning of the BTG works, complete mechanical
and electrical systems of the plant including 400 KV switch yard and interface
with existing switchyard, water system supply to various consumption point
and effluent discharge up to the plant boundary, control and instrumentation
system of the main plant & Balance of plant equipments and systems.
 Commissioning, trial operation, reliability run and performance guarantee test

of the entire plant.
The Company may choose to implement the Project through package contracts, which will be
awarded to reputed vendors though competitive bidding process as it entails savings in cost.
The final decision will be based on the detailed evaluation of both the options. The cost
estimates are, however, based on the EPC method.

Company has executed EPC Contract for its 2X660 MW Supercritical power project with a
Chinese EPC Contractor, in September 2007. The EPC Contract was split into two parts- one
for Supply and other for Erection and Commissioning.
9.1.11 Operation & Maintenance Arrangements

The operations & maintenance (O&M) of the power plant would be undertaken by the
Company in-house with the support of its technical team and expert engineers. The
Company would build a strong team of experienced and qualified
engineers/technicians to look after the operations of the Proposed Project.
The O&M team of the power station would be headed by a Senior Vice President,
under whom separate groups viz. Operation, Mechanical, Electrical, Civil and C&I
maintenance would operate. In addition to these groups, operation and efficiency
improvement group and maintenance planning group would monitor the efficiency in
operations and maintenance management respectively and suggest continual
improvements.
9.1.12 Utilities
Construction Power
The requirement of power for construction at site would be sourced from the 33KV
substation of State Discom which is about 10 km from the Project Site. The Company
proposes to obtain power from Express Feeder during construction. The consumers which are
connected on express feeder are exempted from load shedding by State Discom ensuring
continuous supply of power for the Proposed Project. Further, there is 11 KV connection
already existing at the site to meet initial requirement of power.
Construction Water
The requirement of construction water for potable and service purposes will be met by the
existing 2.2 MLD Water Treatment (WT) Plant located within the allotted land for the
Project. The Company has taken over the Water Treatment Plant along with pipeline,
elevated water reservoir, office building etc and paid about Rs. 3.42 Crore for the same.
9.1.13Evacuation of power
Power Evacuation from the Project would be at 400 KV level. There are 400 KV
substations of State Transmission Company which can be utilized to dispatch power to
State Distribution Company. Similarly, there are four 400KV substations of PGCIL at
which can be used to dispatch power to consumer in other states.

The Company proposes to sell about 746 MW gross power output (i.e. 56.50% of
gross capacity) under the long term PPA to a Private Company BEL, a power trading
licensee.
The cost of both the transmission lines as estimated by the Company is about Rs. 316
Crore.
Further, the Company proposes (a) to get the system study done by PGCIL & State
Transco (b) obtain open access permission along with BEL (c) obtain necessary
permissions, clearances for transmission line in due course of time.
9.1.14 Environmental Aspects

There is no sanctuary, national park or archaeological monument within 25 km radium
of the proposed site. The Proposed Project would be equipped with state of the art
pollution control devices to bring down the emission / discharge of pollutants within
the acceptable norms of the country.
Some features of the Project addressing the environmental concerns are as follows.
 An efficient electrostatic precipitator is proposed that would keep the stack

emission of particulate within limits.
 The stack height of 275 m is proposed to limit the ground level concentration
of pollutants (SOx, NOx etc).
 Adequate silencing equipments would be provided to attenuate the noise to

acceptable level.
 Adequate green belt would be developed in and around the Project area and the
ash disposal area satisfying the requirement of State as well as Central
Pollution Control Board.
The Company has applied for Environmental Clearance and for NOC from Pollution
Control Board.

9.1.15 Schedule of Implementation

The Project is expected to achieve commercial operations (COD) within 45 months
from the date of issuance of Notice to Proceed (NTP) for EPC contract. The first unit
is expected to be completed within 39 months and second unit will be commissioned
with a time gap of 6 months. The Company proposes to issue the NTP for the Project
by April 1, 2008. The overall time schedule for implementation of the Project is as
follows:
Particulars Completion
Notice to Proceed for EPC Contract April 1, 2008
Unit I Trial Runs April 1, 2011
Commercial Operation Date (Unit I) July 1, 2011
Unit II Trial Runs October 1, 2011
Commercial Operation Date (Unit II) January 1, 2012
Total Implementation Period 45 Months
It may be noted that the above-mentioned schedule is tentative and the final schedule will be
firmed up on award of the turnkey EPC contract.
**********

9.2: COST OF THE PROJECT

9.2.1 Components of Project Cost
The Project is estimated to be set up at an aggregate cost of Rs. 6560 Crore comprising of
expenditure towards Land, EPC Cost, Mining Cost, Transmission Line, Coal Transportation
Arrangement, Water Arrangement, Preliminary & Preoperative Expenditure, Contingencies,
Interest During Construction Period and Margin Money for Working Capital. A summary of
the components of Project cost is presented below:
(In Rs. Crore)
Particulars Estimated Cost
Land & Site Development 39
Engineering, Procurement & Construction Cost 4544
Supply Contract (USD 949,960,000) 3800
Service Contract 704
Escalation due to Re Depreciation 40
Mining Cost 400
Coal Transportation Arrangement 40
Water Arrangement 206
Transmission Line 316
Township 50
Total Hard Cost 5595
Pre-operative Expenditure 80
Interest During Construction Period 1167
Contingencies 145
Margin Money for working capital 104
Total Cost 7091

Land & Site Development
Land requirement for the Project is about 305 Ha. The Company has already acquired about
204 Ha Land on 95 years Lease. The Company has applied to State Govt. for allotment for
additional 101 Ha land for the Project. The cost of land acquisition and site development is
estimated to be about Rs. 39.47 Crore.
Engineering, Procurement and Construction Cost
The Project is proposed to be implemented through turnkey EPC contract to be awarded on

International Competitive Bidding Process for 1320 MW project. The EPC contract will be
split in two parts viz. Supply and Service Contracts. The Supply contract will include design,
engineering, procurement and supply of all plant equipments and auxiliaries system for the
Project. The supply contract price is estimated to be about 949,960,000 USD (Rs. 3799.84
Crore @40 Rs./USD) on CIF basis. Payment for Supply Contract will be through an
irrevocable, confirmed, negotiated and usance payable at sight basis Letter of Credit.
Mining Cost
The Company plans to carry out mining by itself for which Company proposes to install
equipment and systems required. The requisite equipments and system will be procured and
installed by one of the reputed vendor and the contract for the same would be awarded though
competitive bidding process. The capital expenditure for mining as estimated by the
Company is about Rs. 400 Crore.
The detailed breakup of the capital cost is as under:
(In Rs. Crore)
Land 81.00
Plant & Machinery 223.00
Buildings & Colony 45.00
Development Expenses 45.00
Miscellaneous 7.00
Total Mining Cost 400.00

Coal Transportation Arrangement
The Company proposes to transport the coal from mines in wagons preferably owned by the
railways.
The coal transportation infrastructure required for the Project as estimated by the Company is
about Rs. 40 Crore.
Water Arrangement
The water arrangement for the Project involves building a barrage/dam, raw water pipeline up
to plant, pump house and a raw water reservoir. The water arrangement is estimated to cost
about Rs.205.83 Crore. The detailed breakup of the capital cost is asunder:
(In Rs. Crore)
Particulars Estimated Cost
Barrage / Dam 125.00
Pump House 30.00
Buried Pipeline 30.00
Raw Water Reservoir 20.83
Total 205.83
Transmission Line
Transmission cost includes supply of transmission towers, earth wire, hardware fittings and
accessories for conductor, insulators and cost of ROU/ROW, land etc. to set up two double
circuit 400 KV transmission line. Total cost of transmission lines is estimated to be about Rs.
316 Crore.
Township
The Company proposes to develop a township for the employees of the Proposed Project.
The township will require about 50 Ha land, which has been included in the overall
requirement for the Project. Township will include the residential units, school, hospital,
community centre etc. Total cost of township development is estimated to be about Rs. 50
Crore.

Pre-Operative Expenses
Pre-operative Expenses are estimated to be Rs.81 Crore and include fees to be paid towards
technical studies conducted by owner’s engineer and lenders’ independent engineer, legal
expenses for fees payable to the lenders’ and owner’s legal counsel, insurance advisor’s fees,
appraisal fees, merchant banker’s fees, upfront fees to lenders, advisors fees, start up fuel,
employees recruitment, training and salaries, other expenses etc. A break up of the estimated
preoperative expenditures is as under:
Contingency
The Company proposes to implement the Project by way of a turnkey EPC contract which
will be a fixed price and fixed time contract. As contracts for the Project are not yet finalized,
the contingency provision of 2.5% of EPC Cost and 5% on non-EPC cost, amounting to
about Rs. 144.85 Crore has been made in the Project cost.
Interest during Construction Period
The interest during construction (IDC) period estimated at Rs. 1167 Crore has been
calculated assuming an implementation period of 39 months for Unit 1 and 45 months for the
entire plant from Notice to Proceed (NTP) to EPC contractor. The debt drawdown schedule
has been made with a provision for 35% equity being brought upfront, with the balance
coming pro-rata with the debt. Term Loan the rate of interest as applicable for rupee loan (i.e.
11.50%) has been considered.
Margin Money
The provision for margin money for working capital has been made at Rs. 103.79 Crore. The
margin money has been estimated at the rate of 25% of projected net working capital
requirement of Project in the first full year of operation. For the purpose of estimates, the
current assets comprising of receivables of 2 months, primary fuel stock of 1 month,
secondary fuel stock of 2 month, O&M expenses of 1 month and spares requirement equal to
20% of the O&M cost has been assumed.

