India - Third Trombay Thermal Power Project

Docummn of The World Bank FOR OFFICIAL USE ONLY Report No. 6253 PROJECT COMPLETION REPORT INDIA THIRD TROMBAY THERMAL POWER PROJECT (LOAN 1549-IN) June 6, 1986 Power and Transportation Division South Asia Projects Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT Measures and ' quivalents 1 Ton (t) = 1 metric ton = 2,200 lbs 1 Kilovolt (kV) = 1,000 volts (V) 1 Kilovolt-ampere (kVA) = 1,000 volt-amperes (VA) 1 Megavolt-ampere (MVA) = 1,000 kVA 1 Megawatt (MW) = 1,000 kilowatts (kW) = 1 million watts Abbreviations and Acronyms BEST - Bombay Electric Supply & Transport BHEL - Bharat Heavy Electricals Ltd. BSES - Rombay Suburban Electric Supply CEA - Central Electricity Authority FGD - Flue Gas Desulphurization cOI - Government of India GOM - Government of Maharashtra IBRD - International Bank for Reconstruction and Development ICB - 7iternational Competitive Bidding IERR - ,nternal Economic Rate of Return KFW - Kreditanstalt Fuer Wiederaufban MSEB - Maharashtra State Electricity Board- NTPC - National Thermal Power Corporation PCR - Project Completion Report SO2 - Sulphur Dioxide SPCB - State Pollution Control Board TCE - Tata Consulting Engineers TEC - Tata Electric Companies TK~~O OFFIAN M 0CMAL USE ONLY THE WORLD SANK We0ngton. D.C. 20433 U.S.A. 01ke M Dctm-Cal Opeseoof EvaMsM June 6, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on India - Third Trombay Thermal Power Project (Loan 1549-IN) Attached, for information, is a copy of a report entitled "Project Completion Report on India - Third Trombay Thermal .Power Project (Loan 1549-IN)" prepared by the South Asia Regional Office. Further evaluation of this project by the Operations Evaluation Department has not been made. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT Table of Contents Page No. Key Project Data..............**************************** i Highlights......... *****************************************.. iv I. INTRODUCTION..... .................................. 1 Maharashtra State Power Subsector.................... 1 Bank Group Involvement...o......................... 3 II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL....... 3 Project Origin, Preparation, Appraisal, Negotiations and Approval....................................... 3 Project Objective.................................... 4 Project Description.................................. 4 III. IMPLEMENTATION.........................6**......**... 4 Loan Effectiveness................................... 4 Project Execution.................................... 5 Reporting............................................ 7 Project Cost...........................90000000000*00*0 7 Procuremento************************************** 8 Disbursements................................*...... 9 Performance of Consultants, Contractors and Suppliers 9 IV. OPERATING PERFORMANCE.................................. 10 V. FINANCIAL PERFORMANCE...........o...................... 11 VI. INSTITUTIONAL DEVELOPMENT.. ..........*...*............. 14 VII. ECONOMIC REVALUATION......... ...o..... .... ....o. ...... 14 VIII. PERFORMANCE OF THE BORROWER AND THE BANK............... 15 IX. CONCLUSIONS........o.......oe... ....................... 16 This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authoriation. ANNEX Page No. 1 - Organization of the Power Subsector in India .......... 17 2 - MSEB's Generation Developments not Approved by 1977 but Scheduled for Commissioning by 1983/84 ........... 18 3 - Implementation and Construction Schedule .............. 19 4 - Estimated and Actual Project Cost ..................... 21 5 - Schedule of Disbursements ** *****.................... 22 6 - Combined Forecast and Actual Source and Application Statements, FY78 -FY84 *......................*0... * 26 7 - Internal Economic 1hte of Iturn (Ex-Post) ............ 31 ATTACHMENT A - Comments from the Government .................. 33 ATTACHMENT B - Comments from the Borrower .................... 35. INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT Preface The Project involved the construction at Trombay (Bombay) of a 500 MW unit with triple fi.ed boiler (coal, oil or gas), .1lectrical and mechanical plant including pollution control equipment and associated civil works. A Bank loan of US$105 million was made to the Tata Electric Companies (TEC) on February 8, 1979. The Project was to be completed by December 31, 1982. However, because of substantial delays in the delivery of equipment and materials, precipitated largely by developments beyond the control of the borrower, the Project was not completed until January 1, 1984, and the Loan was not closed until December 31, 1984. The Project, though successfully completed, was implemented at a higher cost than was originally estimated, US$241.2 millionl/ compared to US$209.3 million, largely because of higher than anticipated increases in the cost of equipment and materials and custom duties, the need to replace contractors whose performance was inadequate, the acquisition of more spare parts than specified and an underestimation of the quantities of cable required. The cost overruns were financed by TEC from its own resources, additional borrowing from local financial institutions, suppliers' credit and debentures. The Project Completion Report (PCR) was prepared jointly by the borrower and the South Asia Region on the basis of the Staff Appraisal Report No. 1788b-IN, dated March 28, 1978 and the Loan and Project Agreements, both dated June 19, 1978. The PCR has been amended in light of the comments of GOI and TEC which are reproduced in Annex 8. In accordance with the revised procedures for project performance audit reporting, this Project Completion Report was read by the Operations Evaluation Department (OED), but the project was not audited by OED staff. Following standard procedures, OED sent copies of the draft PCR to the Government and the Borrower. Comments received from them have been reproduced as Attachments A and B to the report. 1/ Amended in light of comments of the borrower. INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT Key Project Data Original Plan Actual Project Cost (US$M) 209.3 241.2 Loan Amount (US$M) 105.0 105.0 Disbursed 105.0 105.0 Date for completion of physical components 12/31/82 1/1/84 Proportion completed by targec date (%) 100 89 Economic Rate of Return (%) 14 30.5 Institutional Performances Satisfactory Satisfactory Cumulative Estimated and Actual Disbursements (US$M) FY79 FY80 FY81 FY82 FY83 FY84 FY85 Appraisal Estimate 11.0 35.0 80.0 100.0 105.0 105.0 105.0 Actual 9.0 15.0 42.0 75.0 93.0 101.0 105.0 Actual as a % of Estimate 82 43 52 75 89 96 100 Other Project Data Original Item Plan Revisions Actual Concept in Bank 1973 - - Negotiations 2/78 - 2/78 Board/Credit Signing 6/78 - 6/19/78 Effectiveness 9/78 - 2/08/79 Closing Date 3/31/84 - 12/31/84 Borrower Tata Electric Companies Executing Agency Tata Electric Companies Fiscal Year of Borrower April 1 - March 31 Follow-up Project Fourth Trombay Thermal Unit, Ln. 2452-IN Mission Data Month/ No. of No. of Man- Date of Item Year Weeks Persons Weeks Report Appraisal 7/77 2 3 6 3/28/78 Supervision 1 1/79 1/2 3 1-1/2 2/01/79 Supervision 2 6/79 1/2 3 1-1/2 1/18/80 Supervision 3 3/80 1/2 2 1 7/17/80 Supervision 4 10/80 1/2 4 2 12/23/80 Supervision 5 9/81 1 2 2 11/05/81 Supervision 6 10/82 1 2 2 12/21/82 Supervision 7 3/83 1/2 3 1 7/22/83 Supervision 8 2/84 1/2 1 1/2 2/29/84 Supervision 9 6/84 1/2 1 1/2 8/18184 Country Exchange Rates Name of Currency - Rupee Appraisal year (1977) average - US$1 = Rs 8.6 Intervening years average - US$1 = Rs 9.6 Completion year (1984) average - US$1 Rs 10.0 -iv- INDIA THIRD TROMBAY THERMAL POWER PROJECT - LAN 1549-IN PROJECT COMPLETION REPORT Highlights Loan 1549-IN was for the construction of a 500 MW unit with a triple fired boiler (coal, oil or gas), electrical and mechanical plant including pollution control equipment and associated civil works at Trombay (Bombay). It was to be implemented by the Tata Electric Companies (TEC), the borrower of the loan. As per the Staff Appraisal Report estimates, the Project was to be completed by December 31, 1982 and the loan was to be closed on Marrh 31, 1984. However, because of delays in the delivery of equipment and materials, precipitated mostly by developments beyond the control of the borrower, the Project was not completed until January 1, 1984 and the loan was not closed until December 31, 1984. In fact, the completion of the Project would have been delayed further had the borrower not increased its work force and i.mple- mented numerous tasks concurrently. For this, the borrower needs to be commended. In addition to being commissioned one year behind schedule, the Project was implemented at a higher cost than was estimated by the Appraisal Report, US$241.2 million compared to US$209.3 million.1/ The actual cost exceeded the appraisal estimate largely because of higher than anticipated increases in the price of the turbogenerator, labor and material for civil works and custom duties, replacement of contractors for civil works, acquisi- tion of more spare parts than envisaged at appraisal to take advantage of favorable international prices, provision for an additional electrostatic precipitator, and underestimation of cable quantities required. Despite these setbacks, the Project was successfully completed and its objectives were fully achieved. Specifically, the Project assisted in the transfer of technology for the design, construction and operation of large thermal power plants whose role in the country's power subsector is expected to increase substantially over the forseeable future. Moreover, with the installation of the computerized analogue simulator, the Project has provided the facilities needed to train local personnel in the operation of the 500 NW power plants. Finally, the Project has been instrumental in augmenting the generating capability of TEC, a critical private sector ele- ment in the country's power subsector.1/ 1/ Amended in light of the comments of the Borrower. INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT I. INTRODUCTION 1.01 Power shortages were widespread throughout India between 1970 and 1976, and several states including Maharashtra were experiencing power cuts of up to 30%. These shortages, though likely to continue, were expected to become less acute as the states generation development programs were implemented and the large thermal power plants, as well as the associated transmission network, were brought into operation by the Center to augment the states generating capacity. The Project was to assist in alleviating the power shortages in the State of Maharashtra and was an integral part of its generation development program for FY80-FY84. Maharashtra State Power Subsector 1.02 As in other Indian States,1/ the responsibility for the operation and development of the power subsector in Maharashtra, including the regulation of licensees, is assigned to tie State's electricity board. The Maharashtra State Electricity Board (MSEB) geuerates and distributes electricity throughout the state except in concession areas served by four private licensees, the Tata Electric Companies (TEC), the Bombay Suburban Electric Supply Undertaking (BSES), the Bombay Electric Supply and Transport Undertaking (BEST) and the Thana Electric Supply Company (TESCO). These licensees, except TEC, are involved solely in the distribution of electricity which they purchase from MSEB and TEC, the borrower of the loan. 1.03 As of March 31, 1977, TEC, the largest private licensee in Maharashtra, was operating four power stations, three hydro and one thermal, with a total installed capacity of 622 MW. About 54% of the generating capacity was thermal and the rest hydro. A 40 MW power station at Chola, which is owned by the Indian Railways, was also connected to the TEC system. TEC's transmission network, consisting of medium and high voltage lines (110-kV and 132-kV)2/ was about 2,200 circuit km. It was tied in with MSEB's 220-kV network at three points with an aggregate step-down capacity of 1,250 MVA. The aggregate transformer capacity of TEC's system was about 3,500 MVA. Losses in the network were relatively low, amounting to about 1/ The organization of the Indian power subsector is described briefly in Annex 1. 2/ Amended in light of the comments of the Borrower. -2- about 3% of sales. TEC wss also operating a modern load despatch center at Trombay. 1.04 TEC was supplying energy in bulk to textile mills and other large industries, distributing licensees and local authorities in Bombay and surrounding areas. It was also supplying about 60 MW of power to the Indian Railways. The Chola station, which was connected to the TEC system at Kalyan, provided about 25 MW of power to the Indian Railways. The remaining 15 MW was sold to a group of consumers, mainly textile manufacturers, who, because of the power restrictions, were prepared to pay.a higher price for Chola power which was wheeled over TEC's system. Charges were collected by the Mill Owners' Association and passed to Indian Railways via TEC which applied a "wheeling charge" of 6%. In 1977, TEC was serving a total of 214 customers. The maximum demand on the TEC system was about 1,000 MW, which necessitated purchases of about 500 MW of power from MSEB. 1.05 TEC consists of three companies: the Tata Hydroelectric Power Supply Company Limited, formed in 1910; the Andhra Valley Power Supply Company Limited, formed in 1916; and the Tata Power Company Limited, formed in 1919. These companies are a part of the Tata group of enterprises which have substantial financial resources, an excellent credit rating and a long and successful history of operations in many industrial and other fields. The three companies are independent publicly-owned entities in the private sector; however, they operate as a group under the same management. The Board of Directors of the three companies, though separate, have four common members: the Chairman, the Managing Director and two other directors including the Director of Finance. Other members of each Board include representatives of the Government of India (OI), the State Government and leading industrial and banking institutions. The companies are well managed utilities, operated in accordance with sound commercial principles. In 1977 the companies together had a staff of 2,645. 1.06 The three companies comprising TEC function as an interconnected grid. The hydroelect,ic power stations (para 1.03) are owned individually and the Trombay thermal power station together with the transmission system and substations are owned jointly in the ratio of 20:30:50 by Tata Hydro, Andhra Valley and Tata Power, respectively. Although each company operates under a separate license, a joint license was granted to all three for Trombay. 