India - Renewable Resources Development Project

ZA/S C VV- / Document of The World Bank FOR OFFICIAL USE ONLY MICRTuE TCHE CO-)FXY l.pcirt. No. :11240-TN TType: (SAR) Report?No. 11240-IIN ' i tle: RENEWABLE RESOtUPCES DEVELOPMEN Author: MAGWDA,ENA MANZO Ext. :81466 r Oom:G-2051 Dept.: AS2EG STAFF APPRAISAL REPORT INDIA RENEWBLE RESOURCES DEVELOPMENT PROJECT NOVIER 30, 1992 Energy Operations Division India Country Department South Asia Region This document has a reicted distribuon and may be used by redpients only in the perfonnance of their offic:id duties. Its contents may ot otherwise be disclosed without World Bsnk adhorization.  CURRENCY EQUIVALENTS (as of July, 1992) Currency Unit - Rupees (Rs) Rs 1.00 = Paise 100 Rs 1,000,000 = US$38,462 US$1.00 = Rs 26 MEASURES AND EQUIVALENTS 1 Meter tm) = 39.37 inches (in) 1 Cubic Meter (m8) = 1.31 cubic yard (cu yd) = 35.35 cu. ft. 1 Ton (t) = 1,000 kilograms (kg) = 2,200 lbs 1 Kilovolt (kV) = 1,000 volts (V) 1 Kilovolt-ampere (kVA) = 1,000 volts-amperes (VA) 1 Megawatt (MW) = 1,000 kilowatts (kW) = l million watts 1 Kilowatt-hour (kWh) = 1,000 watt-hours 1 Megawatt-hour (MWh) = 1,000 kilowatts-hours 1 Gigawatt-hour (GWh) = 1,000,000 kilowatt-hours ABBREVIATIONS AND ACRONYMS DANIDA Danish International Development Agency DEA Department of Economic Affairs SIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan ESMAP Energy Sector Management Assistance Program GEF Global Environment Facility GET Global Environment Trust Fund GOI Government of India GOTN Government of Tamil Nadu IBRD International Bank for Reconstruction and Development IDA International Development Association IDBI Industrial Development Bank of India ICB International Competitive Bidding IREDA Indian Renewable Energy Development Agency Limited LCB Local Competitive Bidding LICB Limited International Competitive Bidding MNES Ministry of Non-Conventional Energy Sources MIS Management Information System NCE Non-conventional energy NGOs Non-governmental organizations OPS Operational Policy Statement SEB State Electricitv Board SCF Standard Conversion Factor SDC Swiss Development Cooperation SGC State Generating Corporation SPV Solar Photovoltaic The Act Electricity Supply Act of 1948 TNPL Tamil Nadu Newsprint and Papers Limited FISCAL YEAR April 1 - March 31  FOR OFCIA USE ONLY RENEWABLE RESOURCES DEVELOPMENT PROJEcT STAFF APPRAISAL REPORT Table of Contents Pase No. CreditlLoan and Project Sunmary .... .............. . .... ,iv I. SECTORAL CONTEXT.............. Introduction ............................. India's Primary Energy Resources ....................... . .1 Organization of the Mon-Conventional Energy Sub-Sector..3 GOS's Sub-sector Strategy ............................... 3 Key Sectoral Issues . ................................ 4 Efforts at Reform . . ............................... . 4 India's Newsprint and Paper Industry .................... 6 Role of the Bank ................... .............. 7 Past Bank Group -Support ..... ............... .. .......... a Global Environmental Facility (GEP) Funding... ... 8 11 L ENEPI ARIES.. .. ...... .......... 8 Indian Renewable Energy Development Agency (IREDA) . 8 Tamil Nadu Newsprint and Papers Limited (TNPL) ......... 12 tIII. THE PROJECT ............................................... 13 Project Objectives ... 13 Project Description ....... 13 Status of Project Engineering and Project Pipeline ..... 16 Project Implementation Arrangemets .................... 17 implementation of the TNPL Papermill Expansion . .... 18 Implementation Schedule ................. .0 ....... ..19 Environmental antd Resettlement Aspects .................I1 Project Costs . . ... .... ................... . . . . 20 Project Financing ...... . .1.......... On-Lending Arrangements .... . . 22 Procurement under the Line of Credit ................... 23 Procurement by TNPL .. . ........ 24 Security Arrangements ......... . 24 Disbursement .. . . . . . . . .. .. . . . . . . . .. ..... ...... 25 Monitoring and Evaluation ................... .......... .26 This report vas prepared by Mrs. Magdalena Manzo (Energy Specialist), Messrs. Alfonso Mejia (Principal Pinancial Analyst), Raymond Chalk (Sr. Pulp and Paper Engineer), John Irving (Power Engineer), Anll Cabraal (Consultant, Alternate Energy). The report has been reviewed by Messrs. Ernest Terrado (Principal Energy Planner, ESMOD), Karl Jechoutek (Principal Economist, EMSIE), and Jamil Sopher (Sr. Financial Analyst, EAlIE). The report has been endorsed by Mr. eiipz Vergin, Director (India Country Department) and Mr. Jean-Francois Bauer, Chief (Energy Operations Division, India Country Department). This document has a restricted distribution and mya be used by recipients only in the perorman-e of their official duties Its contents may not otherwise be disclosd wthout World Bank au horizai on.  - ii. - Pase No. IV* FINANCE ................ .. ........................ 27 Indian Renewable Energy Development Agency ............ 27 Tamil Nadu Newsprint and Papers Limited ............... 31 V. BENEFITS AND RISK8 ....................................... 34 Renewable Energy Investments ......... #*.......#..... .34 TNPL Papermill Project ................................ 36 Project Rlk ...Riks......................................... 36 IVI* AG9tMkNS ADRCMMED2083 Agreements Reached .3........ ....................... 3 Conditions of Effectiveness 39 Receomendation 39............*...... 