ADB Power Projects in India

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ADB Power Projects in India

In August 2007, the Asian Development Bank (ADB) released its evaluation of energy sector lending in India which concluded that its aid has generally been successful as a result of targeting state electricity sectors that were thoroughly committed to change. The study highlights the following: ao ADB began its power sector operations in India in 1986; by mid-2007, there have been 24 public sector loans for 21 projects, with a total value of $4.6 billion (29% of total public sector lending to India). ADB provided an additional $337 million of loans through its private sector operations. These loans were supported by 50 technical assistance (TA) projects, valued at $23.5 million. A further $1.9 billion in public sector loans are in ADBs funding pipeline. ADB loans have focused on transmission and distribution and more recently on power sector restructuring. Private sector operations are now taking a larger role in financing generation. ADB provided program assistance to three state electricity boards/SEBs: Assam, Gujarat, and Madhya Pradesh. The major issues facing the Indian power sector are fourfold: (i) New investments in the energy sector will depend on the commercial viability of the distribution sector to guarantee the power purchase agreements or prudential requirements. (ii) Funding for the power sector, and particularly the distribution sector, will depend upon reforms and to make this sector self-funding. The generation and transmission sectors are likely to become self-funding. (iii) The availability of secure, reliable, and well-managed sources of fuel supplies to the generation sector and other energy intensive industries is threatened by shortages and will need to be developed in tandem with the industry expansion. (iv) Managing the environmental impacts of the electricity sector is increasing in importance, as the system is expanding and the primary fuel source is coal.

o

o The impacts of electricity reforms have increased competitiveness and led to ademonstration effect among the states electricity sectors and their regulators, adding momentum to the central governments impetus for reform. The positive outcomes have isolated national anti-reform movements. The effects of reforms are incremental, rather than big bang, and follow an Indian development model rather than one imposed by outside assistance agencies. The reforms are gradually shifting the financial risks from the consumer to the management of the electricity sector.

o In all three SEBs evaluated (Assam, Gujarat, and Madhya Pradesh,), unbundlinghas been achieved and new separate corporate entities with clean balance sheets have been established as a result of restructuring. The restructuring included partial state assumption of liabilities, more transparent subsidies, renegotiation of power purchase agreements, rationalization of state-owned generation to promote merit order dispatch, and changed organizational structures and cultures that were re-focused on service delivery. All states

By VIOLETA P. CORRAL, Public Services International Research Unit-Asia (www.psiru.org), August 2009.a

See: Energy Sector in India Building on Success for More Results, Sector Assistance Program Evaluation, ADB Operations Evaluation Department/OED, Aug 2007 (pp iii-vi) http://www.adb.org/Documents/Reports/SAPE/IND/SAP-IND-2007-17.pdf

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indicated that ADB assistance was catalytic in providing the impetus to implementing the reform process.

o The transformation process for unbundling the distribution companies is welldeveloped but has not been completed. In Assam, there is a concern that the split into three distribution companies may not have been optimal; concerns that the required future staff expertise and numbers, together with unbalanced customer mixes, may lead to at least one distribution companys being unsustainable.

o The outcome of TA support to the regulators in Assam and in Gujarat wassuccessful and is sustainable. The state regulators have developed a high degree of independence and are proactively regulating the SEBs generation, transmission, and distribution sectors, with increased performance-based regulation replacing normative, cost-based regulation.

o Loans to Power Grid Corp were timed to extend and upgrade the grid, connectnew supply to the grid, facilitate interregional transfer of power to optimize costs and grid operations, and to gain efficiencies in service delivery at a time of national shortages. Continued financial support will be required for Power Grid to develop its interregional transmission capacity from 9,500 megawatts (MW) to over 30,000 MW by 2012.

Over the period 20082010, support for infrastructure development will remain the core focus of ADBs India assistance strategy; energy projects account for 26% of total loan amount.b ADB will consolidate its operations in weak states, such as Assam, Chhattisgarh, Jammu and Kashmir, Uttarakhand, and those in the North Eastern region. ADB will assist relatively poorer states of Bihar, Jharkand, and Orissa. Energy loans include assistance to Uttaranchal, Madya Pradesh, Bihar and Himachal, Assam and Haryana, Gujarat, Jammu & Kashmir, and state-owned corporations (Power Grid Corp, National Thermal Power Corp/NTPC, Power Finance Corp, Rural Electrification Corp). Private sector operations include loan packages to Tata Power Company Ltd to undertake: (a) Mundra Ultra Mega Power Project ($750M), a 4,000 MW coal-fired power plant on a build-own-operate basis in Gujarat; (b) Wind Energy Financing Facility ($79M) to demonstrate successful implementation of large-scale wind power projects by private sector; and (c) Tata-Delhi Power Transmission/TDTL ($62M), ADBs first private sector power transmission project. TDTL is a joint venture between Tata Power and POWERGRID to evacuate power from Tala HEP in Bhutan and transfer surplus power from Indias eastern region to power-deficit northern region. A corporate financing facility will be used for capital expenditures of generation plants being developed by NTPC, the largest electric power generator in India; although an SOE, NTPC is operated as an independent commercial entity.

