Components of ARR of GenCo• Fixed Charges – Return on Equity – Interest on loan capital – Depreciation & AAD; – Interest on working capital; – Operation and maintenance expenses; – Cost of secondary fuel oil (for coal-based and lignite fired generating stations only); – Special Allowance in lieu of R&M or separate Compensation Allowance• Energy Charges• Special allowance in lieu of R&M or separate compensation allowance, wherever applicable.
Norms of Operations• Availability of generation plant – 85%• PLF for incentives – 80%• Secondary Fuel Oil Consumption for Coal genCo – 1 ml/ kWh• Secondary Fuel Oil Consumption for Lignite fired genCo – 2 ml/ kWh• Auxiliary energy consumption for Coal Plants – 8.5%• Auxiliary energy consumption for Gas and Liquid Plants – 3% for Combined Cycle, 1% for Open cycle• Limestone consumption norms• Normative Annual Plant Availability factor for Hydro plants redefined in new regulation• NAPAF for AC Transmission system – 98%• NAPAF for DC bipole Transmission link – 92%• NAPAF for DC back to back Transmission link – 95%
Return on Equity• 30% of the Capital Investment in Plant, Machinery and its offices – Where actual equity is more than 30%, excess equity shall be treated as debt – Where actual equity is less than 30%, actual equity shall be considered for Return• Base Pretax Return 15.5%/(1-tax rate) (Earlier Post tax 14%)• Base pretax Return 16.0 %/(1-tax rate) for projects commissioned after 01.04.2009 within prescribed Timeline• The Tax on income shall be trued at actual every year after assessment
Interest on Loan Capital• The benefit of swapping of loan shall be shared between genCo/ TransCo and beneficiary in ratio 1: 2• Normative loan repayment equal to depreciation• Accordingly interest shall be calculated on balance normative loan at weighted average interest rate.• Cost of hedging and foreign exposure shall be recoverable from beneficiary
Depreciation & AAD Regulation 2004 Regulation 2009Coal Thermal Plant 3.60% +AAD 5.28% for 12 yearsGas/Diesel/ Liquid 6.00% +AAD 5.28% for 12 yearsFuel Thermal PlantHydro Plant 2.57% +AAD 5.28% for 12 yearsTransmission Line 5.28% for 12 yearsLand and Civil 0% 0.00%Building Licence fee/ lease 3.34% lifeDepreciation D & AAD DDepreciation after Remaining unavailed depreciation todebt repayment period spread on remaining useful life of asset.
Interest on Working Capital Regulation 2004 Regulation 2009Coal/ Lignite/ 1.5 month for pit head plants at 1.5 month for pit head plants atlimestone cost normative Plant availability normative Plant availabilityCoal/ Lignite/ 2 month for non-pit head plants 2 month for non-pit head plants atlimestone cost at normative Plant availability normative Plant availabilitySecondary Fuel 2 month at normative Plant 2 month at normative Plantoil Stock availability availabilityGas Station One month of Oil/ Gas One month of Oil/ GasMaintenance 1% of GFA in first year 20% of O&M Cost for Coal/ LigniteSpares Thereafter escalated by 6% Plant every year 30% of O&M Cost for Gas Plant 15% of O&M Cost for Hydro PlantReceivables 2 months fixed + variable 2 months fixed + variable charges charges calculated at target calculated at target availability availabilityO&M Cost One month One monthInterest rate SBI PLR as on 1.4.2004 SBI PLR as on 1.4.2009 Notional charge Notional charge
Operations & Maintenance Cost• As given in table.• The charges schedule approved
Other matters in generation & Transmission• Rebate 2% for payment through L/c• Late Payment Surcharge 1.25% after 60 days from date of billing.• UI Charges – Variation between actual generation and scheduled generation
Comparison of Key parametersParameter Regulation 2004 Regulation 2009Useful Life of Coal/ 25 years 25 yearsLignite Thermal PlantsUseful Life of Gas & 15 Years 25 YearsLiquid FuelAC/ DC S/s 25 years 25 yearsHydro Stations 35 years 35 yearsTransmission Lines 25 years 35 yearsReturn on Equity 14% 15.50% 16.00%Refinancing the Loan Cost to be borne by Cost to be borne by beneficiary if there is net beneficiary if there is net benefit benefit All benefit to the Benefit to be shared in beneficiary GenCo 67%: beneficiary 33%
CDM benefit• CDM revenue of 1st year for GenCo/ TransCo – 100%• CDM revenue of 2nd year for GenCo/ TransCo – 90%• CDM revenue of 3rd year for GenCo/ TransCo – 80%• CDM revenue of 4th year for GenCo/ TransCo – 70%• CDM revenue of 5th year for GenCo/ TransCo – 60%• CDM revenue of 6th year for GenCo/ TransCo – 50%• CDM revenue of subsequent year for GenCo/ TransCo – 50%