9.3: MEANS OF FINANCE
The cost of the Project estimated at Rs. 7091 Crore is proposed to be financed with senior
debt and equity in ratio of 75:25. The proposed components of financing are as under. Equity
is broken in a ration of equity to sub-debt as 80:20.
Particulars Rs. Crore %
Capital Contribution
1418.37
- Equity Capital 20%
Sub-debt Finance
354.59 5%
- Loan
Senior Debt Finance

5318.89
- Rupee Term Loans 75%
Total 7091.86 100%
Capital Cost Comparison

The total Project cost of the Project envisaging setting up a 1320 MW power plant using
super critical technology on a turnkey EPC contract basis is estimated at Rs. 7091 Crore.
Based on the total Project cost of Rs. 7091 Crore, including transmission lines and mining
cost, the per MW cost of the Project works out to Rs. 5.37 Crore. If we exclude the cost of
transmission line & mining and corresponding IDC, the Project Cost reduces to Rs. 5308
Crore and the per MW cost of the Project works out to be Rs. 4.02 Crore.
It may be observed that the cost per MW of the Project is competitive even with other thermal
power projects being developed using sub critical technology.

9.4: MARKET AND SELLING ARRANGEMENTS
Selling Arrangements
The Company proposes to sell the power generated by the Project as under:
I. 80% of total installed capacity, power output under 15 years take or pay power
purchase agreement to BEL at quoted tariff.
II. Remaining power to be sold on merchant basis on the best available terms and
conditions from time to time. For financial projections for the Project, the tariff as
above has been assumed.
As per financial projections, the power will be generated at Levelized (25 years) cost of
generation of Rs. 2.61 per unit comprising Rs. 1.54 per unit towards fixed charges and Rs.
1.07 per unit towards variable charges. The cost of generation for the Project as per CERC
norms is estimated to be about Rs. 2.21 per unit comprising Rs. 1.42 per unit towards fixed
charges and Rs. 0.79 per unit towards variable charges.
The tariff of the Company is quite competitive because of captive coal mines. The cost of
generation is Rs. 1.93 per unit and the tariff works out to be Rs. 2.21 per unit considering
15.5% ROE (levelized for 25 Years). As per CERC norms, the tariff works out to Rs. 1.96
per unit comprising of Rs. 1.25 per unit as fixed charges and Rs. 0.71 per unit as variable
charges, with ROE of Rs. 0.25 per unit.

9.5: STATUS OF APPROVALS / CLEARANCES

The current status of the key statutory approvals and clearances is as follows:
Approval/ Authority / Agency Status

Consent
Environmental clearance MoEF The Company has applied for the

for Power plant clearance.
Environmental clearance MoEF To be applied.

for Coal Mines
Pollution control Board State Pollution The Company has applied for the
NOC for Power plant Control Board clearance.
Pollution control Board State Pollution To be applied.

NOC for Coal Mines Control Board
Stack height clearance Airport Authority of To be applied.

India (AAI)
Water availability Water Resource The Company is to submit proposal for

Department / State water availability certificate.
Govt.
Land Availability State Government 204 Ha land has been already acquired.
The Company has applied for allotment of
balance 101 Ha of land.
Primary Fuel Ministry of Coal / Ministry of Coal has allotted Coal block to
Government of company for the use in the Proposed
India Project. Company proposes to get the
mining plan approval, mining lease.
Transportation of Fuel Indian Railways Company proposes transportation logistics

from Coal mines to Plant Site and to get
the requisite approvals for railway sidings.
Transmission Line PGCIL Company proposes to get the system study

State Transco done and get open access permission from
PGCIL & State Discom in conjunction
with BEL.

9.6: PROFITABILITY PROJECTIONS
9.6.1 Financial Projections –Snapshot
The financial projections, based on the capital/project cost as specified by the borrower,
would be as below:
Particular Value
Parameters
DSCR
Minimum 1.10
Average 1.35
Maximum 3.34
Project IRR, 25 years 16%
Equity IRR, 25 years 20%
Cost of generation, w/o RoE, Rs / kWh 2.13
Projected first full year cost of generation 2.18
The detail financial statements and cash flow statements, balance sheet are placed as
Annexure-VI.

9.6.2 Sensitivity Analysis

A sensitivity analysis of the Company’s financial position has been carried to ascertain the
robustness of its financials. Various scenarios for which the sensitivities was carried out and
the results are as follows.
Avg Min Project Equity

Scenario
DSCR DSCR IRR IRR
Base Case 1.70 1.38 19% 31%
Case 1: PLF at 75% 1.28 0.91 13% 14%
Case 2: Increase in Fuel Cost by 20% 1.30 0.97 13% 15%
Case 3: Increase in Project cost by 10% 1.33 0.97 16% 19%
Case 4: Decrease in calorific Value of Coal by 13% 15%

1.29 0.96
20%
Case 5: Increase in Interest Rate by 100 bps 1.42 1.02 16% 21%
Case 6: No power sold on Merchant basis 1.28 0.90 14% 15%
The key assumptions underlying the profitability projections for the Project are detailed in
Annexure VI. Based on these assumptions key financial parameters for first eight years of
operations are given below. Detailed Profit & Loss Account, Cash Flow Statement, Balance
Sheet and DSCR Calculations as projected are given in Annexure VI.
The above financials have been worked out considering 85% PLF. Higher PLF would
improve the financials of the Project. From the above financial projections, it may be
observed that the Project is financially viable. It may also be noted that the average DSCR for
the Project debt is 2.08 while minimum DSCR is 1.63. The DSCR levels of the Project are
satisfactory. Further, Project IRR is 20.54% which seems adequate.
It may be observed from above mentioned results that Project financials are quite robust in
various scenarios and the DSCR levels are satisfactory.

9.7: RISK ANALYSIS AND SWOT ANALYSIS

9.7.1 Risk Analysis – Allocation & Mitigation
a. Pre-Construction
S. Risk Mitigation / Allocation

No.
1 Grant of approvals / A suitable pre-disbursement condition has been

clearances stipulated:
Obtain all statutory and non statutory clearances
including the MOEF clearance, Pollution Control
Board NOC and agree to comply with all the
conditionality of these clearances
2 Finalisation of Contracts The Company has already awarded the EPC

Contract Project. The service contract has also
been awarded by the Company. The EPC
contract has provided for liquidated damages in
case of delay in implementation and for plant’s
various performance parameters below stipulated
level.
3 Procurement of land Land has been already acquired which is

sufficient for the main power block, Ash Dyke
and Raw Water Reservoir (Both Phase I and
Phase II). Balance 295 Ha of land required (for
both Phase and Phase II) is being acquired.
b. Construction
S. No. Risk Mitigation / Allocation
1 Cost estimate Since the technology is based on super critical

parameters, it is difficult to fairly compare costs.
Cost overrun undertaking has been sought.
2 Cost increase and price Package contracts are expected to have suitable
escalation safeguards and will be subject to LIE review. Also,
any increment in project cost would be met by the
promoters without recourse to either the project or
its lenders.
3 Completion delay and The package contract is expected to have suitable

Equipment Supply delay provision for timely project completion. Also, LDs

have been stipulated for delay in equipment supply.
4 Evacuation facility The Company proposes to evacuate the power to

both State Discom and PGCIL sub-stations.
Evacuation to State Discom will be for the capacity
as specified in the PPA with State Discom. The
remaining power would be evacuated to PGCIL
sub-station.
5 Forex risk Adverse movements impacting the project cost is

proposed to be mitigated by appropriate forex
management, which may include hedging.
6 Equity infusion The equity in company will be infused by

promoter’s Group as also by raising funds from
financial/strategic investors. Suitable conditions
have been stipulated to ensure that required amount
of equity is infused.
c. Post Construction
S. No. Risk Mitigation / Allocation
1 Fuel supply risk The Company has also got the captive mine
allotted for the Phase I of the project. The coal, if
available, from there can also be used for Phase
II.
Hence, fuel supply risk is perceived to be low.
2 Fuel price risk The fuel supply agreement is yet to be signed.

The fuel supply agreement shall be subject to
review by Lenders / Lenders’ agencies.
3 Performance shortfall The EPC Contract is expected to provide suitable

defect liabilities / warranties. LD clauses would
also be stipulated for ensuring performance. As a
preventive measure, the design shall be subject to
review by both the Owners Engineer and LIE.
4 O&M O&M is expected to be done in house. Condition

has been stipulated that the O&M plan be
prepared and be approved by LIE to ensure
adequacy of the same.

5 Technology risk EPC contract have been awarded to a contractor

having super critical technology and sufficient
experience. Company is also implementing other
project on the same technology, which again
reduces the risk.
6 Force Majeure The risk will have to be borne by the project

Company, and may prove to be damaging for the
project and by extension the lenders. This may be
mitigated to some extent by ensuring adequate
security for the lenders.
7 Off take risk The Company would sell 1320 MW of net power
to State Discom through a long term PPA at a
levelized tariff of Rs. 2.61 per unit.
With CoG of approximately Rs. 2.21 per unit, the
off take of balance power, to be sold on merchant
basis, should not a problem.
8 Price risk The cost of generation, is lower than the assumed

average purchase price of power of Rs. 2.78 /
kWh. The risk may be perceived to be low.
9 Payment risk Payment risk is perceived to be low as the major

portion of power is being sold to State Discom
under a long term take or pay PPA.
Also, LDs have been specified in the PPA for
payment security.
10 Environmental Hazards Appropriate conditions for obtaining MOEF

Clearance and Pollution Control Board NOC
have been specified.
11 Lower cost power producers With newer technology, the cost of energy
generated might be significantly lower than cost
of energy. Older plants, with depreciated assets
would also be able to compete with company.

Integrated Rating
The entity is rated according to the financials submitted by the company and evaluating
through the model.
Based on the model, the Promoters are evaluated and score is given on that basis
Promoter 1:- 5.36 {equity = 51%}
Promoter 2:- 2.56 {equity = 49%}
Combined Score = 5.36x0.51 + 2.56x0.49 = 3.988 i.e. III
SPV Rank
Quantitative Score III
Qualitative Score B
Combined Grade (by matrix) = 3 or E3 (i.e. IIIB).
Project Rating
Quantitative Parameters
SN. Parameter Wt Score Score

Result
obtained
1 First full year cost of generation w/o 25% 12.5

2.18 Rs. 9.44
RoE
2 Levellised tariff/ cost of generation with 25% 12.5

2.61 Rs. 10.24
RoE and tax
3 Average DSCR 50% 25 1.35 20
Total 100% 50 39.68

1 Power offtake 20% 10 6
a IPP- Status of PPA & PSM and/or Captive- 70% 7 4.2

Payment Security Mechanism
b Buyers rating 30% 3 N.A.
2 Fuel supply 30% 15 15
3 Construction Contract 35% 15 12.885
a Type of contract and bidding 35% 5.25 5.25
b Experience of the EPC contractor 35% 5.25 3.675
c Commercial terms of Contract 30% 4.5 3.96
4 O&M 20% 10 6
Total 100% 50 32.885
From the above scores the project is rated as P2 according to the matrix.
Integrated Project Rating
The grade combination of E3 (Entity Grading) and P2 (Project Grading) is overall Integrated
Rating 2.