1.07 TEC's licenses had been the subject of a series of meetings between TEC, MSEB and Government of Maharashtra (GOM) during 1977. A satisfactory settlement of the whole question of license extension and rationalization of distribution facilities was reached in principle, in September 1977. This settlement, which had to be formalized, provided for an extension of TEC's licenses and franchise for a period coterminous with the last repayment of the Bank loan. In order to ensure that no action would be taken which would interfere with TEC's performance or adversely affect its financial posicion, -3- including delimiting TEC's area of supply, the formal extension of TEC's licenses was set as a condition of disbursement of the loan. Bank Group Involvement 1.08 The Bank Group's involvement with TEC began in 1954 when a Bank loan of US$16.2 million (Loan 106-IN) was made to finance the construction of two 62.5 MW thermal generating units at Trombay. A second loan of US$9.8 million (Loan 164-IN) was made in 1957 to expand the generating capacity at Trombay by another 62.5 MW. The Project was the Bank's third tending operation with TEC. II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL Project Origin, Preparation, Appraisal, Negotiations and Approval 2.01 COM had given high priority to eliminating restrictions on power supply by the end of the 1970s and had proposed an investment program of about US$1.5 billion for the period FY75-FY79 to increase the State's installed generating capacity to 4,730 MW. However, as less than one half of the proposed expenditures were approved, the installed generating capacity was not expected to exceed 3,610 MW by the ene of FY79, implying that load restrictions, which were increasingly becoming a constraint to the State's industrial base, would continue into the early 1980s. The generation developments that were either under implementation or had been approved and were expected to be commissioned by FY84 are shown below: MSEB's Generation Developments Scheduled for Commissioning by FY84 Scheduled Scheduled Commissioning Commissioning Hydro MW Date Thermal MW Date Koyna III 160 1982 Gas Turbines 4x60MW 240 December 1978 (nos.3&4) Koradi III No. 1 210 January 1978 Nasik Ext. 1 210 Decemoer 1978 Bhusawal No. 2 210 February 1979 Koyna Dam 40 January 1980 Nasik Ext. II 420 February 1980 Pench 52 June 1981 Parli 210 March 1980 Tillari 60 June 1981 Koradi III No. 2 210 February 1981 Bhira Chandrapur No. 2 210 December 1981 Tailrace 80 October 1982 Koradi III No. 3 210 June 1981 Chandrapur No. 2 210 February 1982 Trombay 500 June 1982 TOTAL 392 2,840 -4- Additional generation development investments which were also expected to come on stream by FY84 but had not been approved are shown in Annex 2. 2.02 The Project, which was an integral part of MSEB's generation development program, was to be implemented by TEC. It was assigned to TEC mainly because the demand on its system had for some years exceeded its firm generating capacity and had necessitated bulk purchase of power from MSEB, which by FY77 was in excess of 500 MW (para 1.04). Since MSEB was also experiencing capacity shortages, implementation of the Project by TEC was expected to release MSEB's capacity to meet its own demand. Accordingly, the Project was prepared by TEC with the assistance of its consultant. The Project was appraised in July and August of 1977, and negotiations were held in Washington, D.C. in February/March 1978. Project Objective 2.03 The objective of the Project was to assist in alleviating power shortages in Maharashtra through the expansion of the generating capacity at Trombay. In addition, it was to promote institution building by assisting in the transfer of technology for the design, construction and operation of large thermal power plants. Project Description 2.04 The Project consisted of a 500 MW unit with triple fired boiler (coal, gas or oil), electrical and mechanical plant including pollution control equipment and associated civil work. It was to be erected on reclaimed land (ash disposal area) owned by TEC, adjacent to the existing Trombay power stations. Basic infrastructure facilities for coal handling and water supply were available at the site and were to be extended to meet the requirements of the Project. III. IMPLEMENTATION Loan Effectiveness 3.01 As one of the conditions of loan effectiveness, TEC was required to complete security arrangements satisfactory to the Bank involving: (a) a first specific mortgage on the properties provided under the Project and those subsequently added, pari passu with Indian financial institutions in respect of their share of co-financing; -5- (b) a first floating charge on all existing immovable and movable assets held under the Trombay Thermal License pari passu with other lenders; and (c) assignment to the Bank by way of mortgage of the Trombay Thermal License including extensions and/or renewals thereof. The other conditions of loan effectiveness required TEC to furnish letters of unqualified commitment from local financial institutions for loans of Rs 550 million and secure permission from the Government of Maharashtra for special appropriation, as may be necessary, to meet the cash shortfall for debt redemption. 3.02 Following compliance with the conditions of effectiveness, the Loan was made effective on February 8, 1979, about four months later than the date specified in the Loan Agreement. This was largely because of delays in the creation of a valid security in favor of the Bank. Originally, as a condition of effectiveness, TEC were required to secure the Loan by a written mortgage in favor of the Bank in the form of a Trust Deed. Due to delays in obtaining GOM's approval of TEC's exemption from stamp duty on the registration of the Trust Deed, TEC proposed to the Bank (letter dated January 5, 1979) to make the Loan effective upon creation of an equitable mortgage by deposit of title deeds (an instrument free of stamp duty). TEC could then execute the Trust Deed within 90 days after effectiveness of the Loan. The Bank agreed on this arrangement and the Loan was declared effective after equitable mortgage was created. Subsequently, security by the Trust Deed dated May 14, 1979, was completed. The postponement of Loan effectiveness, however, did not delay the implementation of the Project. Project Execution 3.03 The Project was executed satisfactorily, but because of substantial delays in the delivery of equipment and materials, the plant was commissioned about one year later than originally planned, January 1984 instead of December 1982. Most of this delay was due to developments beyond the control of the borrower.1/ First, as the steam generator was the first of its size to be produced in India, local manufacturers took more time than anticipated in preparing the engineering information needed to design the foundations. As this information was not made available until the end of 1979, pile driving had to be postponed by one full year. 3.04 Second, delivery of critical sections of the high pressure piping system was delayed due to a fire on board the ship M.V. 'ARIS'. The piping system, which was shipped in January 1982, arrived at site in September 1982 1/ Amended in light of the comments of the Borrower. -6- after protracted negotiations between the salvors, charterers, owners of the vessel and hull and cargo insurers.1/ Consequently, the hydro tests, which were scheduled for mid-1982 were delayed by seven months. 3.05 Third, critical bent pipe sections of the cold reheat line had to be remanufactured because the thickness of the bends provided by the manufacturer in late 1981 was less than statutorily admissible. The remanufactured pipe sections were received in October 1982. Most of the joints in the main steam and reheat piping, which had to be welded sequentially from terminal points, were therefore available for erection only after October 1982, when the pipes aboard the 'ARIS' and the remanufactured pipe sections were received. Erection took eight months and was completed in June 1983. 