Project Profile on Mott MacDonald

Bagasse Base High-efficiency Co-generation Power Plant iNDEXTb

Sector Agro and Food Processing

Sub - sector Agri-infrastructure
Project No AF-32
Project/Product Bagasse base high efficiency Co-generation power plant

Project Description
Indian Sugar mills both in the private and co-operative / joint sector have accepted the importance of
implementing high efficiency grid connected cogeneration power plant for generating exportable
surplus. Gujarat, being one of the leading sugarcane producer and processor states, has the potential
to set up Bagasse base co-generation power plants.

The proposed project envisages setting up of a Bagasse based co-generation power plant, either to
be added in an existing Sugar Mill or as a stand alone unit for power generation.

Project Concept
The proposed project proposes to utilize Sugarcane Bagasse which is a co-product of Sugarcane
crushing, to generate steam from high efficiency, high pressure boiler and run turbine for generation
of electricity. Sugarcane Bagasse is an ideal renewable source of energy and is readily available from
Sugar mills, while Sugarcane crushing is undertaken by Sugar mills. This will also help in improving
operational economics of such sugar unit(s) and it will also give opportunity for additional income,
should the unit feed surplus power to the state electric grid.

Such project can come up as an addition to an existing Sugar mill or as a common utility infrastructure
project near a cluster of Sugar mills in South Gujarat.

Market & Growth Drivers

Increasing price of petroleum crude and other fossil fuels, world over and in India in the last two
decades, has forced us to look for cheaper, renewable sources of energy. Use of bio-mass generated
from Agriculture and Agro-process industries are the prime and readily available sources of renewable
energy. These bio-mass are used directly as a source of energy or used as a fuel for boilers to
generate high pressure steam, which in turn will be used for running turbines and generate electric
power.

Energy demand is fast increasing with rapid industrialization and urbanization in India. In a developing
economy like India, generally energy demand is increasing at much faster pace than supply.
Increasing demand also leads to increase in cost of energy, hence high power tariffs for consumers.
This is also applicable to a highly industrialized state like Gujarat.

India is the second largest producer of Sugar cane in world after Brazil, with an estimated production
of 258 million MT in the year 2005 and which is estimated to touch to 329.60 million tones by the year
2015.There are approx. 575 sugar mills operating in India and the energy potential of India from
cogeneration is estimated at 19,500 MW, comprising around 3,500 MW of surplus power from

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Project Profile on Mott MacDonald
Bagasse Base High-efficiency Co-generation Power Plant iNDEXTb

bagasse based cogeneration, and another approx. 16,000 MW of power from other surplus biomass
materials.
WADE (World Alliance for Decentralized Energy) estimates India’s total electric generation capacity
as 495.9 Tetra Wh and it is expected that the current prevailing energy mix, consists of 65-70% fossil
fuel based thermal energy, will remain at this level over the next 10-20 years. India’s renewable
energy market is currently estimated at US $500 million, which is growing annually by 15%. As per the
estimates made by Government of India, of the available 100,000 MW potential from Bio-mass based
renewable energy around 3500 MW only is exploited till date.

The average cane crushing unit size in India is 2500 TCD (Tons Cane crushing per Day), relatively
much lower than Brazil (9200 TCD) and Thailand (10300 TCD). However, there are several units in
Gujarat having capacity of more than 5000 TCD. In fact some mills are having surplus Bagasse and
generating power for longer period than their own requirement and are feeding this power to state
power supply grid and thereby generate additional income for the unit.

Bagasse from 1 ton cane crushing can produce 100 KwH of electricity. Normally, 2500 TCD project
can produce 2.5 MW of Electricity, after using Bagasse as a fuel for steam generation in boiler. State
wise Cogeneration potential is summarized in following table:

State Wise Potential of Bagasse Base Cogeneration in India

Sr. No. State Potential (MW)

1 Maharashtra 1,250
2 Uttar Pradesh 1,250
3 Tamil Nadu 500
4 Karnataka 500
5 Andhra Pradesh 300
6 Bihar 300
7 Gujarat 250
8 Punjab 150
9 Other 500
10 Total 5,000
SOURCE: MNES, NEW DELHI, 2004

Growth Drivers
 Growing demand for power in India in general and Gujarat in particular will also attract investment
in co-generation.
 Constantly increasing cost of Fossil Fuels, has forced us to look for renewable source of energy
like Bio-mass based cogeneration (Including Bagasse base Co-generation) in India and Gujarat.
 Environment friendly means of power generation with lower emissions of carbon dioxide and
other gases than from conventional fossil fuel generation will also help in driving the growth of
such power plants.

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Project Profile on Mott MacDonald
Bagasse Base High-efficiency Co-generation Power Plant iNDEXTb

 Electricity generation using renewable source of energy at point of utilization will help in curtailing
high T & D (Transmission and Distribution) losses substantially and there by make higher electric
power at point of utilization.