9.7.2 SWOT Analysis

Strength
 The Project has been allocated Coal Blocks by Ministry of Coal for use in the Project.
The captive mines will be operated by the Company itself. This will ensure complete
control over the fuel supply and will also minimize the inventory costs, transportation
delays, shortages and leakages.
 The captive mines allocated for the Project have good quality coal and the GCV of
coal is expected to be about 4895 kcal/kg. High GCV and control over mining costs
will ensure very competitive cost of generation at Rs.2.21 per unit and corresponding
tariff of Rs. 2.61 per unit (assuming 15.5% ROE).
 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 204 Ha land which is adequate for the main power
plant block. The work on site may start immediately without any delay.
 Promoting Group has demonstrated its infrastructure project development and

execution skills in the port sector and is on the verge of completion of the power
project.
 The Project is based on Super Critical Technology which is expected to provide

efficiency gains to the Company resulting in lower cost of generation. Use of Super
Critical Technology will reduce the pollution and the Project may be qualified to get
CER under CDM. This would act as additional revenue stream for the Project and
improve the financials of the Company.
 The Project is expected to be accorded Mega Power Status which will render various
cost benefits to the Project and will keep the cost of generation competitive.
 The promoter group company, undertake to fund the cost overruns, if any, for the
Project. It also undertake to fund the increase in cost if Mega Power Status is not
granted to the Project.

Weaknesses
 Company shall be selling 574 MW power on Merchant Basis.
 Environment and Forest Clearances still to be obtained.
Opportunities
 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, thus allowing them
to bypass the SEBs and sell power directly to bulk consumers. Slowly open access in
distribution is also being allowed. These provisions will give credence to the concept
of merchant power.
 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.
 There is huge power deficit in the country and the demand supply situation in the
country is expected to remain favourable to power generators for the next 8/10 years
at least. This presents huge opportunities in the power sector for power generators.
Threats
 The super critical technology is not yet tested in India and the Company also does not
have any prior experience of operating such power plant.
 A part of power generated will be sold on Merchant basis

9.8: CONCLUSIONS
Company has proposed to set-up 1320 MW (2x660MW) 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 Company has already acquired the land required for the Main plant from Industrial
Development Corporation and has made the requisite payments. The remaining required land
has been identified and the process of acquisition is underway.
The Proposed Project will be implemented by way of a turnkey Engineering, Procurement
and Construction (EPC) contract to be awarded on International Competitive Bidding Process
(ICB).
The Project requires about 4.12 MTPA coal based on average GCV of 4895 kcal/kg and PLF
of 85%. Ministry of Coal has allocated Coal block for the Proposed Project. The Company
plans to mine the coal by itself and transport through rail route to the Project site. Appropriate
arrangements are proposed to be done. The captive mines will make the cost of generation for
the Project very competitive and will also give complete control over the primary fuel for the
Project.
The Project will require about 5000 cubic meter per hour make-up water during operation.
The Company has received letter of intent from Water Resource Department of State
Government for allocation of 10,417 cubic meters per hour water from River which flows
near by the Project site.
1056 MW of power is proposed to be sold on 15 years take or pay PPA to BEL at the quoted
tariff from COD. Balance 264 MW will be sold on Merchant basis. Considering the cost of
generation of Rs. 2.21 per unit, Company does not envisage any difficulties in selling the
power through merchant route.
Power Evacuation will be through two double circuit 400 KV transmission lines connecting
the Project to the PGCIL substation and State TRANSCO substation.
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, thus allowing them to bypass the SEBs
and sell power directly to bulk consumers. Slowly open access in distribution system is also
being allowed.
Assessment of the financial feasibility of the Proposed Project, delivers satisfactory financial
parameters as per base financial model. It has also assessed the viability of the Project under
the impact of various scenarios, which could be at variance with the base case scenario
assumed.
Subject to the weaknesses and threats enumerated in the SWOT analysis and the impact of
the various scenarios as envisaged under the sensitivity analysis, the Proposed Project is
viewed as economically viable.

10: LIMITATIONS
This analysis is limited to an examination of annualized expenses and revenue and represents
a prototypical year of operations in base year dollars. The development of a complete
financial plan must include consideration of cash flows for expenses and revenues, both
capital and operating, on a year-by-year basis from the current year through and beyond the
design year selected for the estimation of tariff. This analysis should examine alternative pay-
as-you-go and debt financed scenarios, be conducted in year-of-expenditure dollars, and
address the underlying uncertainties associated with inflation, interest rates, project cost
(exclusive of inflation), foreign exchange rate, grant funding levels and rates of payment, and
other factors over which the project sponsor will have no direct control.
The assumptions and sources of information underlying the development of the capital and
operating cost estimates are an integral part of the financial analyses documented in this
report. Uncertainties associated with fluctuating economic conditions and other factors may
result in the actual results of the financial program varying from the projections in the
financial analyses, and the variations could be material.
Some of the major limitations and issues regarding the project appraisal are as follow:
1. The rate of escalation is taken as constant over the life of the project (about 25 years);
being the life of project large it is not easy to predict the actual cost and inflationary effect
on the price of fuels and other inputs with the change in market conditions.
2. Cash flows not really known until the project is in service – no history of cash flows
3. Value of debt and equity driven by cash flow.
4. Measure the value of different securities supported by project cash flow
5. Risk analysis depends on contracts used to allocate risk to different parties
6. Foreign exchange rate is taken on regular depreciation of rupees and this will be a
limitation to the model.
7. Monthly analysis of construction is used for accurate representation of IDC, but; the
expense schedule is given on annual basis. So, proper distribution of expense on monthly
basis and allocation of funds (using debt, equity or sub-debt) is a problem.

11: LEARNINGS
The experience and know-how gained from this internship, has left me in more compliant
form and stature in order to fare better in areas of similar interest. Now I here make it sort
with few but most important points what I have learned:
 A practical exposure of financial world.

 Learnt about investment scenario in power generation.
 Know about various complicacies in power generation and their mitigation.
 Know about project implication and investment.
 Learnt financing aspect of various investment related parameters.
 Learnt the formulation and analysis of various financials sheets through model.
 Quantification of various risk related parameters.
 Learnt corporate culture.

12: RECOMMENDATIONS
Recommendation:
 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.
 With the increasing IPPs in power generation the exposure to them should be more and
the portfolio size for IPPs should be increased. It will increase the revenue because of
higher interest rate and some extra charges.
 Currently PFC has less % funding in renewable energy, PFC should also concentrate to
increase its share in renewable energy.
 Nuclear power projects should be taken as a future prospect business of PFC.
 In project appraisal, during calculation of IDC, the sub ordinate debt part should be
properly discussed with promoter. Sometimes it is a part of debt or equity. The interest
charge on sub-debt should be checked correctly.
 The entity appraisal is very detailed and sensitive part of project financing, manual work
should be replaced with good software.
 With the changes in project parameters, the re-rating of project should be done at an
appropriate time and linkages of interest rate, exposure limit and security to the new
project rating should be done.
 There should be more bifurcation in the linkages to integrated project rating. A detailed
and comprehensive model study should be made for accordingly.

13: ANNEXURES
Annexure - I
Degree of safety with reference to entity appraisal rating
Degree of Safety with

Grade Combinations regard to setting up Comments
the new project
The fundamentally strong ability of the
promoters to set up the new project and
1 Grade IA, IB, IIA Very High
is unlikely to be adversely affected by
changes in circumstances
Adverse business conditions are unlikely
2 Grade IC, IIB, IIIA High to affect the promoters ability to set up
the project
Promoters ability to set up the project is
Grade IIC, IIIB, less likely to be adversely affected by
3 Satisfactory
IVA changes in circumstances than for lower
grades
Changes in circumstances are more
likely to lead to weakened ability of
4 Grade IIIC, IVB Average
promoters to set up the project than for
higher grades
While such promoters are less
susceptible to default in setting-up of the
Grade ID, IID, project than those in lower grades,
5 Below Average
IVC, VA, VB uncertainties faced by them could
adversely affect their ability to set-up the
project
Adverse business or economic
Grade IIID, IVD,
conditions and poor capabilities are
6 VC, VD, VIA,VIB, Low
likely to lead to promoters lack of ability
VIC, VID
to set-up the project

Annexure –II
Weightages to various parameters in project rating:
S. No. Parameters Weightage Points

Quantitative Parameters
1 First full year cost of generation w/o RoE 25% 12.5
2 Levellised tariff/ cost of generation with 25% 12.5
RoE and tax
3 Average DSCR 50% 25
Total 100% 50
1 Power offtake 20% 10
a IPP- Status of PPA & PSM and/or Captive- 70% State Private
Payment Security Mechanism Sector sector
buyer Buyer
7 10
b Buyers rating 30% 3 N.A.

2 Fuel supply 30% 15
3 Construction Contract 35% 15
a Type of contract and bidding 35% 5.25
b Experience of the EPC contractor 35% 5.25
c Commercial terms of Contract 30% 4.5
4 O&M 20% 10
Total 100% 50

Annexure-III
Linkage of Collateral Security to Integrated Project Rating
Integrated Rating Collateral security/Additional covenants to be prescribed

1-2
Pledge of Share: At least 26% of project equity till currency of PFC loan with non
disposal undertaking for additional 25% till 50% of loan is repaid.
DSRA: At least 2 quarters
On repayment of 50% loan, DSRA requirement may be brought
down to 1 quarter
3
Pledge of Share: At least 51% of project equity till currency of PFC loan, However
25% may be considered for release after 50% of loan is repaid.
4
Pledge of Share: At least 51% of project equity till currency of PFC loan,
However 21% may be considered for release after 75% of loan is

repaid.
Personal Guarantee of at least two promoter directors, where promoters do not have
prior experience in setting up projects.
In case of subordinate debt, additional pledge of 10% share would be required, which
may be considered for release after 50% of entire project loan is repaid.
5
Pledge of Share: At least 51% of project equity till currency of PFC loan, However
25% may be considered for release after 50% of loan is repaid.
Personal guarantee of at least two promoter directors.
Option to convert up to 10% of PFC loan disbursed, into equity shares at book value
any time up to 5 years after COD
In case of subordinate debt, additional pledge of 16% share would be required, which
may be considered for release after 50% of entire project loan is repaid.