3.06 Fourth, the delivery of valves and reheaters for steam generator was delayed by eight months, August 1982 instead of January 1982, because of the takeover of the European supplier by another company.2/ 3.07 Finally, pressure parts for the steam generator were not received in the correct sequence. For example, links and headers above the boiler roof were received in early 1982 instead of in mid-1981, delaying the erection of the boiler roof and the superheater and reheater coils. Erection of the steam generator had therefore to be rushed through in 1982 to meet the hydro test target date, and the items delivered late had to be erected after September 1982. 3.08 Largely because of these developments the hydro test of the steam generator water walls and superheater could not be completed before February 1983, and that of the reheater before June 1983. The original schedule, which envisaged seven months from hydro test to synchronization was maintained, resulting in synchronization on January 25, 1984. The project percentage completion curves and bar charts, actual and scheduled, are presented in Annex 3. It is estimated by the borrower that these developments would have resulted in a delay of about two years in the commissioning of the Project had TEC's management not decided to employ double shifts and implement a variety of tasks concurrently. For this, the borrower needs to be commended. 3.09 During implementation, TEC changed the scope of the Project with the approval of the Bank. Instead of modifying the existing 150 MW analogue 1/ The ship was abandoned at sea and given up to salvage. It was towed to Singapore, the salvage vessel's principal port, from where TEC reclaimed the piping and shipped it to India, causing a delay of eight months. 2/ Amended in light of the comments of the Borrower. -7- simulator at Trombay to simulate the dynamic responses, interlocks and operational sequences of the 500 MW unit as was originally planned, TEC installed a computerized 500 MW simulator for which the main frame computer and the associated hardware and software were imported. Additional software packages, input/output systems, etc., were developed mostly by Tata Consulting Engineers and TEC's operational staff and its Research and Development Department. The simulator, which was installed at a cost of about US$3 million 1/, is now in operation and is being used to train TEC's staff. This facility is also available for the training of operators employed by NTPC, SEBs and foreign utilities. 3.10 At the request of GOM, the appraisal report had made provision for space to be left for the installation, if necessary, of flue gas desulphurization (FGD) equipment because the power plant was expected to burn coal. The installation of this equipment was contingent upon the findings of a study to be conducted by TEC's consultant (para 2.02) to determine if such equipment was necessary to meet environmental quality standards. The study c-included that the power plant posed no significant environmental problems because, for some years, it was expected to burn sulphur free gas rather than coal. In view of these findings, the State Pollution Control Board (SPCB) was requested to waive its requirement for the installation of flue gas desulphurization equipment. SPCB acceded to this request, but recommended the installation of a pilot FGD unit following the commissioning of the plant. Accordingly, TEC is now installing a pilot plant using new technology for removing sulphur dioxide. It is estimated to cost Rs 88 millionl/ which is expected to be met by special appropriation of two paise/kih for which GOM's approval would be sought. The plant is expected to be commissioned by the end of 1986. Reporting 3.11 TEC met all of the Bank's reporting requirements, submitting on a regular basis quarterly progress and annual reports. Project Cost 3.12 The Project was completed at a cost of US$241.2 million,l/ which is about 15% higher than the appraisal estimate of US$209.3 million. This was due to: (a) negotiated increase in the price of the turbogenerator and associated equipment which, as stipulated by OI, was ordered without competitive bidding on a single tender basis from BHEL under Kreditanstalt Fuer Wiederaufban (KFW) financing; 1/ Amended in light of the comments of the Borrower. -8- (b) higher than anticipated increases in custom duties and prices of labor and materials for civil works including cement steel, form work materials, sand, etc.; (c) replacement of civil work contractors whose work was inadequate; (d) acquisition of more spare parts than envisaged at the appraisal to take advantage of favorable international prices; (e) provision for an additional electrostatic precipitator; and (f) underestimation of the quantities of cable required because of TEC's inexperience in implementing a unit of this size. A detailed comparison of the appraisal estimate and actual Project costs is presented in Annex 4. The actual cost exceeded the appraisal estimate by about 36% for civil works, 20% for turbogenerator and associated equipment, 9% for the steam generator, 47% for electrical equipment, 49% for miscellaneous electrical and mechanical equipment, 10% for coal and ash handling, 28% for switchyard equipment and 122% for engineering and administration. The cost overruns were financed by TEC from its own resources, additional borrowing from local financial institutions, suppliers' credit and debentures. Procurement 3.13 All procurement requiring international competitive bidding (ICB) was done according to Bank guidelines. In only one case was there some disagreement about the award of contract. The lowest bidder for concrete pumps submitted a bid bond which failed to arrive on time because of a banking delay. At the Bank's insistence the contract was awarded to another bidder from the same country; the impact on project cost was, however, negligible. 3.14 The Bank accepted all the other recommendations of the borrower. There was one representation by an Indian manufacturer of a water treatment plant who did not meet the qualification requirements, and whose evaluated price was higher than that of the successful Indian manufacturer. After additional details had been furnished the Bank accepted the borrower's recommendations. 3.15 The contract for the electrostatic precipitator was awarded for three fields plus the S03 conditioning equipment, to achieve the 99.5% efficiency recommended by the TEC and the review consultants, Ebasco Services, Inc. However, after reviewing the import proposal, GOI insisted on the addition of -9- a fourth field instead of the S03 conditioning equipment which would have required imports of sulphur throughout the life of the plant. The fourth field was procured from the same vendor at an additional cost of US$3 million. 