Why Gujarat?
 Ready demand of electricity in Gujarat offers ample potential for eco-friendly Bagasse based
co-generation in Gujarat.
 Gujarat is having well developed HT power grid net work for easy transmission and
distribution, as required basic infrastructure of SEB is already in place.
 Attractive incentives package and relatively better Power Purchase Policies (PPP) of SEB
(State Electricity Board) as compared to other neighboring states.
 There is ready availability of technical and managerial manpower in Gujarat for operation and
maintenance of such Bagasse based co-generation power plants.

Technology / Process
The amount of energy that can be extracted from Bagasse is mainly dependent on two main criteria:
moisture content and the technology used for energy production.

Bagasse Based Power Cogeneration Process

Steam Turbo Steam & Sugar

generator Power Process
Bagasse Boiler
Steam mill
drives Surplus
Electricity to
grid

Suggested Project Capacity and Project Cost

In the proposed cogeneration project 3 Mw capacity power plant is suggested for a 2500 TCD Cane
crushing unit in south Gujarat.

The estimated project cost is INR 150 million (US $ 3.33 million) as summarized in following table:
Estimated Cost of Project and Means of Finance
Sr.No. Cost of project INR in Million
1 Land and Land development 8.00
2 Building and Civil Works cost 14.00
3 Plant & Machinery 3 MW Co-generation plant 100.00
4 Miscellaneous Fixed Assets 4.00
5 Preliminary & Pre-operative 7.20
6 Provision for contingencies 4.20

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Project Profile on Mott MacDonald
Bagasse Base High-efficiency Co-generation Power Plant iNDEXTb

Sr.No. Cost of project INR in Million

Total Fixed Assets 137.40
7 Margin Money for working capital 12.60
Estimated Block Capital Cost of Project 150.00
Means of Finance
8 Promoters contribution 42.86
9 Term loan 107.14
Total Means of Finance 150.00

As indicated above, the proposed project will require an approx 16000 sq. mt of land with proposed
built up area of 4000 sq. mt. The unit is proposed to have an installed capacity of 2500 TCD. The total
fixed cost of the project is estimated at INR 137.40 million and INR 12.60 million is the working capital
margin which adds upto total capital cost of INR 150 million. The unit being proposed to cater to
domestic need only, it is suggested to have a Debt equity ratio of 2:1. Thus, the estimated term loan
amounts to INR 107.14 million and Equity at INR 42.86 million.

Utilities required
The proposed unit will have utility requirement in terms of electric power and water. The proposed
project will have its captive power requirement of approx. 150 HP for fuel feeding system and water
pumping. The project will require 60 KL water per hour, i.e it will require 1440 KL water per day.

Manpower required
The proposed project will have manpower requirement of 60 persons, which will include 6 managers,
6 plant supervisors and 12 plant operators as technical labour. The unit would also require 4
accountants & office staff, 24 casual labourers for movement of materials and boiler to be fired and 8
other people that will include driver, peons and security persons.

Suggested Location
Sugarcane Bagasse based co-generation project is suggested in South Gujarat. This can come up as
an extension of existing Sugar mill or as a stand alone unit near a cluster of Sugar mills in Surat,
Bharuch, Narmada or Vadodara districts.

Project Time Line

Proposed Bagasse base cogeneration plant can be set up in a period of 10 to 12 months for existing
Sugar mill or as stand alone project near to a cluster of Sugar mills approx. 12 to 14 months.

Financial Indicators
Proposed project will get incentives as renewable source of energy and term loan funding at
concessional interest rates. In the light of these facts the suggested Debt: Equity ratio is 2:1 and
indicative IRR will be 51% for initial 10 years operation period. These financial ratios have been
summarized in following table:

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Project Profile on Mott MacDonald
Bagasse Base High-efficiency Co-generation Power Plant iNDEXTb

Key Financial Indicators

Sr. No Financial Ratios 1st year 2nd year 3rd year

A Break-Even Point in % capacity 41.62 36.36 31.28

B Debt-service Coverage Ratio 1.80 2.24 2.78

C Average DSCR 2.28

D Return on Investment (ROI) 36.51% 39.65% 42.82 %

E IRR for a 10 Years Project Period 51 %

Clearances Required
The proposed unit will have to register their manufacturing capacity with Industrial Entrepreneur’s
Memorandum (IEM), Secretariat of Industrial Approvals, Ministry of Industries and Government of
India, as it will have plant and machinery investment of more than INR 10 million.

The proposed unit will also require registration with Ministry of Non-conventional Energy, Government
of India to get incentives for their Bagasse based cogeneration plant. The unit will obtain necessary
clearance from state electricity board and will make power purchase agreement with them for selling
surplus power available from cogeneration plant during off season.

Agencies to be Contacted

Industrial Extension Bureau

Mott MacDonald India

Gujarat Agro Industries Corporation Ltd.

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