Annexure-IV
PFC Guidelines for term loan:
1. Purpose
To provide finance to all types of projects in state & private sector viz. generation, transmission,
distribution, renovation & modernization, uprating, environment upgradation, metering, etc. The
infrastructure projects having forward and backward linkages with power projects are also covered.
2. Eligible entities
The entities engaged in generation, transmission, trading, distribution of power or any combination of
these activities including captive / co-gen power producers. The entities engaged in the infrastructure
projects with forward / backward linkages to power projects.
3. Extent of assistance (restricted to actual requirement of funds)
Central/State sector entities- Up to 70% of the project cost
Reforming State sector entities- Up to 80% of the cost of project
Private sector entities*- Up to 50% of the project cost
The extent of funding may vary from project to project.
* In case of thermal generation projects and hydro projects, the financial assistance is generally up to
20% and 25% of the project cost respectively. However, the enhanced limit can be considered for
loan size of Rs. 500 crs and above or where PFC is a lead institution. In case of infrastructure
projects with forward / backward linkages to power projects the financial assistance is up to 20% of
the project cost.
4. Interest rates & other charges
 Interest rates as notified by the Corporation from time to time. Special interest rates
are also available for loans exceeding Rs. 700 crs for generation projects in state
sector and Rs. 500 crs in private sector.
 Interest rates prevailing on the date of disbursement(s) shall be applicable.
 Incentive / rebate available for timely payment of dues for state/central sector utilities.
 For all type of generation projects and infrastructure projects with forward and
backward linkages to power projects, reduction in interest rate after commissioning of
projects / COD as per prevailing policy.
 Penal interest payable on default-payments.
 Commitment fees / upfront fees as may be applicable for respective borrowers from
time to time.
 Processing fee, Lead fee & facility Agent fee for private sector entities as applicable
from time to time.

5. Interest rate reset option
 Option to avail interest rate with reset after every 3 years or with reset after 10 years.
 Interest reset condition to apply from the standard due date following the date of first
disbursement after 3/10 years, as the case may be.
6. Moratorium
Moratorium on principal is available upto 6 months from the date of project commissioning / COD.
There is no moratorium on interest payment.
7. Disbursement mechanism
Disbursement will be made, against bills, as per the ‘Disbursement Schedule’ submitted by the
borrower. In case of small loans (below Rs. 20 Crs.), simplified disbursement procedure is applicable.
In the case of private sector borrower, disbursement is made through Trust and Retention Account
mechanism.
8. Interest payment
Interest is to be paid quarterly, on standard due dates i.e. 15/4, 15/7, 15/10 and 15/1 every year.
9. Repayment
Repayment is to be made in maximum years of:
State/ Central Sector Private Sector

Type of Project 3 years Reset 10 Years Reset 3 years/10 years
Clause Clause reset clause
Hydro Generation Project 20 15 12
Thermal Generation Project 15 15 12
Studies, Consultancy, Training, R&D, S&I,
5 5 5
Computerisation, Meters
All other Projects 15 12 10
The first repayment installment will become due on the standard due date immediately following the
end of moratorium period. Borrower may also opt for a shorter repayment period.
10. Security requirements
 State / Central government or bank guarantee or charge on assets, for state and central
sector entities, while charge on project assets for others. and
 Letter of Credit or Tripartite Escrow Agreement amongst the borrower, the bank PFC
for state and central sector entities while Trust and Retention Account mechanism for
others.

 Corporate and/or personal guarantee of the promoters for private sector, if the
outcome of appraisal establishes a requirement for the same.
 Other securities, as may be necessary.
11. Exposure Limit

Maximum Admissible Exposure to entities would be linked to the exposure available in terms
of Prudential Norms adopted by PFC from time to time, as under:
a. For state/central sector Borrowers:
State Sector As per OPS Norms As per Prudential Norms

Borrowers
Category A+ 100% 150% of PFC’s Net worth and 1.30 times
security coverage for exposure above 100%
Category A 100% 150% of PFC’s Net worth and 1.35 times
Category B 80% 125% of PFC’s Net worth and 1.40 times
Category C 25% 25%
b. Private Borrowers:
Single Company Single Group of Companies
Basic Limit 15% 25%
Additional Exposure for

5% 10%
Infrastructure Loan
Total 20% 35%
Source: http://www.pfc.gov.in/termloan.pdf

Annexure-V
Year Total Tariff (Rs/KWh)
1 2.553
2 2.553
3 2.553
4 2.553
5 2.553
6 2.5748
7 2.5912
8 2.6095
9 2.6299
10 2.6523
11 2.6769
12 2.7038
13 2.5091
14 2.5729
15 2.6392
16 2.7081
17 2.7799
18 2.8545
19 2.932
20 3.0127
21 3.0966
22 3.1839
23 3.2746
24 3.369
25 3.4672

ANNEXURE VI: INPUTS
Project No. of units 2

Capacity
Capacity per unit MW 660
Total project capacity MW 1320
Project Cost Without IDC Rs 5925.00

Crores
IDC Rs 1166.86
Crores
With IDC Rs 7091.86
Crores
Financing Plan Equity (20%) Rs 5318.89

Crores
Debt (75%) Rs 1772.96
Crores
Upfront Equity (35%) Rs 620.54
Crores
Sub debt as part of equity (20%) Rs 354.59
Crores
Pre COD p.a. 11.50%
Post COD p.a. 11.25%
Working Capital p.a. 13.00%
Repayment Repayment Period Years 10

Moratorium Period Months 6
Principle Repayment Start Date Date Jul-2013
Principle Repayment End Date Date Jan-2023
Interest Repayment Start Date Date Jan-2012
Interest Repayment End Date Date Jan-2023
PPA Details PPA with BEL(including all units) MW

% of Total Capacity 80.00%
PPA Tariff Rs / AS Given
unit Annexure V
No. of years Years 25
Selling through Merchant Basis (including all MW
units)
% of Total Capacity 20.00%
PPA Tariff Rs / 3 with escalation
unit of 5%
No. of years Years 25
Reduction Due to Wheeling 5%
Tax Rates Corporate Tax 33.99%

MAT 11.33%

ANNEXURE VI: ASSUMPTION
Technical Parameters GSHR Kcal/KWH 2250

Auxiliary Consumption % 9%
Plant load factor % 85%
O&M Escalation 4%
O&M Expense for COD yr(2010-2011) Rs. 13.08
Lakh/MW/yr
Fuel : Primary Fuel Price Rs/tonne 750

Price Escalation p.a. 5%
Gross Calorific Value Kcal/Kg 4700
Secondary Fuel Price Rs/tonne 25000

Gross Calorific Value Kcal/L 10000
Secondary Fuel Consumption ml/KWH 1
Price Escalation % 4%
Transportation & Handling Charges Rs/tonne 235.86

Escalation % 5%
Working Capital Coal Stock months 2

Limits
Secondary Fuel months 2
O&M Expenses months 1
Maintenance Spares (% of O&M Expense) % 20%
Receivables from Energy Sales months 2
Depreciation Rate For Tariff Calculation p.a 5.28%

Land & Site Development Rs Crores 0
Depreciation for IT Machinery 25%

Calculation
Building 10%
Others Discount Rate (as per CERC norms as on 13%

24-09-2007)
Return on Equity 15.50%
Project Life Years 25

ANNEXURE VI (A): DEBT SERVICING
Year ending March 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
0 1 2 3 4 5 6 7 8 9 10 11
Debt Outstanding 5318.89 4919.98 4388.09 3856.20 3324.31 2792.42 2260.53 1728.64 1196.75 664.86 132.97 0.00
April 0.00 0.00 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97
July 0.00 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 0.00
Repayments
October 0.00 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 0.00
Principle
January 0.00 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 132.97 0.00
Total FY Repayment 0.00 398.92 531.89 531.89 531.89 531.89 531.89 531.89 531.89 531.89 531.89 132.97
Cumulative Principle 0.00 398.92 930.81 1462.70 1994.59 2526.47 3058.36 3590.25 4122.14 4654.03 5185.92 5318.89
Repayment
April 0.00 162.89 150.67 134.39 118.10 101.81 85.52 69.23 52.94 36.65 20.36 4.07
July 0.00 162.89 146.60 130.31 114.02 97.73 81.45 65.16 48.87 32.58 16.29 0.00
Payments
Interest
October 0.00 162.89 142.53 126.24 109.95 93.66 77.37 61.08 44.80 28.51 12.22 0.00
January 162.89 154.75 138.46 122.17 105.88 89.59 73.30 57.01 40.72 24.43 8.14 0.00
Total Yearly Interest payments 162.89 643.42 578.26 513.11 447.95 382.79 317.64 252.48 187.32 122.17 57.01 4.07
Total Debt Servicing 162.89 1042.34 1110.15 1045.00 979.84 914.68 849.53 784.37 719.21 654.06 588.90 137.04