3.16 The foreign component identified in the SAR cost estimate of Rs 1,800 million was Rs 780 million, including the Rs 204 million foreign component for the steam generator. The contract for the sLeam generator was won by an Indian manufacturer and was denominated in rupees; the contractor arranged his own imports amounting to Rs 150 million. The Bank's ICB requirements ensured competitive prices, particularly from local manufacturers, who are permitted by GOI to treat such orders as deemed exports, and hence to import the required raw materials free of duty. TEC has estimated that the cost of indigenov. equipment was about 30% less under ICB than it would otherwise have been. Disbursements 3.17 The appraisal estimate of disbursements and actual disbursements are presented in Annex 5. Cumulative disbursements were slower than the appraisal estimate and as a result the loan amount was not disbursed fully until December 31, 1984, about nine months later than was originally planned.1/ Factors contributing to this delay include the postponement of the award of contracts until 1982 for the coal and ash handling systems whose implementation was deferred because the generating unit was to be fired initially by oil or gas; and the decision by TEC to make payments under case I procedures to local vendors from internal sources and claim reimbursement from the Bank at a later date. In addition, to enable payment withheld on* contracts pending the completion of performance tests on the entire unit, the closing date was extended by nine months upon Bank approval from March 31, 1984 to December 31, 1984. Performance of Consultants, Contractors and Suppliers 3.18 The performance of Projec. consultants was satisfactory. They held regular coordination meeting with TEC's staff throughout the project implementation period and seconded construction engineers to the Project's management and supervisory team. The consultants also assisted TEC in expediting project implementation, monitoring quality control at vendor's works and in issuing clearance for shipment after inspection. Likewise, the consultants' associatesl/ ass-sted in reviewing the specifications of the more sophisticated equipment, instrumentation and controls. 1/ Amended in light of the comments of the Borrower. -10- 3.19 The contractors, all of whom were prequalified, also performed satisfactorily except for the ones listed below: (a) A Rs 25 million contract was awarded in mid-1981 for miscellaneous civil works including switchyard foundations, raw water and fuel oil pump houses, demineralization plant building and ash water pumphouses. The company, however, was unable to mobilize its resources adequately to achieve an average monthly billing of Rs 1 million. Hence, work amounting to Rs 10 million had to be awarded to other smaller contractors in 1982 at a slightly higher rate. (b) A contract of Rs 3 million for cement mortar lining of circulating water pipes was awarded to a contractor who was unable to mobilize the equipment for the contracted work because of legal disputes with the owners of the equipment. This work, therefore, had to be completed with the assistance of the borrower which took eight months instead of the normal three months.1/ (c) Fabrication of 3,500 tons of structural steel for the turbogenerator building and bunker bays was given to local contractors. However, their resources for erection of the structural steel at site were inadequate and they were unwilling to mobilize more forces as their quoted contract rates had become unremunerative. Consequently, over 350 tons of erection work had to be deleted from the contract and done by others. 3.20 As can be expected in a project of this magnitude where equipment must be manufactured to specifications, problems did arise during erection and commissioning. These problems were addressed expeditiously by the appropriate manufacturers. The only exception to this were the local manufacturers of the relatively small equipment packages such as sump pumps, low pressure valves, etc. The selected vendors did not have the required resources/quality control and alternative vendors had to be found for about Rs 2 million of equipment. IV. OPERATING PERFORMANCE 4.01 As noted (para 3.03), the Project was completed in January 1984 and after initial trials, the unit was first synchronized on January 22, 1984. The anit attained full load on April 27, 1984 and in the first year of operation generated 3,108 GW of electricity, corresponding to a utilization factor of about 71%. Unit availability during this period was over 85% which is commendable. The unit, however, had to be taken out for three weeks in October 1984 to install baffles in the second pass to overcome the problem of duct resonance on the steam generator. The unit was also shut down three times and tripped 17 times; most of these trips occurred while correcting and -11- optimizing protective and control circuits. The unit, however, was brought back on line within two hours of each shutdown because of the provision of a turbine bypass.1/ 4.02 Performance tests on all individual plants which were conducted at either the site or works were satisfactory. Preliminary tests indicate that the plant is operating at specified efficiency. V. FINANCIAL PERFORMANCE 5.01 The earnings of licensees like TEC are regulated by the Sixth Schedule of the Electricity (Supply) Act, 1948. This schedule provides, inter alia, that licensees shall so adjust their charges for the sale of electricity, whether by enhancing or reducing them, that their "clear profit" in any year shall not, as far as possible, exceed their amount of "reasonable return". "Clear profit" represents the entity's income (from the sale of energy, rentals and other utility receipts), less its admissible expenses (including operating expenses, interest on money borrowed, income tax, certain appropriations to statutory reserves, and other special appropriations permitted by the State Government). The admissible expenses, together with a margin for clear profit, form the basis for determining the average sale price of power which is set at the maximum allowed under the Act. "The amount of reasonable return" is defined as the sum of: (a) seven percent of that part of the capital base equal to the capital as of March 31, 1965; (b) a percentage on the balance of the capiLal base equal to 2% over the Reserve Bank rate prevailing at the beginning of the year (currently the Reserve Bank rate is 10%); and (c) additional sums equal to 0.5% on capital borrowed ( i) from institutions approved by the State Government; and (ii) by the issue of debentures. In the event that the Companies' "clear profit" would exceed the amount of reasonable return for the year, provision is made in the Act for its disposal. 1/ Amended in light of the comments of the Borrower. -12- 5.02 TEC's income statements, sources and application of funds statements, balance sheets, clear profits statements and capital base and reasonable return statements are presented in Annex 6. The financial statements compare the appraisal forecast foL the period FY78-FY83 with the actual results. However, since the Project was not completed until 1984, the actual results for that year are also presented. 5.03 TEC's financial performance between FY78 and FY83 was satisfactory. In each of those years except FY83, profits, after tax and appropriations, were higher than forecast by the appraisal, about 17% higher in FY78, 10.7% in FY79, 50% in FY80, 140% in FY81 and 73% in FY82. In the following year, by contrast, profits were 46% lower than the appraisal estimate, Rs 26.8 million compared to Rs 49.3 million. This was due to both, depressed electricity sales (para 5.04) and TEC's decision to increase the investment allowance reserve and special appropriation to cover the Project cost overruns (para 3.12). 