b

See: Country Operations Business Plan: India (2008-2010), ADB, Sep 2007 http://www.adb.org/Documents/CPSs/IND/2007/COBP-IND-2007.pdf

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TYPE OF DATE OF AMOUNT ASSISTANC APPROVA (US$) E L NORTHEAST REGION (NER) - comprised of Assam, Arunachal Pradesh, Meghalaya, Nagaland, Tripura, Mizoram, Manipur, and SikkimNorth East Region Power Development Project1 (South Asia Dept) Project is expected to include clean power Loan PROPOSED 250.0M generation, transmission, distribution, and (for OCR efficiency enhancements in power system and approval in improve the well being of the people and the Jan 2010) environmental quality. PPTA Dec 2004 0.75M Project will support Governments Power for All by 2012 efforts in NER using locally available resources including hydropower, natural gas, renewable energy sources, provision of critical transmission and distribution facilities, and support for institutional strengthening. 1. Transmission Capacity Expansion: Construction of new transmission lines (657 ckm.) and 12 substations and augmentation of existing substations. 2. Transmission and Distribution Loss Reduction: Refurbished existing substations, adoption of HVDS and LT-less systems, and installation of ADB cables. 3. Access to Power: Construction of 27 new substations, augmentation of 18 existing substations and addition of new 845 km distribution lines. 4. Distribution Financing (PPP): Investment in last-mile distribution lines, bulk metering and IT systems for billing and metering for franchisees. Loan - MFF PROPOSED (for approval 30 Sep 2009) 200.0M OCR

TITLE

DESCRIPTION

ASSAMAssam Power Sector Enhancement Investment Program (Facility Concept) 2 NAOKI SAKAI [email protected] (South Asia Dept)

ADF Asian Development Fund (concessional terms); OCR Ordinary Capital Resources (less concessional); MFF Multitranche Financing Facility

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Assam Power Sector Development Program 3 TOMOYUKI KIMURA [email protected] (South Asia Dept Project) KIYOSHI TAKEBAYASHI [email protected] (South Asia Dept Policy) CLOSED PROJECTS (TAs, approved Dec 2003) 4

(i) develop appropriate policy, legal and regulatory framework to ensure a balanced growth of power sector; (ii) enhance sector efficiencies by establishing commercial and competitive business environment; and (iii) improve financial viability of sector. (i) Improvement of transmission system; (ii) Improvement of distribution system (APDRP fund); (iii) Intensification of rural electrification; (iv) Revenue Management System; (v) Consulting Services

Policy Loan

Dec 2003 (CLOSED)

150.0M OCR

Project Loan

Dec 2003 (CLOSED)

100.0M OCR

Institutional Development for Rural Electrification; Reorganization of Assam State Electricity Board; Policy and Legal Support for Power Sector Reforms; Building Capacity of Assam Electricity Regulatory Commission Comprehensive power system master plan, with focus on transmission system expansion plans to ensure their adequacy and that they are coordinated with the existing and already planned generation expansion. TA Special Fund Nov 2008 0.9M

HIMACHAL PRADESHCapacity Building for Himachal Pradesh Power Sector Agencies 5 ANDREW [email protected] (South Asia Dept)

Himachal Clean Power Development (Facility Concept)6 ANDREW JEFFRIES [email protected] (South Asia Dept)

Help Himachal become Indias hydropower MFF - Loan Oct 2008 800.0M state. Physical investments in hydroelectric OCR power generating facilities in northwestern state of Himachal Pradesh, and nonphysical interventions in capacity development Consists of Sawra Kuddu HEP, Stage I of Kashang MFF - Tranche Oct 2008 150.0M Hydroelectric Project, and $12 million capacity 1 OCR development component; main objective is to help fulfill local demand. Physical investments will include construction of hydropower generation facilities, underground power houses, associated civil works, tunnels, river diversion and power evacuation systems. Capacity development to Himachal Pradesh Power Corporation Ltd. includes fiduciary oversight

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and governance, knowledge management, safeguards, procurement, project implementation, supervision, and monitoring capabilities. Construction of four medium to large hydropower projects -- Sawra Kuddu (111 MW), Integrated Kashang (stage I, II and III totaling 243 MW), Sainj (100 MW) and Shongtong-Karcham (402 MW).