ANNEXURE VI (B): IDC
Project Phasing Month Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug-
May-09
2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2009
FY 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2010 2010
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Total 1.80%
Percentage 100.00% 2.10% 2.10% 2.09% 1.30% 1.30% 1.30% 1.12% 1.12% 1.12% 1.80% 1.80% 1.80% 1.80% 127.65
Amount 7091.86 148.93 148.93 148.22 92.19 92.19 92.19 79.43 79.43 79.43 127.65 127.65 127.65 127.65 1599.21
Upfront Equity 620.54 308.62 173.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Upfront Debt 1861.61 0.00 135.02 244.32 244.32 244.32 231.46 25.72 0.00 0.00 0.00 0.00 0.00 0.00 127.65
Matching Equity 1152.43 0.00 0.00 0.00 0.00 0.00 0.00 61.72 69.44 73.30 53.04 53.04 53.04 48.22 0.00
Matching Debt 3457.28 0.00 0.00 0.00 0.00 0.00 0.00 144.02 162.02 171.03 123.77 123.77 123.77 112.52 0.00
Total Equity 1772.96 308.62 173.60 0.00 0.00 0.00 0.00 61.72 69.44 73.30 53.04 53.04 53.04 48.22 0.00
Total debt 5318.89 0.00 135.02 244.32 244.32 244.32 231.46 169.74 162.02 171.03 123.77 123.77 123.77 112.52 127.65
Sub debt component 354.59 308.62 173.60 0.00 0.00 0.00 0.00 61.72 69.44 29.58 0.00 0.00 0.00 0.00 0.00
Pure equity 1418.37 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 43.72 53.04 53.04 53.04 48.22
0.00
component
Interest 1166.86 0.00 0.65 2.46 4.81 7.15 9.43 11.35 12.94 14.54 15.95 17.13 18.32 19.45 13.52

Project
Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10
Phasing
2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011
15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.50% 1.50% 1.50%
Percentage 127.65 127.65 127.65 127.65 127.65 127.65 127.65 127.65 127.65 127.65 127.65 127.65 127.65 106.38 106.38 106.38
Amount 1726.87 1854.52 1982.17 2109.83 2237.48 2365.14 2492.79 2620.44 2748.10 2875.75 3003.40 3131.06 3258.71 3365.09 3471.47 3577.84
Upfront
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Equity
Upfront
127.65 127.65 127.65 127.65 127.65 127.65 117.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Debt
Matching
0.00 0.00 0.00 0.00 0.00 0.00 2.66 31.91 31.91 31.91 31.91 31.91 31.91 26.59 26.59 26.59
Equity
Matching
0.00 0.00 0.00 0.00 0.00 0.00 7.98 95.74 95.74 95.74 95.74 95.74 95.74 79.78 79.78 79.78
Debt
Total
0.00 0.00 0.00 0.00 0.00 0.00 2.66 31.91 31.91 31.91 31.91 31.91 31.91 26.59 26.59 26.59
Equity
Total debt 127.65 127.65 127.65 127.65 127.65 127.65 124.99 95.74 95.74 95.74 95.74 95.74 95.74 79.78 79.78 79.78
Sub debt
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
component
Pure
equity 0.00 0.00 0.00 0.00 0.00 0.00 2.66 31.91 31.91 31.91 31.91 31.91 31.91 26.59 26.59 26.59
component
Interest 14.85 16.18 17.51 18.84 20.17 21.50 22.81 23.96 24.96 25.96 26.95 27.95 28.95 29.86 30.69 31.53

Project
Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
Phasing
2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 2012 2012 2012
31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 4.35% 4.35% 4.35% 4.50% 4.50% 4.50% 2.00% 2.00% 1.00%
Percentage 212.76 212.76 212.76 212.76 212.76 212.76 308.50 308.50 308.50 319.13 319.13 319.13 141.84 141.84 70.92
Amount 3790.60 4003.35 4216.11 4428.87 4641.62 4854.38 5162.87 5471.37 5779.87 6099.00 6418.13 6737.27 6879.10 7020.94 7091.86
Upfront
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Equity
Upfront
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Debt
Matching
53.19 53.19 53.19 53.19 53.19 53.19 77.12 77.12 77.12 79.78 79.78 79.78 35.46 35.46 17.73
Equity
Matching
159.57 159.57 159.57 159.57 159.57 159.57 231.37 231.37 231.37 239.35 239.35 239.35 106.38 106.38 53.19
Debt
Total Equity 53.19 53.19 53.19 53.19 53.19 53.19 77.12 77.12 77.12 79.78 79.78 79.78 35.46 35.46 17.73
Total debt 159.57 159.57 159.57 159.57 159.57 159.57 231.37 231.37 231.37 239.35 239.35 239.35 106.38 106.38 53.19
Sub debt
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
component
Pure equity
53.19 53.19 53.19 53.19 53.19 53.19 77.12 77.12 77.12 79.78 79.78 79.78 35.46 35.46 17.73
component
Interest 32.77 34.43 36.10 37.76 39.42 41.08 43.12 45.53 47.94 50.39 52.88 55.38 57.18 58.29 59.12

ANNEXURE VI(C): WORKING CAPITAL
Year Ending March 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
1 2 3 4 5 6 7 8 9 10 11 12 13 14
ITEMS
Nor
m
Primary fuel 2 month 48.88 102.06 106.56 111.25 116.15 121.27 126.62 132.20 138.04 144.14 150.51 157.16 164.11 171.38
Secondary 2 month
8.19 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38
fuel
O&M 1 month
7.19 16.08 17.00 17.97 19.00 20.09 21.24 22.45 23.74 25.09 26.53 28.05 29.65 31.35
Expense
Maintenanc 20% O&M
e Spares (1%
17.27 38.59 40.80 43.14 45.60 48.21 50.97 53.89 56.97 60.23 63.67 67.31 71.16 75.23
of capital
cost)
Receivables 2 month
from Energy 152.23 304.46 304.46 304.46 304.46 307.06 309.01 311.20 313.63 316.30 319.23 322.44 299.22 306.83
Sales
WORKING CAPITAL
Total Working Capital 233.76 477.58 485.20 493.20 501.59 513.01 524.22 536.12 548.75 562.14 576.32 591.34 580.53 601.17
Increase In Working Capital 233.76 243.82 7.62 8.00 8.40 11.41 11.21 11.90 12.64 13.38 14.18 15.02 -10.81 20.64
WORKING CAPITAL DEBT
Working Capital Debt 175.32 358.19 363.90 369.90 376.20 384.76 393.16 402.09 411.56 421.60 432.24 443.51 435.40 450.88
Increase In Working Capital
175.32 182.86 5.71 6.00 6.30 8.56 8.41 8.92 9.48 10.04 10.64 11.27 -8.11 15.48
Debt
CURRENT ASSETS
Total Current Assets 226.57 461.50 468.20 475.22 482.59 492.92 502.98 513.67 525.02 537.04 549.79 563.30 550.88 569.82
Increase in Current Assets 226.57 234.93 6.70 7.03 7.37 10.33 10.06 10.68 11.35 12.03 12.75 13.50 -12.42 18.94

Year Ending March 31 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
15 16 17 18 19 20 21 22 23 24 25
ITEMS
Norm
Primary fuel 2 month 178.97 186.90 195.18 203.84 212.89 222.34 232.22 242.54 253.33 264.60 276.38
Secondary fuel 2 month 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38
O&M Expense 1 month 33.14 35.04 37.04 39.16 41.40 43.77 46.27 48.92 51.71 54.67 57.80
Maintenance 20% O&M
Spares (1% of 79.54 84.09 88.90 93.98 99.36 105.04 111.05 117.40 124.12 131.21 138.72
capital cost)
Receivables from 2 month
314.74 322.95 331.52 340.41 349.66 359.28 369.29 379.70 390.51 401.77 413.48
Energy Sales
WORKING CAPITAL
Total Working Capital 622.76 645.35 669.02 693.77 719.68 746.81 775.20 804.93 836.05 868.64 902.76
Increase In Working Capital 21.59 22.59 23.66 24.76 25.90 27.13 28.40 29.73 31.12 32.59 34.12
WORKING CAPITAL DEBT
Working Capital Debt 467.07 484.02 501.76 520.33 539.76 560.10 581.40 603.70 627.04 651.48 677.07
Increase In Working Capital Debt 16.19 16.94 17.75 18.57 19.43 20.35 21.30 22.30 23.34 24.44 25.59
CURRENT ASSETS
Total Current Assets 589.62 610.32 631.98 654.62 678.28 703.04 728.93 756.02 784.33 813.96 844.96
Increase in Current Assets 19.80 20.70 21.66 22.64 23.66 24.76 25.89 27.09 28.32 29.63 31.00

ANNEXURE VI (D): EFFECTIVE TARIFF
Year Ending March 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
1 2 3 4 5 6 7 8 9 10 11 12 13
Energy Supplied Million

thr PPA Units
3577.65 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31
on Merchant Units 894.41 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83
Basis
Total Energy Million

Supplied Units
4472.07 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14
Tariff for CSEB Rs/Unit 2.55300 2.55300 2.55300 2.55300 2.55300 2.57480 2.59120 2.60950 2.62990 2.65230 2.67690 2.70380 2.57290
Tariff Assumed Rs/Unit

for Sale on 3.00000 3.06000 3.12120 3.18362 3.24730 3.31224 3.37849 3.44606 3.51498 3.58528 3.65698 3.73012 3.88082
Merchant basis
Tariff Assumed RS/Unit
Less Wheeling
2.85000 2.90700 2.96514 3.02444 3.08493 3.14663 3.20956 3.27375 3.33923 3.40601 3.47413 3.54362 3.68678
Effective Tariff Rs/unit 2.61240 2.62380 2.63543 2.64729 2.65939 2.68917 2.71487 2.74235 2.77177 2.80304 2.83635 2.87176 2.79568

Year Ending March 31 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
14 15 16 17 18 19 20 21 22 23 24 25

thr PPA Units
7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31
on Merchant Units 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83
Basis
Total Energy Million

Supplied Units
8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14
Tariff for CSEB Rs/Unit 2.50910 2.63920 2.70810 2.77990 2.85450 2.93200 3.01270 3.09660 3.18390 3.27460 3.36900 3.46720
Tariff Assumed Rs/Unit

for Sale on 3.80473 3.95844 4.03761 4.11836 4.20072 4.28474 4.37043 4.45784 4.54700 4.63794 4.73070 4.82531
Merchant basis
Tariff Assumed RS/Unit
Less Wheeling
3.61449 3.76051 3.83572 3.91244 3.99069 4.07050 4.15191 4.23495 4.31965 4.40604 4.49416 4.58405
Effective Tariff Rs/unit 2.73018 2.86346 2.93362 3.00641 3.08174 3.15970 3.24054 3.32427 3.41105 3.50089 3.59403 3.69057