5.04 The improvement in TEC's financial performance between FY78 and FY82 was due to higher than forecast increases in both electricity sales and tariffs. Electricity sales were about 6.3% higher than the appraisal estimate in FY78, 16.3% in FY79, 6.2% in FY80 and 8.4% in FY81. This trend was interrupted in FY82 by the strike in the textile industry, and TEC's electricity sales dropped below the SAR forecast in FY82 and FY83. As shown below, this decline, however, was more than offset by the upward adjustments in tariffs which increased between FY78 and FY83 at an average annual rate of about 20.7% compared to the SAR forecast of about 1.7%. Increase in TEC's Electricity Sales and Tariffs Electricity Sales (Gwh) Tariffs (paise/Kwh) SAR Actual as % SAR Actual as % Estimates Actual of Estimate Estimates Actual of Estimate FY78 6350 6754 6.4 22.25 22.01 -1.1 FY79 6350 7385 16.3 22.53 24.50 8.7 FY80 6540 6947 6.2 23.40 27.73 18.5 FY81 6735 7299 8.4 24.83 33.98 36.8 FY82 6940 6375 - 8.1 25.79 44.70 73.3 FY83 7145 5382 -24.6 24.16 56.41 133.4 5.05 Despite the improvements noted above, TEC had problems in maintaining sufficient liquidity to conduct its operations. During the Project implementation period the current ratio, instead of increasing from 1.5 in FY78 to 1.7 in FY83, dropped to 1.0 in FY81 and remained at that level thereafter. The cash flow problem was precipitated by the difficulty TEC had in securing financing from GOM for which an understanding was obtained from -13- GOI and TEC in the preamble of the Loan Agreement. As per that understanding, GOM was required to contribute to the Project an amount equal to the difference between Rs 172 million and any security deposits which TEC might collect from its consumers. Under the Act, TEC had the right to collect from each consumer a security deposit amounting to a maximum of three months' billings, or an aggregate of about Rs 150 million. As TEC was collecting these amounts, several consumers brought suit against a different utility in the Greater Bombay area contending that because of their long histories of paying bills promptly, the posting of security was unnecessary. The court ruled in favor of the plaintiffs and, in a separate action enjoined TEC from collecting any more security deposits from its consumers; however, it did not require TEC to refund the Rs 51 million already collected, leaving a financing gap of about Rs 121 million. GOM agreed to contribute Rs 73 million to bridge the financing gap with the rest being secured by TEC through the revenue enhancement measures that it had instituted in 1981. Although an amount of Rs 73 million was included in COM's FY83 budget, TEC received only a partial payment of Rs 40 million on March 31, 1983, together with the assurance that the remaining Rs 33 million had been budgeted and would be paid during FY84. However, TEC did not pursue the release of this balance as it was able to cover the financing gap for the Project through a special appropriation fund and by deferring some minor capital improvements (para 5.06).1/ 5.06 The problem of TEC's liquidity was also exacerbated by the substantial cost overruns in the implementation of the Project which it had to meet in advance of realizing reimbursements or refinancing of these costs. To meet these cost overruns, TEC raised an additional Rs 266.4 million in loans from local financial institutions; Rs 39.1 million in fixed deposit loans from shareholders and the public at large, and Rs 16.6 million from i:.:,ernal sources. To cover the remaining gap, and also to ease the constraints caused by its inability to collect the aforementioned Rs 121 million, TEC created and began contributing two paise/kWh on all power sold to a Special Appropriation for Project Costs beginning 1981 without the approval of GOM. However, a favorable ruling regarding the admissibility of past contributions to this Special Appropriation was recently obtained. TEC had contributed Rs 267.7 million to this by FY84. This contribution was intended to cover the remaining gap of Rs 195.3 million for the Project together with the Rs 48 million differential between GOM's obligation to finance Rs 121 million and its agreement to meet only Rs 73 million of the Project cost. TEC had also raised the Rs 33 million that was to be secured from GOM, thereby ensuring full financing for the Project. 1/ Amended in light of the comments of the Borrower. VI. INSTITUTIONAL DEVELOPMENT 6.01 One of the objectives of the Project was to promote institution building by assisting in the transfer of technology for the design, construction and operation of large thermal power plants (para 2.03). This objective was fully achieved with the commissioning of the 500 MW unit at Trombay. The experience gained has had beneficial spin-offs for the follow-up Fourth Trombay Thermal Power Project (Loan 2452-IN), where greater attention is being accorded to: completing the civil works earlier to provide clear access and a clean working environment for equipment erectors; and packaging civil works contracts differently to make them more manageable. The Project has also benefitted CEA and NTPC in that TEC, as per the agreement with GOI, made available its facilities and expertiese to these entities for training their staff in implementing 500 MW power plants. The installation of the computerized 500 MW analogue simulator (para 3.03), moreover, has provided the facility needed for the training of TEC's and other power utilities' staff in the operation of 500 MW power plants. Finally, the Project was instrumental in augmenting the generating capability of TEC, a critical private sector element in the country's power subsector.1/ VII. ECONOMIC REVALUATION 7.01 In the staff appraisal report the return on investment for the Project was calculated on the basis of quantifiable benefits to be derived from the 500 MW unit at Trombay. It was defined as the discount rate at which the present worth of the Project costs equal the present worth of the benefits over the life cycle of the Project. The measurable costs included were: (a) capital and labor costs involved in the implementation of the Projert; (b) the annual operation and maintenance costs; and (c) fuel cost. The measurable benefits included the revenues to be derived from the sale of electricity. 1/ Amended in light of the comments of the Borrower. -15- 7.02 Based on the measurable costs and benefits associated with the Project, the ex-ante internal economic rate of return (IERR) was estimated at about 14%. However, because of substantial reductions in the cost of fuel precipitated by the use of associated gas until F'i90 instead of coal as was originally planned, this same approach results in an ex-post IERR of about 30.5%. Details of the assumptions used are presented in Annex 7. The ex-post IERR which compares favorably with the opportunity cost of capital of about 12% fully justifies the Project on economic grounds. It also validates the appropriateness of the Government's decisi3n to allow the use of associated gas, which otherwise would have been flared, for power generation. VIII. PERFORMANCE OF THE BORROWER AND THE BANK 8.01 The performance of TEC, the executing agency, needs to be commended because it was able to overcome unexpected implementation problems and avoid an additional year's delay in the commissioning of the plant by increasing the work force and implementing a number of tasks con,:urrently. Specific areas in which TEC played a critical -role in the successful implementation of the Project are$ (a) involvement of key operation and maintenance personnel in the design of the Project to ensure that feedback from their experience was built into the specifications; (b) quality control and quality assurance programs at manufacturer's works, and shipping releases after detailed inspection from the raw material stage up to finished product; (c) involvement of operational personnel in the testing of equipment at manufacturers' works and at the site; (d) meticulous attention to housekeeping to improve productivity and safety and maintain morale; (e) close attention to monitoring all field activities, equipment supplies, transport and related matters; and (f) use of mechanized concrete batching plant and placement equipment. 