BIHARCapacity Development of Bihar State Power Sector Agencies (Bihar Electricity Regulatory Commission/ BERC) 7 ANDREW JEFFRIES [email protected] (South Asia Dept) Bihar Power Sector Development Program 8 ANDREW JEFFRIES [email protected] (South Asia Dept) Developing the Power System Master Plan for Bihar 9 ANDREW JEFFRIES [email protected] (South Asia Dept) Support BERC in its future role in restructured power sector in Bihar. PROPOSED 0.2M (for approval June 2010) (i) establish norms of operation for the sector companies; (ii) rationalization of electricity tariff and settling up norms for disaggregated tariffs for generation, transmission and retail supply tariffs; (iii) revise existing grid code; (iv) specify security of supply, metering and energy accounting norms; (v) review and ratify financing restructuring plan; (vi) set up licensing standards; and (vii) other areas to be identified during the fact-finding mission. TA will set up twinning arrangements with Indian and international regulatory commissions for BERC members to obtain on-the-job training. (i) Meet GOIs power for all by 2012 objective, Loan PROPOSED 300.0M (ii) develop run-of-river hydropower to meet (for OCR Bihars generation gap, (iii) expand and approval rehabilitate transmission and distribution lines, March substations to improve reliability of power. 2010) Outputs include an electricity demand forecast for Bihar, determination of generation supply options, generation expansion planning and transmission planning completed by the end of May 2009, followed by distribution planning by the end of July 2009. A transmission & distribution capital works program and final project reports are currently proposed for completion by the end of September 2009. TA will prepare a project designed to support selected investments in hydropower TA Special Fund April 2008 0.6M TA Special Fund

JAMMU AND KASHMIRJammu and Kashmir State Clean Power TA Dec 2007 0.8M Japan Special Fund

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Development10 TOMOYUKI KIMURA [email protected] (South Asia Dept)

development and associated transmission system expansion to facilitate sector sustainability, and promote sector reforms in J&K to further facilitate clean power generation, transmission and distribution in J&K with minimum advance environmental and social adverse impacts. Continue promoting power sector reforms, by MFF Loan Mar 2007 620.0M financing further costs of adjustments: (i) (Facility OCR implementation of financial restructuring plan, ii) Concept) align financial restructuring plan with medium term fiscal frameworks, (iii) ensure full MFF Tranche April 2007 106.0M autonomy for power sector companies, (iv) 1 OCR improve legal and regulatory compliance, and MFF Tranche April 2007 45.0M OCR (v) enhance awareness and communication with 2 stakeholders. ADB will finance transmission MFF Tranche Aug 2007 144.0M component; construction of new transmission 3 OCR lines will remove constraints to power flow and MFF Tranche Aug 2007 90.0M OCR provide additional operational flexibility to 4 TRANSCO in its role as independent system MFF Project 5 April 2009 166.0M operator. Supply reliability will be further OCR improved and promote open access and development of intra-state and inter-state power trading by providing sufficient excess substation and line capacity to handle unplanned power transfers. Project 5: Part A (DISCOM-C): By 2012: conversion of LVD to HVD (11 kV), introduction of automatic remote meter reading, and renovation and modernization of 33/11 kV substations The draft bidding documents for contract packages (D-04, D-05, D-06, D-07) were submitted to ADB for approval in Dec 2008 which was subsequently approved in Jan 2009. Bidding documents were issued in Feb 2009 and bid closing date was extended for the 3rd time up to 23 June 2009. Awaiting submission of bid evaluation reports. [One package (D-08) was dropped from the list per DISCOM-C request since DISCOM-C intends to include it in the next tranche.]