ANNEXURE VI (E): FUEL

Yr Ending March 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
1 2 3 4 5 6 7 8 9 10 11 12
Primary Fuel Cost Rs

Crores
293.29 612.39 639.34 667.49 696.89 727.61 759.70 793.22 828.23 864.82 903.03 942.96
Secondary Fuel Rs
Cost Crores
0.14 0.29 0.30 0.31 0.32 0.34 0.35 0.36 0.38 0.39 0.41 0.43
Total Fuel Cost Rs
Crores
293.43 612.68 639.64 667.80 697.22 727.95 760.05 793.58 828.61 865.21 903.44 943.39
Capacity MW
Commissioned
880.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00
Energy Generated Million
Units
4914.36 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72
Energy Sold Million
Units
4472.07 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14
Energy Transmitted Million

thr PPA Units
3577.65 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31
on Merchant Basis Units
894.41 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83
Capital Cost Rs
Component Crores
per
4255.12 6382.67 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86
month
Equity Cost Rs
Component Crores
per
3191.34 4787.01 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89
month
Debt Cost Rs
Component Crores
per
1063.78 1595.67 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96
month

Yr Ending March 31 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
13 14 15 16 17 18 19 20 21 22 23 24 25
Primary Fuel Cost Rs

Crores
1028.26 1073.80 1121.38 1171.09 1223.04 1277.31 1334.03 1393.30 1455.23 1519.95 1587.58 1658.27 1732.13
Secondary Fuel Rs
Cost Crores
0.46 0.48 0.50 0.52 0.54 0.56 0.58 0.61 0.63 0.66 0.68 0.71 0.74
Total Fuel Cost Rs
Crores
1028.72 1074.28 1121.88 1171.61 1223.57 1277.87 1334.61 1393.90 1455.86 1520.61 1588.27 1658.97 1732.87
Capacity MW
Commissioned
1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00 1320.00
Energy Generated Million
Units
9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72 9828.72
Energy Sold Million
Units
8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14

thr PPA Units
7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31 7155.31
on Merchant Basis Units
1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83 1788.83
Capital Cost Rs
Component Crores
per
7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86 7091.86
month
Equity Cost Rs
Component Crores
per
5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89 5318.89
month
Debt Cost Rs
Component Crores
per
1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96
month

ANNEXURE VI (F): TARIFF

Year Ending March 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
1 2 3 4 5 6 7 8 9 10 11 12 13 14
VARIABLE TARIFF
Energy Available Million
4472.07 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14
for Sale Units
Variable Fuel Cost Rs Crores 293.43 612.68 639.64 667.80 697.22 727.95 760.05 793.58 828.61 865.21 903.44 943.39 985.12 1028.72
Variable Fuel Cost Rs/KWH
0.66 0.69 0.72 0.75 0.78 0.81 0.85 0.89 0.93 0.97 1.01 1.05 1.10 1.15
per Unit
FIXED TARIFF
Interest Rs Crores 162.89 643.42 578.26 513.11 447.95 382.79 317.64 252.48 187.32 122.17 57.01 4.07 0.00 0.00
Return on Equity Rs Crores 123.66 247.33 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81
Depreciation Rs Crores 196.61 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 106.79 106.79
Cumulative Rs Crores
196.61 458.77 720.92 983.07 1245.22 1507.37 1769.53 2031.68 2293.83 2555.98 2818.13 3080.29 3187.07 3293.86
Depreciation
O&M Expense Rs Crores 86.33 192.97 204.01 215.68 228.02 241.06 254.85 269.43 284.84 301.13 318.35 336.56 355.82 376.17
Interest on Rs Crores
16.44 44.77 45.49 46.24 47.02 48.09 49.15 50.26 51.45 52.70 54.03 55.44 54.42 56.36
Working Capital
Income Tax Rs Crores 46.75 66.93 71.11 133.65 186.70 234.27 272.30 304.37 331.89 355.86 377.07 391.96 387.67 336.23
Fixed Cost Rs Crores 632.68 1457.58 1435.83 1445.64 1446.65 1443.18 1430.89 1413.50 1392.46 1368.82 1343.43 1324.99 1179.50 1150.36
Fixed Cost per Unit Rs/KWH 1.41 1.63 1.61 1.62 1.62 1.61 1.60 1.58 1.56 1.53 1.50 1.48 1.32 1.29
Fixed Cost w/o ROE Rs Crores 509.01 1210.25 1161.02 1170.83 1171.84 1168.37 1156.08 1138.69 1117.65 1094.01 1068.62 1050.18 904.69 875.55
Fixed Cost per Unit Rs/KWH
1.42 1.69 1.62 1.64 1.64 1.63 1.62 1.59 1.56 1.53 1.49 1.47 1.26 1.22
w/o ROE
Total Cost per Unit Rs/KWH
2.08 2.38 2.34 2.38 2.42 2.45 2.47 2.48 2.49 2.50 2.50 2.52 2.37 2.37
w/o ROE
Total Cost per Unit Rs/KWH 2.0709 2.3147 2.3205 2.3629 2.3970 2.4274 2.4496 2.4676 2.4833 2.4978 2.5121 2.5362 2.4202 2.4363
Effective Tariff Rs/KWH 2.61240 2.62380 2.63543 2.64729 2.65939 2.68917 3.20956 3.27375 2.77177 2.80304 2.83635 2.87176 2.73018 2.79568
PV Calculation
PV Factor 0.88 0.78 0.69 0.61 0.54 0.48 0.43 0.38 0.33 0.29 0.26 0.23 0.20 0.18
DISCOUNTED TARIFF
Variable Tariff Rs/KWH 0.58 0.54 0.50 0.46 0.42 0.39 0.36 0.33 0.31 0.28 0.26 0.24 0.22 0.21
Fixed Tariff Rs/KWH
1.25 1.28 1.11 0.99 0.88 0.78 0.68 0.59 0.52 0.45 0.39 0.34 0.27 0.23
including ROE
Total Tariff Rs/KWH
1.83 1.81 1.61 1.45 1.30 1.17 1.04 0.93 0.83 0.74 0.65 0.59 0.49 0.44
including ROE
Total Tariff w/o Rs/KWH
1.84 1.86 1.62 1.46 1.31 1.18 1.05 0.93 0.83 0.74 0.65 0.58 0.48 0.43
ROE
Effective Tariff Rs/KWH 2.31 2.05 1.83 1.62 1.44 1.29 1.36 1.23 0.92 0.83 0.74 0.66 0.56 0.51

Year Ending March 31 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
13 14 15 16 17 18 19 20 21 22 23 24 25
VARIABLE TARIFF
Energy Available for Million
8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14 8944.14
Sale Units
Variable Fuel Cost Rs Crores 985.12 1028.72 1074.28 1121.88 1171.61 1223.57 1277.87 1334.61 1393.90 1455.86 1520.61 1588.27 1658.97
Variable Fuel Cost Rs/KWH
1.10 1.15 1.20 1.25 1.31 1.37 1.43 1.49 1.56 1.63 1.70 1.78 1.85
per Unit
FIXED TARIFF
Interest Rs Crores 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Return on Equity Rs Crores 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81 274.81
Depreciation Rs Crores 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79
Cumulative Rs Crores
3187.07 3293.86 3400.64 3507.43 3614.21 3721.00 3827.79 3934.57 4041.36 4148.14 4254.93 4361.71 4468.50
Depreciation
O&M Expense Rs Crores 355.82 376.17 397.68 420.43 444.48 469.91 496.78 525.20 555.24 587.00 620.58 656.07 693.60
Interest on Working Rs Crores
54.42 56.36 58.38 60.50 62.72 65.04 67.47 70.01 72.68 75.46 78.38 81.43 84.63
Capital
Income Tax Rs Crores 387.67 336.23 336.38 335.48 333.68 331.01 327.53 323.31 318.32 312.59 306.06 298.76 290.64
Fixed Cost Rs Crores 1179.50 1150.36 1174.05 1198.01 1222.48 1247.56 1273.38 1300.12 1327.83 1356.65 1386.61 1417.86 1450.47
Fixed Cost per Unit Rs/KWH 1.32 1.29 1.31 1.34 1.37 1.39 1.42 1.45 1.48 1.52 1.55 1.59 1.62
Fixed Cost w/o ROE Rs Crores 904.69 875.55 899.24 923.20 947.67 972.75 998.57 1025.31 1053.02 1081.84 1111.80 1143.05 1175.66
Fixed Cost per Unit Rs/KWH
1.26 1.22 1.26 1.29 1.32 1.36 1.40 1.43 1.47 1.51 1.55 1.60 1.64
w/o ROE
Total Cost per Unit Rs/KWH
2.37 2.37 2.46 2.54 2.63 2.73 2.82 2.93 3.03 3.14 3.25 3.37 3.50
w/o ROE
Total Cost per Unit Rs/KWH 2.4202 2.4363 2.5137 2.5937 2.6767 2.7629 2.8524 2.9458 3.0430 3.1445 3.2504 3.3610 3.4765
Effective Tariff Rs/KWH 2.73018 2.79568 2.86346 2.93362 3.00641 3.08174 3.15970 3.24054 3.32427 3.41105 3.50089 3.59403 3.69057
PV Calculation
PV Factor 0.20 0.18 0.16 0.14 0.13 0.11 0.10 0.09 0.08 0.07 0.06 0.05 0.05
DISCOUNTED TARIFF
Variable Tariff Rs/KWH 0.22 0.21 0.19 0.18 0.16 0.15 0.14 0.13 0.12 0.11 0.10 0.09 0.09
Fixed Tariff Rs/KWH
0.27 0.23 0.21 0.19 0.17 0.15 0.14 0.13 0.11 0.10 0.09 0.08 0.08
including ROE
Total Tariff Rs/KWH
0.49 0.44 0.40 0.37 0.34 0.31 0.28 0.26 0.23 0.21 0.20 0.18 0.16
including ROE
Total Tariff w/o Rs/KWH
0.48 0.43 0.39 0.36 0.33 0.30 0.28 0.25 0.23 0.21 0.20 0.18 0.16
ROE
Effective Tariff Rs/KWH 0.56 0.51 0.46 0.42 0.38 0.34 0.31 0.28 0.26 0.23 0.21 0.19 0.17