8.02 The Bank supervised the Project nine times and maintained good relations w.th the borrower. This involvement resulted in the processing of the follow-up Fourth Trombay Thermal Power Project (Loan 2542-IN) which involves the installation of yet another 500 MW thermal power unit and in a further extension of TEC's license to August 15, 2004. -16- IX. CONCLUSIONS 9.01 The Project was entirely successful in that the power plant was completed satisfactorily and is functioning properly. The VAjor factors leading to the successful completion of India's first 500 MW thermal power unit were the active involvement of the borrower in all stages of Project preparation, implementation and quality control. The Project has introduced into India the technology for designing, manufacturing and implementing large thermal power units whose role in the country's power sector is expected to increase substantially over the foreseeable future.1/ The Project, with the installation of the computerized analogue simulator, has also provided the facilities needed to train local personnel in operation of those power plants. Finally, the Project has been instrumental in augmenting the generating capability of TEC, a critical private sector element in the country's power subsector.2/ 1/ Presently, twelve 500 NW units ere being implemented. 2/ Amended in light of the comments of the Borrower. -17- Annex 1 INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT Organization of the Power Subsector in India Responsibility for the supply of electricity is shared between the Central and State Governments. The State Electricity Boards (SE8s) and the Regional Electricity Boards (REBs) are controlled by States; the Central Electricity Authority (CEA), the National Thermal Power Corporation (NTPC), the National Hydro-Electric Power Corporation (NHPC), and the Rural Electrification Corporation (REC) are controlled by the Central Governmeat. SEBs were instituted under the Electricity (Supply) Act, 1948 (the Act), to promote the development of the power subsector and to regulate private licensees. Although SEBs are supposed to autonomous in managing their day-to-day operations, in practice they are under the control of State Governments in such matters as capital investment, tariffs, borrowings, pay and personnel policies. As a first step towards national integration, the SEBs have been grouped into five regional systems, each coordinated by an REB. Coordination responsibilities include overhaul and maintenance programs, generation schedules, inter-State power transfers and concomitant tariffs. CEA was created in 1950 to develop national power policy and to coordinate the various agencies involved in supplying electricity. It is responsible for the formulation of countrywide investment plans for approval by the Central Government, development of integrated system operation, training of personnel, and research and development. It maintains operations, economic and financial data at both the Central and State levels, and provides consulting support to SEBs. NTPC and NHPC were incorporated in 1975 by GOI to construct and operate large power stations and associatee transmission facilities. They sell bulk power to the SEBs for distribution. NTPC has had marked success and has grown rapidly. In contrast, NHPC is still struggling to establish a role for itself. The States own most hydro sites and are reluctant to relinquish these sources of comparatively inexpensive energy to the Central Government. REC was established in 1969 to coordinate rural electrification and provide financial and technical expertise for SEB schemes. At present, REC finances more than half of total rural electrification investment. -18- Annex 2 INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT MSEB's Generation Developments not Approved by 1977 but Scheduled for Commissioning by 1983/84 Date to be Thermal MW Commissioned Bhusawal No. 3 210 October 1982 Ojari No. 1 210 December 1982 Ojari No. 2 210 April 1983 Parli No. 4 210 June 1983 Chandrapur No. 3 210 December 1983 Chandrapur No. 4 210 February 1984 TOTAL ly260 Annex 3 Page 1 of 2 - - . *UI>4t-*...--'.f _________-- ----.-- ------ ~ .- -.- - - - -- . ' - -- --.-- - - -I----.. 't - - --- --------- _ S - --- +É r-xr Glie b40- i Li- J11 ol I - I - __' lit -- g i 1. Vå ~ d ~ 8611 8 !~ lä TATA TROMBAY SO0MW EXPANSION PROJECT CONSTRUCTION PROGRESS CURVE avm wo~ms P SiffstmOeI two SMOI~~ ~ IMa MANDAV :- COMSTRCIM MM:- 2R.M.EL" - * C0<tUTes ISf •D Pnojnc, - ni.as5.6 * sugmstgous.aest - se os ?C.us PEAK STRENGT:- 4500 9C> le -9 cifa ilif -a ~ -21- Annex 4 INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT Estimated and Actual Project Cost (US$ Millions) Item Estimated Actual Local Foreign Total Local Foreign Total Preliminary Works (a) Roads & Railways 0.9 - 0.9 0.8 - 0.8 (b) Miscellaneous 1.8 - 1.8 1.5 - 1.5 Subtotal 2.7 - 2.7 2.3 - 2.3 Civil Works 16.0 - 16.0 21.7 - 21.7 Electrical & Mechanical (a) Turbogenerator(KFW) 8.6 31.6 40.2 13.9 28.0 41.9 (b) TG Associated Equipment (KFW) 6.1 5.0 11.1 7.4 12.3 19.7 (c) Steam Generator 23.5 23.0 46.5 49.6 1.1 50.7 (d) SC & TG Associated Equipment 22.2 6.6 28.8 15.7 9.1 24.8 (e) Sulphur dioxide removal eqpt/ particulate removal 4.6 13.7 18.3 12.1 1.5 13.6 (f) Electrical 9.1 3.1 12.2 8.7 9.2 17.9 (g) Miscellaneous E&M Equipment 5.0 0.7 5.7 8.0 0.5 8.5 Subtotal 79.1 83.7 162.8 115.4 61.7 177.1 Coal & Ash Handling 7.6 - 7.6 8.4 - 8.4 Switchyard 6.6 4.6 11.2 12.4 2.0 14.4 Construction Equipment 2.1 - 2.1 0.8 1.0 1.8 Engineering & Admn. 4.5 2.5 7.0 14.5 1.1 15.6 TOTAL 118.6 90.8 209.4 175.3 66.0 241.3 -22- 'Annex 5 Page 1 of 4 INDIA THIRD TROMBAY THERMAL POWER PROJECT - WAN 1549-IN PROJECT COMPLETION REPORT Schedule of Disbursements SAR Actual as % Estimate Actual of Estimate ----US$ Million--- June 30, 1979 11 9 82 June 30, 1980 35 15 43 June 30, 1981 80 42 52 June 30, 1982 100 75 75 June 30, 1983 105 93 89 June 30, 1984 101 96 December 30, 1984 105 100 山IneX S Page 2 of 4 ·23· 쎄 & I RUPEE FUND EX*PENDI1rURE CURVE Y/ (D (D 4& -B 'lig 55 62 a 63 64 64 m $-up lm Ul SEP. 0 13 is tg-- 22 26 o- op ire 14 13 sal" i i n 1 92 1 løff4 144 1~ 1153 1 is I" i a- Fir! la lit 1» 1 4ý PaM-15sts2 UNIT-S PROJECT TOTAL EXPENDITURE CURVE n gas 9 no --- --- - - lo. gggg ff C 10 I l - - l - l l - 88 W %-UP-j - - - S EPT- f0 - 004PWGGMi Jt 1 Jo. -UPTOMT -tP1 flfC -f INDIA THIRD TROMMYA THERMAL POWlER PROJECT TATA LECTRIC COMPANIES Combined Forecast and Actual Source and Application Statements. FY78 - FYS4 (In Millions of Rupees, except where otherwise stated) March 31 1978 1979 1980 1981 1982 1983 Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Acul ENERGY GENERATED AND SOLD Hydro Generation GWh 1,250.0 1,417.0 1,250.0 1,486.0 1,200.0 1,308.0 1,200.0 1,..;.0 1,200.0 1,342.0 1,200.0 1,245.0 1,245.0 Thermal Generation GWh 1,900.0 2,196.0 1,900.0 2,347.0 1,900.0 2,153.0 1,800.0 2,016.0 1,800.0 2,235.0 2,550.0 2,171.0 2,309.0 Power Purchases Gh 3,605.0 3.5M4.0 3,605.0 3,934.0 3,850.0 3,837.0 4,165.0 4,177.0 4.385.0 3.194.0 3,910.0 2,326.0 2,911. Total 6,755.0 7,119.0 6,755.0 7,767.0 6.950.0 7,298.0 7.165.0 7,663.0 7,385.0 6.771.0 7,660.0 5,742.0 6,571.0 Use in Station, add Trans- 405.0 365.0 405.0 382.0 410.0 351.0 430.0 364.0 445.0 396.0 515.0 360.0 414.0 mission Loss Gih Sales of Energy GWh 6,350.0 6.754.0 6.350.0 7,385.0 6,540.0 6,947.0 6,735.0 7,299.0 6,940.0 6.375.0 7.145.0 5,382.0 6,257.0 Average Price (paise/kWhb) 22.25 22.01 22.53 24.50 13.40 27.73 24.83 33.98 25.79 44.70 24.16 56.41 57.74 9PERATING REVENUE Sales of Energy 1,412.8 1,486.3 1,430.6 1,809.1 1,530.1 1.926.6 1.672.6 2,480.5 1,790.0 2,849.5 1,726.4 3,035.9 3,612.9 OPERATING EXPENSES Cost of Fuel 366.3 435.5 368.3 461.6 368.3 510.7 