MADYA PRADESHMadhya Pradesh Power Sector II (Investment Program)11

MUKHTOR KHAMUDKHANOV mkhamudkhanov@adb. org (South Asia Dept)

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Madhya Pradesh Power Sector Development Program 12 DAGMAR GRACZYK [email protected] (South Asia Dept)

Part B (DISCOM-E): By 2012: conversion of LVD to HVD (11 kV) and separation of agricultural feeders from village feeders - The draft bidding documents for contract packages were submitted to ADB for approval in Jan 2009 which was subsequently approved in Feb 2009. Bidding documents were issued in Feb 2009 and bid closing date was extended for the 3rd time up to 20 May 2009. Awaiting submission of bid evaluation reports. Part C (DISCOM-W): By 2012:augmentation, renovation and modernization of 33/11 kV substations, construction of new 33/11 kV substation, installation of capacitor banks in substations, construction of new and augmentation of existing 11 kV lines, and enhancement of IT systems (introduction of SCADA and remote metering reading) - Draft bidding documents for contract packages were submitted to ADB for approval in Jan 2009 which was subsequently approved in March 2009 subject to incorporation of ADB's comments. Final version was approved by ADB in June 2009. Awaiting submission of the final versions of the remaining 8 bidding documents for ADB approval. Program to facilitate restructuring power sector Program Loan; Dec 2001 150.0M in Madhya Pradesh to improve sector efficiencies Project Loan (CLOSED) OCR; and to reduce the financial transfers from State 200.0M Government into power sector. Program to instill OCR competition, corporatization, commercialization and private sector participation in power sector to improve quality and quantity of power supply to customers. Included a policy loan and a project loan. Policy framework supported: (1) Madhya Pradesh Vidyut Sudhar Vidheyak, 2000 (the Reform Act) brought into force 3 July 2001. Act was the most progressive in India at the time and includes provision for (a) restructuring of Madhya Pradesh State Electricity Board/MPSEB, (b) mandatory metering of all consumers, (c) rationalization of tariff that all classes of consumers will pay at least 75 percent of cost of supply (progressively phased over 5 years), (d) subsidies through Government budget to be allocated before subsidizing any category of consumers (e) creation of Madhya Pradesh State Electricity Regulatory Commission/MPSERC, and (f) dispute resolution between GOMP and the MPSERC by reference to Central Electricity Regulatory Commission/CERC as against reference to courts. (2) Conversion of existing MPSERC into the first MPSERC (3) Corporatization and commercialization of generation, transmission and distribution functions of MPSEB. (4) Rationalization of tariff structure and restrictions of free power supply in Madhya Pradesh (5) Financial restructuring of sector. Project loan component financed investments for metering, and transmission and distribution systems strengthening

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and upgrading.

Energy SmartFacilitating the Operations of Energy Conservation Fund in Madhya Pradesh 14 ANDREW JEFFRIES [email protected] (South Asia Dept)

TAs approved 2002 (CLOSED) 13-- Development of a Transfer Scheme for Madhya Pradesh Power Sector Reform (0.4M TA) assist MPSEB in developing a scheme under which employees would be transferred to successor entities. Cabinet approved Employment Data and Transfer Scheme, Organizational Structures, and Service Rules and Conditions in August 2003; transfer of personnel was completed in Sep 2004. Strengthening Consumer and Stakeholder Communication for Madhya Pradesh Power Sector Reform (0.15M TA). Legal Support for Madhya Pradesh Power Sector Reform (0.15M TA). Review of Electricity Legislation and Regulations (1.0M TA) TA will provide impetus to Energy Efficiency TA Nov 2008 1.7M program by financially supporting activities of ATF ECF created for this purpose. Denmark Renewable Energy

UTTARANCHALUttaranchal Power Sector Investment Program (Facility Concept) (formerly Chhattisgarh Power Sector (a) Raise output and efficiency of Uttaranchal power sector; and (b) ensure fully inclusive power services for all type of consumers in Uttaranchal: residential, industrial, commercial, and public administrations. ADB-supported investments will increase power supplies by MFF Loan March 2006 300.0M OCR 41.92M OCR

MFF (Subproject 1)

Jan 2007

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Development Program)15

HIROKI KOBAYASHI [email protected] (South Asia Dept)

Uttaranchal Power Sector Capacity Building 16

2012, from large and small plants, by adding new assets, and rehabilitating existing ones. Transmission expansion will enable a more efficient transfer of power within state, and sale of excess power to Northern Region grid. Small hydropower plants investments expected to generate carbon credits. Subprojects include design, construction, and commissioning of: (a) 10-MW Madhyamaheswar Hydropower Plant; (b) 9-MW Kaldigad Hydropower Plant; (c) 4-MW Kaliganga I-Hydropower Plant; (d) 6-MW Kaliganga II-Hydropower Plantand (e) Hydrological Information System. Strengthen existing feasibility, environmental, and social impact studies: (i) expansion of highvoltage transmission system; (ii) small hydropower development (325 MW) and rehabilitation of existing mini-hydropower facilities (