ANNEXURE VI (G): PROFIT & LOSS
1 2 3 4 5 6 7 8 9 10 11 12 13
Year ending March 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Revenue from energy sale 913.38 1826.75 1826.75 1826.75 1826.75 1842.35 1854.08 1867.18 1881.77 1897.80 1915.40 1934.65 1795.34
to BEL
Revenue from energy sale 254.91 520.01 530.41 541.02 551.84 562.88 574.14 585.62 597.33 609.28 621.46 633.89 646.57
on Marchant Basis
Total Revenue 1168.28 2346.76 2357.16 2367.77 2378.59 2405.23 2428.22 2452.80 2479.10 2507.08 2536.87 2568.54 2441.91
Expenses
Fuel 283.55 590.99 615.88 641.84 668.90 697.11 726.53 757.19 789.17 822.51 857.26 893.51 931.30
O&M expenses 86.33 192.97 204.01 215.68 228.02 241.06 254.85 269.43 284.84 301.13 318.35 336.56 355.82
Depreciation 196.61 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 106.79
Interest payments 179.21 687.85 623.38 558.94 494.53 430.41 366.26 302.17 238.15 174.20 110.32 58.73 53.58
Total expenditure 745.71 1733.96 1705.43 1678.61 1653.60 1630.73 1609.79 1590.95 1574.31 1559.99 1548.09 1550.95 1447.48
Profit before tax, PBT 422.58 612.80 651.74 689.16 724.99 774.49 818.43 861.85 904.79 947.09 988.78 1017.59 994.43
PBT+Deprn on books 619.19 809.41 913.89 951.31 987.14 1036.65 1080.58 1124.00 1166.95 1209.24 1250.93 1279.74 1256.58
PBT for IT purposes -99.93 -98.58 220.17 419.58 578.03 720.54 835.16 932.42 1016.50 1090.32 1156.26 1203.81 1195.19
Payable tax 47.88 69.43 74.84 142.61 196.47 244.91 283.87 316.93 345.51 370.60 393.01 409.18 406.25
Applicable tax 47.88 69.43 74.84 142.61 196.47 244.91 283.87 316.93 345.51 370.60 393.01 409.18 406.25
Corporate tax -33.97 -33.51 74.84 142.61 196.47 244.91 283.87 316.93 345.51 370.60 393.01 409.18 406.25
MAT 47.88 69.43 73.84 78.08 82.14 87.75 92.73 97.65 102.51 107.31 112.03 115.29 112.67
PAT 374.70 543.37 576.90 546.55 528.52 529.58 534.56 544.92 559.29 576.49 595.76 608.41 588.18
Accumulated PAT 374.70 918.07 1494.97 2041.51 2570.03 3099.61 3634.17 4179.09 4738.38 5314.87 5910.64 6519.05 7107.23
Depreciation as per IT Act 719.12 907.99 693.71 531.74 409.11 316.11 245.43 191.58 150.45 118.92 94.67 75.93 61.38
Machinery depreciation 658.53 823.17 617.38 463.03 347.27 260.46 195.34 146.51 109.88 82.41 61.81 46.36 34.77
Machinery, WDV 3292.67 2469.50 1852.13 1389.09 1041.82 781.37 586.02 439.52 329.64 247.23 185.42 139.07 104.30
Buildings depreciation 60.59 84.82 76.34 68.71 61.83 55.65 50.09 45.08 40.57 36.51 32.86 29.58 26.62
Buildings, WDV 848.21 763.39 687.05 618.35 556.51 500.86 450.78 405.70 365.13 328.62 295.75 266.18 239.56

14 15 16 17 18 19 20 21 22 23 24 25
Year ending March 31, 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
Revenue from energy sale
1840.99 1888.43 1937.73 1989.10 2042.48 2097.94 2155.68 2215.71 2278.18 2343.08 2410.62 2480.89
to BEL
Revenue from energy sale
659.50 672.69 686.14 699.87 713.87 728.14 742.71 757.56 772.71 788.16 803.93 820.01
on Marchant Basis
Total Revenue 2500.49 2561.12 2623.87 2688.97 2756.35 2826.08 2898.38 2973.27 3050.89 3131.24 3214.55 3300.90
Expenses
Fuel 970.70 1011.79 1054.63 1099.31 1145.90 1194.48 1245.14 1297.98 1353.07 1410.54 1470.46 1532.96
O&M expenses 376.17 397.68 420.43 444.48 469.91 496.78 525.20 555.24 587.00 620.58 656.07 693.60
Depreciation 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79
Interest payments 55.45 57.41 59.45 61.59 63.83 66.17 68.62 71.18 73.86 76.66 79.59 82.66
Total expenditure 1509.11 1573.67 1641.30 1712.17 1786.42 1864.22 1945.74 2031.18 2120.72 2214.56 2312.92 2416.02
Profit before tax, PBT 991.38 987.45 982.57 976.81 969.93 961.86 952.64 942.09 930.17 916.68 901.63 884.88
PBT+Deprn on books 1098.17 1094.24 1089.36 1083.59 1076.72 1068.65 1059.43 1048.88 1036.96 1023.47 1008.42 991.67
PBT for IT purposes 1048.14 1053.12 1055.29 1055.13 1052.75 1048.31 1042.06 1033.94 1024.03 1012.23 998.60 983.05
Payable tax 356.26 357.96 358.69 358.64 357.83 356.32 354.19 351.44 348.07 344.06 339.42 334.14
Applicable tax 356.26 357.96 358.69 358.64 357.83 356.32 354.19 351.44 348.07 344.06 339.42 334.14
Corporate tax 356.26 357.96 358.69 358.64 357.83 356.32 354.19 351.44 348.07 344.06 339.42 334.14
MAT 112.32 111.88 111.33 110.67 109.89 108.98 107.93 106.74 105.39 103.86 102.16 100.26
PAT 635.12 629.50 623.88 618.17 612.10 605.54 598.45 590.66 582.10 572.63 562.21 550.74
Accumulated PAT 7742.35 8371.85 8995.73 9613.90 10226.00 10831.54 11429.99 12020.64 12602.74 13175.37 13737.58 14288.32
Depreciation as per IT Act 50.03 41.12 34.07 28.46 23.97 20.33 17.37 14.94 12.92 11.24 9.82 8.62
Machinery depreciation 26.07 19.56 14.67 11.00 8.25 6.19 4.64 3.48 2.61 1.96 1.47 1.10
Machinery, WDV 78.22 58.67 44.00 33.00 24.75 18.56 13.92 10.44 7.83 5.87 4.41 3.30
Buildings depreciation 23.96 21.56 19.40 17.46 15.72 14.15 12.73 11.46 10.31 9.28 8.35 7.52
Buildings, WDV 215.60 194.04 174.64 157.18 141.46 127.31 114.58 103.12 92.81 83.53 75.18 67.66

ANNEXURE VI (H): CASH FLOW

1 2 3 4 5 6 7 8 9 10 11 12 13
Year ending, March
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
31
Inflow
Equity 1772.96 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Debt 5551.01 241.85 7.28 7.63 8.00 11.00 10.76 11.42 12.13 12.84 13.60 14.41 -11.47
Term loan 5318.89 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WC debt 232.11 241.85 7.28 7.63 8.00 11.00 10.76 11.42 12.13 12.84 13.60 14.41 -11.47
PBT 422.58 612.80 651.74 689.16 724.99 774.49 818.43 861.85 904.79 947.09 988.78 1017.59 994.43
Depreciation 196.61 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 106.79
Total cash inflow 7746.55 1116.80 921.16 958.94 995.14 1047.64 1091.35 1135.42 1179.07 1222.08 1264.53 1294.15 1089.74
Outflow
Project expenditure 7091.86 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WC expenditure 224.92 232.96 6.36 6.66 6.98 9.91 9.61 10.21 10.84 11.48 12.17 12.89 -13.07
Tax 47.88 69.43 74.84 142.61 196.47 244.91 283.87 316.93 345.51 370.60 393.01 409.18 406.25
Loan repayments 0.00 398.92 531.89 531.89 531.89 531.89 531.89 531.89 531.89 531.89 531.89 132.97 0.00
Total cash outflow 7364.66 701.31 613.08 681.16 735.34 786.71 825.37 859.03 888.24 913.97 937.07 555.04 393.17
Excess / shortfall 381.89 415.49 308.08 277.78 259.81 260.93 265.97 276.40 290.83 308.11 327.46 739.11 696.57
Opening balance 0.00 381.89 797.38 1105.46 1383.25 1643.05 1903.98 2169.96 2446.36 2737.19 3045.30 3372.76 4111.87
Closing balance 381.89 797.38 1105.46 1383.25 1643.05 1903.98 2169.96 2446.36 2737.19 3045.30 3372.76 4111.87 4808.44

14 15 16 17 18 19 20 21 22 23 24 25
Year ending, March 31 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
Inflow
Equity 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Debt 19.94 20.85 21.80 22.82 23.86 24.95 26.12 27.32 28.59 29.90 31.30 32.76
Term loan 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WC debt 19.94 20.85 21.80 22.82 23.86 24.95 26.12 27.32 28.59 29.90 31.30 32.76
PBT 991.38 987.45 982.57 976.81 969.93 961.86 952.64 942.09 930.17 916.68 901.63 884.88
Depreciation 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79
Total cash inflow 1118.11 1115.09 1111.16 1106.41 1100.58 1093.60 1085.54 1076.20 1065.55 1053.37 1039.72 1024.42
Outflow
Project expenditure 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WC expenditure 18.24 19.05 19.90 20.82 21.74 22.71 23.75 24.82 25.94 27.10 28.34 29.63
Tax 356.26 357.96 358.69 358.64 357.83 356.32 354.19 351.44 348.07 344.06 339.42 334.14
Loan repayments 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total cash outflow 374.51 377.01 378.60 379.45 379.57 379.03 377.94 376.25 374.01 371.16 367.76 363.77
Excess / shortfall 743.60 738.08 732.56 726.96 721.01 714.57 707.60 699.95 691.53 682.21 671.95 660.66
Opening balance 4808.44 5552.05 6290.12 7022.68 7749.64 8470.65 9185.21 9892.81 10592.76 11284.29 11966.50 12638.46
Closing balance 5552.05 6290.12 7022.68 7749.64 8470.65 9185.21 9892.81 10592.76 11284.29 11966.50 12638.46 13299.11

