Financing a power project

1. Issues and Challenges of Power
Projects
K Biswal
Director (Finance)
NTPC Limited
An Analytical Perspective
PROJECT MEET 2015

2. NTPC’s Plan Perfect – 128 GW by 2032
Power Mix STANDALONE SUBS./JV Total
Coal 34425 4229 38654
Gas 4017 1967 5984
Hydro 800 0 800
RE 110 0 110
TOTAL 39352 6196 45548
45548 MW
23,004 MW
48,338 MW
11,110 MW 82,452 MW
45,548 MW
68552 MW
76,662 MW
128000 MW 1,28,000 MW
Sept2015 Capacity Under Construction Invited Bids from Vendor FR approved or being prepared Total by FY : 2032
Vision to Maintain
Leadership Position in
India, Current
Development Pipeline of
82.5 GW

3. Problems faced duging Project Execution
PPA Land
Environment
Clearance
Water Coal Linkage
Basic elements for investment approval of Power Projects
 All our investment decisions and due-dilligence covers all the above aspects
 All Problems are somewhat lies with above five factors either directly or indirectly
Without PPAs,
setting up of
Project is
suicidal
 Physical possession
and LA is taking
long time
 Expectations of
PAPs growing day
by day
 Acceptability of
R&R Policies
 NGO/Green Lobby
 Environment
clearance of
Power plant is
linked to
environmental
clearance of its
fuel linkage
 Water scarcity
for industrial
use
 Delays in CWC
clearance
 State Govt.
insistence on
Pondage/canal
lining
 Delays in
getting
environment/fo
rest clearance
 Coal Demand &
Supply
Mismatch

4. Timely Execution is key for Project Bankability
Sr.No. Project/Unit
**
Inv App.
Date
COD -
Inv App.
COD -
Revised
Delay (in
Months)
1 Barh-1 Feb'2005 Nov'2014 Mar'2018 41
2 Bongaigaon Jan'2008 Oct'2011 Mar'2017 66
3 BRBCL Feb'2007 Jun'2014 Jun'2017 37
4 KBUNL Mar'2010 Feb'2013 Mar'2016 38
ROE and
RONW can
be
improved
by
improving
the ratio of
CWIP to
Gross Fixed
Assets
(Out of Fixed
Asset**s of
Rs.1,35,000
cr., CWIP is
around
Rs.56,000 cr.
which is not
giving any
return)
** List is just indicative only

5. CWIP to Gross Block
(%) (Actual)
2014-15 42%
2013-14 38%
2012-13 36%
Therefore, in order to achieve our target of
128 GW by 2032, we have only one option, i.e.
to expedite conversion of CWIP into generating
assets so as maintain our profits & cash flows.
As on date the ratio of CWIP to Gross Block is at
ALARMING level of 42% - This needs to be
managed at around 35%.
CWIP to FIXED ASSETS TO BE CAPPED
Pace of Conversion of CWIP into Operating asset need to be matched with the pace of
Award of new projects otherwise NTPC Balance Sheet would come under stress.

6. Impact of Delay
In case, project is delayed beyond
the time period stipulated in the
Tariff Regulations.
Loss of ROE by 0.5% for the entire
life of the project.
Capital cost incurred up to Cut off
Date only will be admitted.
Capital cost beyond Cut off Date is
subject to prudence check by CERC.
For Example, in the recent tariff order
issued by CERC for Farakka-III, the
disallowed capital cost on account of cost
overrun is
IEDC 7.60 Crs
IDC 79.21 Crs
Price escalation 21.33 Crs
TOTAL 108.14 Crs
Because of above, there is a gap of about
5% between gross block as per books of
accounts (Rs 2222.49 Crs) and allowed gross
block by CERC.

7. Impact of delay in projects over DCO and IEDC & EDC
NTPC
versus IPP
Capital cost of NTPC
plants on an average
34% higher than IPPs.
Avg. Timelines for
completion of super
critical pants is 49 months
by IPPs whereas NTPC’s
Sipat I – 86 Months & Barh
II – 62 Months.
75
Months
78
Months
50
Months
34
Months
72
Months
3,229
6,946
3,746
6,444
2,256
4,161
10,413
4,843
7,313
2,861
1,264 1,566
530
1,754
694
3,007
4,314
1,780
2,237
958
Koldam Barh-I Bongaigaon Sipat-I Tapovan
Original DCO RCE
Original (IEDC+IDC) Revised (IEDC+EDC)

8. Risk and Cost of Packages
 Risk and Cost Provision should act as
deterrent for the errant contractor
 Cost and Risk provision exist only on
paper
 Cost and Risk leads
Litigation/arbitration
 Hence Cost and Risk is a misnomer in
NTPC
 Contract closing become nightmare
Remedy Proposed
 Sub-contracting to the right Vendor
can be ensured
 Assessment of Vendor should be on
360 degree basis
 Foreign Vendor should be
scrutinized thoroughly
 Policy advocacy to check this menace
 Alternate Dispute Resolution

9. Vendor Assessment
INDURE
BGR
TECPRO McNally
TPE
Energo
Non-Performance
Poor Financial Conditions
Lack of Quality Manpower
 QR need to be Package-wise
 Vendor Rating – To be part of QR
 Objective Assessment of Capability
& manpower deployed

10. Key Take-aways
1. We should strive hard to generate Affordable Power.
2. We should shed the notion that every money spent can be passed on to the
consumer. All round efforts should launched to contain cost by bringing in
Prudence on Capex and Opex Spending to earn Rank on the Merit Order.
3. Pit-head and port linked stations should be preferred for expansion.
4. We should excel on all operational parameters and contain fuel cost by
maximum.
5. High Fixed Cost may pose PPA denial.

11. Thanking you all