9  - iii - ANNEXES 1.1 All-India Blectricity Deand and Supply 1.2 Proposed Power Generation from New and Renewable Sources of Energy (NILE) 1.3 hxamples of State Policies Governing Private Investmaent In Irrigation-based Small Hydra aud Windfarm Schemes 1 4 Previous Loans and Credits to Indian Power Sector 2.1 IREDA - Current/Proposed Organizational Charts 2.2 Operational Policy Statement (OPS) 2.3 IMEDA - Cumulative Lending PY87 to FY92 2.4 TNPL - Organizational Chart 2.5 TNPLs Product Mix and Estimate of Sales Revenue 3 1 Pre-Identified Irrigation-Based Small Hydro Scheme In the Southern Region 3.2 Historical Performance of Sample Wind Farms 3.3 Potential Domestic and Comuerical Market for mall PV Systms 3.4 Solar PV Applications 3.5 IREDAs Plan for Implementing the Institutional Development Program 3.6A Terms of Reference for Management Service Consultants 3.6B Quality Assurance Consulting Services to IUaA - Terms of Reference 3.6C General Terms of Reference for Consultants to assist IRSDA In Preparation of a Pipeline of Nw Minihydel Projects for further Developement 3.7 Preliminary List of Proposals for Small-Hydro and Vindfarm Projects 3.8 Small Hydro Component 3.9 PV Market Development Component: Project Implemeatation 3.10 Solar PV Market Development Components Sub-Project Eligibility Criteria 3.11 TNPL: Arrangement for Project Supervision and Management 3.1.2 IREDA: Environmental Assessment Summary 3.13 ItEDA's Environmental Assessment Functions Proposed Scope of Work 3.1* TNPL2 Environmental Assessment Sumnary 3.15 TNPL: Schedule for Resettlement Plan 3.16 IuDAs Project Cost Summary 3.17 IRSDAt Eligible Procurement Items for Credit Line 3.18 TNPL Papermill Expansions Procurement Status 3.19 Schedule of Estimated Disbursemants 3.20 Supervision Plan 4.1 IRUDAs Historical and Projected Financial Statements 4.2 TNPLs Historical and Projected Income Statements 4.3 Highlights of TNPL's Future Operating Performance 5.1 Small Hydro Schemess Economic Analysis 5.2 Generic Criteria for GEM Project Eligibility 5.3 IR3DA viudfarms Developmest Components BEconomic Analysis 5.4 TNPLs Financial Rate of Return Analysis 6.1 Documents in Project File MAP IBRD 24281  - iv - INDIA RENEWABLE RESOURCES DEVELOPMENT PROJECT CreditlLoan and Project Summary Borrower: India, acting by its President; Tamil Nadu Newsprint and Papers Limited (TNPL) Beneficiary: Indian Renewable Energy Development Agency (IREDA) Guarantor: IBRD Loans India, acting by its President. The Government of India (GOI) would charge TNPL a guarantee fee of 1? per annum on the principal amount of the IBRD loan withdrawn and outstanding. Credit Amount: SDR 81.6 million (US$115 million equivalent) Loan Amount: US$75 million Termss The IBRD loan would have a repayment period of twenty years, including five years' grace, at the Bank's standard variable interest rate. The IDA credit would be on standard terms with a 35 year maturity. Onlending Termss GOI will onlend the proceeds of the credit to IREDA at an interest currently set at 12.51 per anum, with a repayment period of 12 years, including a grace period of 3 years. The Government would bear the foreign exchange risk. IRRDA will relend to its clients interest rates which now range from 102 to 15? and with repayment terms ranging from 5 to 10 years. according to the types of assets financed. The lending rates will be adjusted from time to time to reflect variations in IREDA's cost of funds. Proiect Description: The proposed project comprises: (a) the financing through IREDA of private sector investments in renewable energy sub- projects, namely, irrigation-based aall hydros, wind farms, and solar photovolataic systems; (b) expansion of TNPL's bagasse-based paper mill; and (c) technical assistance for institutional development of IREDA and promotion of renewable energy technologies. Benefits: The main benefits of the project are: (a) demonstration on a commercial scale of renewable resource systems that could lead to their replication In other parts of India and the world; (b) mobilization of private investments into the energy sector and newsprint Industry; (c) reduced reliance on fossil fuels and forest resources and thus help improve the environment; (d) increased availability and improved reliabiity of power supply to help meet the industrial and decentralized rural energy needs; and (e) Increased domestic neweprint supply in India.  v Riskst There are several areas of project risks. First, there are the risks associated with monitoring numerous work sites; these are being countered by involving the private sector as Investors and by setting up a monit*ring and evaluation team at IREDA with back-up consultancy support to monitor progress of the works. Second. there are risks that the institutional and energy-pricing environment may prevent the solar PV systems from becoming affordable. These risks will be managed by requiring that adequate commercial arrangements for the supply and after sales service are in place prior to loan approval by IREDA and by firmly establishing, thru maket surveys, the viability of product dmand and acceptabiity withiu the context of the users' environment. Third, operation of the new energy systems may not be sustainable if the deployed systems perform poorly and capital and operating costs are higher than expected. These risks will be minimized by limiting financing to those technologies for which performance reliability and costs have been sufficiently established through actual operating experience in India and in other countries. estimated Cost: Local Foreign Total