ANNEXURE VI (I): BALANCE SHEET
1 2 3 4 5 6 7 8 9 10 11 12 13
Year ending; March 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Liabilities
Shareholders' equity 2147.66 2691.03 3267.93 3814.48 4342.99 4872.58 5407.14 5952.06 6511.35 7087.84 7683.60 8292.01 8880.19
Equity capital 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96
Reserves and surplus 374.70 918.07 1494.97 2041.51 2570.03 3099.61 3634.17 4179.09 4738.38 5314.87 5910.64 6519.05 7107.23
Loan funds 5551.01 5393.94 4869.33 4345.07 3821.18 3300.29 2779.16 2258.69 1738.93 1219.88 701.60 583.03 571.56
Term loan 5318.89 4919.98 4388.09 3856.20 3324.31 2792.42 2260.53 1728.64 1196.75 664.86 132.97 0.00 0.00
WC loan 232.11 473.96 481.24 488.87 496.87 507.87 518.63 530.05 542.18 555.02 568.62 583.03 571.56
Total liabilities 7698.67 8084.97 8137.26 8159.55 8164.18 8172.86 8186.30 8210.75 8250.28 8307.72 8385.20 8875.04 9451.76
Assets
Project assets 7091.86 6829.71 6567.56 6305.40 6043.25 5781.10 5518.95 5256.80 4994.64 4732.49 4470.34 4208.19 4101.40
Depreciation 196.61 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 262.15 106.79
Current assets 224.92 457.88 464.24 470.90 477.87 487.78 497.39 507.60 518.44 529.93 542.10 554.98 541.91
Coal stock 47.24 98.45 102.60 106.92 111.43 116.13 121.03 126.14 131.46 137.02 142.81 148.85 155.14
Secondary fuel 8.19 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38
Maintenance spares 17.27 38.59 40.80 43.14 45.60 48.21 50.97 53.89 56.97 60.23 63.67 67.31 71.16
Receivables from energy sale 152.23 304.46 304.46 304.46 304.46 307.06 309.01 311.20 313.63 316.30 319.23 322.44 299.22
Cash 381.89 797.38 1105.46 1383.25 1643.05 1903.98 2169.96 2446.36 2737.19 3045.30 3372.76 4111.87 4808.44
Total assets 7698.67 8084.97 8137.26 8159.55 8164.18 8172.86 8186.30 8210.75 8250.28 8307.72 8385.20 8875.04 9451.76
Difference 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

14 15 16 17 18 19 20 21 22 23 24 25
Year ending; March 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
31,
Liabilities
Shareholders' 9515.32 10144.81 10768.69 11386.86 11998.96 12604.50 13202.95 13793.61 14375.71 14948.33 15510.54 16061.29
equity
Equity capital 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96 1772.96
Reserves and 7742.35 8371.85 8995.73 9613.90 10226.00 10831.54 11429.99 12020.64 12602.74 13175.37 13737.58 14288.32
surplus
Loan funds 591.50 612.35 634.15 656.97 680.83 705.78 731.89 759.21 787.80 817.70 849.00 881.76
Term loan 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WC loan 591.50 612.35 634.15 656.97 680.83 705.78 731.89 759.21 787.80 817.70 849.00 881.76
Total liabilities 10106.82 10757.16 11402.84 12043.83 12679.79 13310.28 13934.84 14552.82 15163.51 15766.04 16359.55 16943.05
Assets
Project assets 3994.62 3887.83 3781.04 3674.26 3567.47 3460.69 3353.90 3247.12 3140.33 3033.54 2926.76 2819.97
Depreciation 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79 106.79
Current assets 560.15 579.21 599.11 619.93 641.67 664.38 688.13 712.94 738.89 765.99 794.33 823.96
Coal stock 161.71 168.55 175.69 183.13 190.89 198.99 207.43 216.23 225.41 234.98 244.96 255.38
Secondary fuel 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38 16.38
Maintenance 75.23 79.54 84.09 88.90 93.98 99.36 105.04 111.05 117.40 124.12 131.21 138.72
spares
Receivables from 306.83 314.74 322.95 331.52 340.41 349.66 359.28 369.29 379.70 390.51 401.77 413.48
energy sale
Cash 5552.05 6290.12 7022.68 7749.64 8470.65 9185.21 9892.81 10592.76 11284.29 11966.50 12638.46 13299.11
Total assets 10106.82 10757.16 11402.84 12043.83 12679.79 13310.28 13934.84 14552.82 15163.51 15766.04 16359.55 16943.05
Difference 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

ANNEXURE VI (J): RATIOS
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Cash outflow -1276.81 -1299.40 -1581.12 -1767.66 0.00

Cash inflow 544.78 1457.83 1418.23 1322.78 1239.65 1175.62 1115.50 1060.77 1010.05 962.17
Cash to the -1276.81 -1299.40 -1581.12 -1222.88 1457.83 1418.23 1322.78 1239.65 1175.62 1115.50 1060.77 1010.05 962.17
project
Project IRR,life 16.30%
NPV, life @ 12% 1319.80
Cash outflow -1276.81 -1299.40 -1581.12 -1767.66 0.00

Cash inflow 374.70 918.07 1494.97 2041.51 2570.03 3099.61 3634.17 4179.09 4738.38 5314.87
Cash to the equity -1276.81 -1299.40 -1581.12 -1392.96 918.07 1494.97 2041.51 2570.03 3099.61 3634.17 4179.09 4738.38 5314.87
holder
Equity IRR, life 20.33% MIRR
NPV, life @ 12% 31677.95
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
916.36 876.16 696.57 743.60 738.08 732.56 726.96 721.01 714.57 707.60 699.95 691.53 682.21 671.95 660.66
916.36 876.16 696.57 743.60 738.08 732.56 726.96 721.01 714.57 707.60 699.95 691.53 682.21 671.95 660.66
5910.64 6519.05 7107.23 7742.35 8371.85 8995.73 9613.90 10226.00 10831.54 11429.99 12020.64 12602.74 13175.37 13737.58 14288.32
5910.64 6519.05 7107.23 7742.35 8371.85 8995.73 9613.90 10226.00 10831.54 11429.99 12020.64 12602.74 13175.37 13737.58 14288.32

Annexure – VI (K): DSCR Calculation
1 2 3 4 5 6 7 8 9 10 11
Year ending March 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Debt servicing sources 544.78 1146.21 1418.23 1322.78 1239.65 1175.62 1115.50 1060.77 1010.05 962.17 916.36
Debt servicing requirements 162.89 1042.34 1110.15 1045.00 979.84 914.68 849.53 784.37 719.21 654.06 588.90
DSCR 3.34 1.10 1.28 1.27 1.27 1.29 1.31 1.35 1.40 1.47 1.56
Minimum DSCR 1.10
Average DSCR 1.35
Maximum DSCR 3.34

REFERENCES
i. Chandra Prasanna, Project Management, 4th Edition, 2005.

ii. Financial Management: by I.M.Pandey
iii. A Report on Indian Energy Sector by SBICAP.
iv. PFC website: www.pfcindia.com
v. www.cerc.gov.in
vi. www.powermin.nic.in
vii. Operational policy statement of PFC
viii. Project Appraisal Manual
ix. Entity Appraisal Manual
x. Integrated Project Rating Model Manual
xi. Computerized model of PFC for Entity Appraisal
xii. Detailed Project Report of the Company
105 Project Appraisal & Integrated Project

FINAL REPORT Power Project Financing

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FINAL REPORT Power Project Financing

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Project Appraisal and Integrated Project Rating of

Thermal Power Project at Power Finance Corporation Ltd.

A SUMMER PROJECT STUDY SUBMITTED IN PARTIAL

LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT, DELHI

1 Project Appraisal and Integrated Project Rating

9.1.14 Environmental Aspects .............................................................................................54

2 Project Appraisal and Integrated Project Rating

Shyam Sunder Gupta

3 Project Appraisal and Integrated Project Rating

BTG Boiler, Turbine & Generator

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

COD Commercial Operation Date

DPR Detailed Project Report

EPC Engineering, procurement & construction Contract

FSA Fuel Supply arrangement/agreement

FTA Fuel Transport Agreement

GCV Gross Calorific Value

GoI Government of India

IPP Independent Power Producer

Kcal Kilo Calories

KWh Kilo Watt Hour

MoP Ministry of Power

MoEF Ministry of Environment & Forest

NOC No Objection Certificate

O&M Operations & Maintenance

PFC Power Finance Corporation Ltd.

PGCIL Power Grid Corporation of India Limited

PLF Plant Load Factor

PPA Power Purchase Agreement

SPV Special Purpose Vehicle

TRA Trust and Retention Account

4 Project Appraisal and Integrated Project Rating

5 Project Appraisal and Integrated Project Rating

1. Indian Power Sector

1.1 Introduction to the Power Sector in India

6 Project Appraisal and Integrated Project Rating

Installed Generation Capacities

7 Project Appraisal and Integrated Project Rating

Total installed capacity is 148,265.4 MW

1.3 Structural and regulatory reform conducive to PSP

1.2 Opportunities of growth in the Indian power sector

8 Project Appraisal and Integrated Project Rating

1.5 Growth Blue-print of Ministry of Power:

• An investment requirement of US$ 90 billion in generation of which US$ 19 billion is

9 Project Appraisal and Integrated Project Rating

1.6 Ultra Mega Power Projects by Government of India

1.7 Transmission: Policy Initiatives

1.7.1 Guidelines for encouraging competition in development of transmission projects

10 Project Appraisal and Integrated Project Rating

High Voltage Transmission Capacity:

Capacity MVA Circuit KM

765/800 KV 1,500 439

400 6,170 7,390

220 7,863 4,927

HVDC 3,000 5,872

11 Project Appraisal and Integrated Project Rating

Some of the more evident reasons include the following:

Private investment in Power sector

12 Project Appraisal and Integrated Project Rating

1.9 Highlights of performance of Power sector in 2007

(i) Capacity Addition: 9050 MW (5093 MW)

1.10 Total Installed Capacity: