India - Private Power Utilities TEC) Project

 Private power utilities (TEC) project Report No: ; Type: Report/Evaluation Memorandum ; Country: India; Region: South Asia; Sector: Thermal; Major Sector: Electric Power & Other Energy; ProjectID: P009900 India: Private Power Utilities (TEC) Project (Loan 3239-IN) The Implementation Completion Report (ICR) for the India Private Power Utilities (TEC) Project (Loan 3239-IN, approved in FY90) was prepared by the South Asia Regional Office. The Bank loan for US$98 million equivalent, was approved on June 26, 1990. The loan closed as stipulated in the Loan Agreement on June 30, 1995, and it was fully disbursed. Cofinancing was provided by the International Finance Corporation, Switzerland, and a conglomerate of local banks led by the Industrial Credit and Investment Corporation of India. Comments from the cofinanciers and a summary of the Borrower's review of the project are included in the Appendix of the ICR. The principal project objectives were to increase the privately owned Tata Electric Companies' (TEC) peak generating capacity, increase capacity utilization and mitigate the sulfur dioxide emissions of TEC's existing thermal generating units, and improve system reliability and quality of supply in the Bombay area. The institutional and sectoral objectives were to support increased private sector power generation and encourage improved tariff structures and load management procedures. The project included the following components: (i) construction of a 150 MW pumped storage (PS) scheme at the existing Bhira hydroelectric power plant with associated transmission expansion; (ii) construction of a 180 MW gasfired combined cycle (CC) unit at the Trombay power station; and (iii) extension of the flue gas desulfurization (FGD) facility at the Trombay power station. The overall objectives of the project were substantially achieved, except for the commissioning of the Bhira PS facility. TEC's peak generation capacity has increased with the commissioning of the CC plant, which has also lowered TEC's generation costs because of its significantly higher thermal efficiency. The additional FGD unit at Trombay has helped reduce emissions for this power station. The Bhira PS unit was mechanically completed but a section of the penstock ruptured during commissioning tests, apparently due to faulty design, and has set back the completion of the project. Preliminary estimates indicate that this facility can be prepared for commissioning tests by July 1996. TEC's system reliability and the quality of power supply have improved. Finally, TEC's tariffs were adjusted to capture a larger share of the consumers' willingness to pay. The internal rate of return of the project was estimated at 26 percent at appraisal and reestimated at 20.4 percent in the ICR, with the decline mainly attributable to an increase in the project's component costs as a result of the Gulf War. The outcome of the project is rated as satisfactory, as all objectives were achieved except for the delay in completing the Bhira PS scheme. The sustainability of the physical achievements of the project is rated as likely, given TEC's strong financial performance and excellent operating record. Institutional development is rated as substantial, as valuable knowhow on pumped storage and CC technology was transferred. The Bank's performance is rated as satisfactory. These ratings are in agreement with those in the ICR. TEC represents a good example of a developing country power utility whose financial performance can be described as strong, and a project where commitments made during negotiations and covenants under the loan were fulfilled. The success of the project supports the Bank's strategy to move towards increased private participation in power supply, and is likely to encourage similar investments by private developers in the future. The ICR is satisfactory; it provides a concise discussion of the implementation history of the project, the problems encountered, and the approaches used to resolve them. No audit is planned.