358.9 840.2 358.9 1,060.9 501.3 1,101.6 1,276.7 Other Operating Maintenance 164.1 157.9 173.1 193.7 178.6 203.8 184.1 225.7 189.3 339.6 229.3 387.5 435.7 Power Purchases 740.5 695.8 740.5 905.3 793.0 920.7 855.6 1,127.7 892.5 997.1 681.0 1,060.6 1,449.2 Depreciation 24.3 24.9 25.2 26.1 25.7 27.0 26.0 27.4 26.3 28.2 25.6 28.4 53.4 1 Tax on Se* 26.4 27.5 26.4 29.2 27.1 26.7 27.9 25.4 28.7 25.2 29.6 24.0 29.0 Excise on beseration - 5.8 - 67.0 - 59.7 - 60.3 - 61.6 - 568 64.3 1 Write off - Misc. Exp. 0.3 0.3 0.3 0.2 0.2 0.2 - - - ~ - 0.4 2.2 Total Operating Expenses 1,323.9 1,357.7 1,333.8 1,683.1 1,392.9 1,748.8 1,452.4 2.306.7 1,495.7 2,512.6 1,466.8 2,661.3 3,310.5 Operating Incomes 88.9 128.6 96.8 126.0 137.2 177.8 220.2 173.8 294.3 336.0 259.6 23.8 302.4 lon Operating Incomes 9.0 21.7 9.1 41.9 9.2 32.9 9.3 29.1 9.4 80.4 3.5 3.0 237.6 Total Income 97.9 150.3 105.9 167.9 146.4 210.7 229.5 202.9 303.7 417.3 269.1 482.1 540.0 Deduct Interest on Debt 30.9 31.8 49.2 44.6 78.8 64.9 140.9 90.4 189.0 166.1 212.6 202.8 222.9 Foreign Exchange - Write Off 4.6 4.6 4.4 4.1 4.4 3.7 2.0 1.2 - - - - 0.6 Provision for Taxation 27.1 62.4 22.6 67.7 33.7 81.8 49.2 31.0 64.4 145.0 - 5.9 (1.I) Total - Deductions 62.6 98.8 76.2 116.4 116.9 150.4 192.1 122.6 253.4 311.1 212.6 208.7 21.9 Profit 35.3 51.5 29.7 51.5 29.5 60.3 37.4 80.3 50.3 106.2 212.6 273.4 318.1 Lee& Contingencies Reserve 2.4 2.2 1.3 1.8 1.2 1.3 1.3 0.5 1.2 1.1 7.2 8.6 8.5 Investment Allowance Reserve 6.4 6.1 4.1 4.1 3.5 4.0 - 2.3 - 4.1 - 127.3 56.0 Tariff and Dividends Control Reserve 2.6 1.9 - 2.4 - 2.2 - (9.0) - (9.2) - 4.1 (6.5) Sp. Appre. re. Deferred Tax - 13.3 - 16.3 - 15.6 - - - - - - - " " Project Cost - - - - - - 25.0 - 106.6 125.1 Total Statutory Appropriations 11.4 23.5 5.4 24.6 4.7 23.1 1.3 (6.2) 1.2 21.0 7.2 246.6 183.1 ' Profit (after tax and Appreciations) 23.9 28.0 24.3 26.9 24.8 37.2 36.1 86.5 49.1 85.2 49.3 26.8 135.0 O Adjustments from previous years - - - - - - - - - - - - - * Distributable Profits 23.9 28.0 24.3 26.9 24.8 37.2 36.1 86.5 49.1 85.2 49.3 26.8 135.0 1-' es Proposed Dividend 20.5 20.5 20.5 20.5 20.5 23.1 26.3 23.0 23.0 42.7 34.5 42.7 50.7 0 Retained Profit to General Reserve 3.4 7.5 3.8 6.4 4.3 14.1 9.8 63.5 6.4 50.7 6.6 (23.9) $1.1 Operating Ratii (i,.trating expenses as p%cceAtage of operating revenue)2 94 91 93 93 91 91 87 93 84 8 85 88 92 THIRD TROMAY TSERMNL POWER PROJECT TATA 81.CTRIC CIMPANIES Combined Forecast and Actual Source ad Application 9 Funds, FU7S - FY84 (In Millions of Rupees, except where otherwise stated) March 31 1978 1979 1980 1981 1932 1983 Appraisal Actual Appraiqal Actual Appraisal Actual Appraisal Actual Appraisa Actoal Appre l Actual A SOURCES OF FUNDS Internal Cash Generation Total Income 97.9 150.3 105.9 167.9 146.4 210.7 229.5 202.9 303.7 417.3 269.1 482.1 540.0 Depreciation 24.3 24.9 24.9 26.1 25.7 27.0 26.0 27.4 26.3 20.2 25.6 28.4 53.4 Miscellaneous Expenses 0.3 0.3 0.3 0.2 0.2 0.2 - - - - - - 2.2 (Written-off) Total - Cash Ceneration 122.5 175.5 131.4 194.2 172.3 237.9 255.5 230.3 330.0 445.5 294.7 510.9 595.6 Capital Raised Equity Subscriptions - - - - - - 87.5 - 87.5 177.6 - 5.1 0.4 Security Deposits from Consumers - 1.0 30.0 26.2 50.0 24.6 50.0 15.8 20.0 1.4 - 2.2 2.3 Approved Loans - Unit 5: World Bank - - 93.7 62.0 151.5 29.0 392.8 175.5 225.7 304.9 39.3 208.6 130.1 RCD - - - - - - - - - - - 41.7 5.9 Local 3.3 - 16.5 20.0 205.2 140.0 252.2 177.5 30.8 112.5 64.0 75.0 42.0 Approved Loans - Others - - - 7.7 4.6 4.5 16.9 1.7 - - 16.2 - - Debeaturee 50.0 - - - - - - 77.5 - 72.5 - 72.1 - Cash Credits - - 13.6 - - - - 65.0 - - 3.2 - - Total Capital Raised 53.3 2.0 153.8 115.9 434.2 196.1 799.4 513.0 364.0 668.9 122.7 404.7 180.7 Fixed Deposits - 26.2 - - - - - - - 145.2 - 23.8 - Other Itemq 1.1 1.9 1.1 5.0 1.1 4.9 1.1 1. 13 1.4 1.3 3.0 0. 176.9 205.6 286.3 315.1 607.6 440.9 1,056.0 754.4 695.3 1.261.0 418.7 942.4 776.8 APPLICATION OF FUNDS Capital Expenditures General Construction 34.0 36.0 30.0 28.6 30.0 24.4 30.0 41.6 30.0 40.2 30.0 2.5 21.7 Third Trmbay Power Project 3.3 - 140.2 176.9 406.7 187.0 782.5 586.8 364.0 730.4 103.3 602.8 197.5 (unit 5) Total 37.3 36.3 170.2 205.5 436.7 211.4 812.5 628.4 384.0 770.6 133.3 631.3 219.2 Debt Service Repayment 13.8 - - - - - - 3.2 - - - - Interest 30.0 31.8 49.2 44.6 78.8 64.9 140.9 90.4 189.0 166.1 212.6 202.8 222.9 Amotisation 27.1 20.4 17.6 28.3 17.6 25.7 17.6 61.5 6.0 115.9 8.0 8.3 6 03 Total - Debt Service 71.8 52.2 66.8 72.9 96.4 90.6 158.5 151.9 200.2 282.0 220.6 211.1 288.1 Capital Issue Expenses/Share - - - - - - - 4.6 - 16.7 - 5.5 - Redemption Investments 2.9 4.4 2.4 2.5 1.3 2.0 2.8 1.4 2.8 0.2 1.2 1.2 10.9 0 Tax Provision 27.1 62.4 22.6 67.7 33.7 81.8 49.2 31.0 64.4 145.0 - 5.9 (1.6) tb Dividends 20.5 20.5 20.5 20.5 20.5 23.1 26.3 22.8 42.7 34.5 42.7 50.7 3.9 Working Capital (Increase/Decrease) 17.3 29.8 3.8 (54.0) 19.0 32.0 6.7 (85.7) (8.8) 12.0 20.9 36.7 M0.3 176.9 205.6 286.3 315.1 607.6 440.9 1,056.0 754.4 695.3 1,261.0 418.7 942.4 776,$ No. of times Debt Service covered by Total Cash Generation 1.7 3.4 2.0 2.7 1.8 1.5 1.6 1.6 1.6 1.6 1.3 2.4 2.1 TRERD TRfl&T THMIL 90um ROJ0M? TATA UaCTIC CMM A518 Coedned Foraeaat and Actual melaa. I9ets. 1778 - pm84 (In jiliona of saes except wh t otherim stated> Wareb 31 1978 1979 1980 1981 1982 1983 Aloraeaa Atcal AImraraial A A tual A ~*rA 6*i1 Act cetua Atraiaal Actual Aar*e9l Attual Actual ASSITS Grosa rizad Aseto 90.1 952.6 980.7 989.8 1,005.7 1.018.4 1,030.7 1.031.2 1.054.7 1,053.6 2,878.7 1.740.0 3.384.8 ton: Depreciation (372.4) (376.5) (393.6) (402.0) (415.3) (428.3) (437.3) (447.4) (58.8) <475.2) (479.6) (501.0) () 3.9) set lixed Assets in service 577 57 576.1 587.1 587.8 590.4 $90.1 593.4 583.8 595.9 578.4 2.399.1 1.239.0 2.830.9 ork in Progres 32.1 43.3 166.7 210.5 573.4 392.1 1.355.9 986.8 1.719.9 1.727.3 23.3 1.668.1 241.8 Foreiga ccebänga - Iftreased Cot of Loans for perchae of Capitel A*eta 10.8 9.5 6.4 3.4 2.0 (12.2) - (9.5) - (.6) - -6 Total - Fed Asseta 620.6 62.9 760.2 801.7 1.165.8 970.0 1.949.3 1,6.1 2.315.8 2,303.1 2.422.4 2.907.1 3.169.6 Countingancies esere 45.0 45.3 47.4 47.5 48.7 49.3 49.9 50.7 $1.2 51.5 52.4 52.5 61.1 Othare 9.7 10.8 9.7 11.1 9.7 11.3 11.3 11.3 12.8 10.7 12.8 10.8 13.1 54.7 56.1 57.1 58.6 58.4 60.6 61.2 62.0 64.0 62.2 65.2 63.3 74.2 Clm T Ats Cach and sank 4.0 31.8 4.0 11.0 434.2 198.1 799.4 513.0 364.0 668.9 122.7 404.7 180.7 laventories 113.7 114.6 115.7 123.3 - - - - - 145.2 - 23.8 - Debtore <Conau~r0) 148.1 173.2 148.1 203.3 Other Itn 1.3 1,4 1 j 3,0 0,5 total - Curret Aaseta 320.$ 38. 3221.3 4127.3 339.7 4$3.6 3$4.1 486.8 364.3 671.2 382.5 807.0 98.3 Defered Expengec 0.5 0.6 0.2 0.4 - 0.2 - 0.6 - 17,A - 't,2 %.6 Total - Aesete 9f.3 1.054.2 1.140.0 1.288.0 1.563.9 1.42.4 2.365.0 2.108.5 24.3 3.033.8 2.870.0 3.800.2 4.232.7 mhar* Capital Ordiunary ~bare Capital 133.6 133.6 133.6 133.6 133.6 133.6 221.1 133.6 308.6 311.2 308.6 316.3 316.7 Preference 8bare 38.6 38.6 38.6 38.6 38.6 38. 38.6 34.4 38,6 34.4 38,6 34.4 344,4 Total - Capital 172.2 172.2 172.2 172.2 172.2 172.2 259.7 168.0 347.2 345.6 347.2 350.7 351.1 bareeolde Reserv@* 163.7 168.6 167.5 174.7 171.8 188.6 181.6 252.6 188.0 303.3 196.0 279.4 360.4 Contiusencies Meserves 47.4 47.5 48.7 49.3 49.9 50.8 51.2 51.4 52.4 52.5 59.6 61.1 69.3 Other Statutor7 4eserves 32.8 32.1 36.9 38.7 40.4 44.9 40.4 38.2 40.4 33.1 40.4 164.4 213.9 Deferred Tas Resarv 30.4 42.9 30.4 59.2 30.4 74.8 30.4 74.8 30.4 74.8 30.4 74.8 74.8 $p. Appropriatiom r. Project cag - - - - - - - - 23,0 - 131,6 2%6,7 Total - Neserves 274.3 52.2 283.5 321.9 292.5 359.1 303.6 417.0 311.2 488.7 325.0 711.3 975.5 Ca.b Credits 11.0 14.1 24.6 20.1 47.5 - 47.5 65.0 44.3 - 47.5 - - Dbenturas 208.5 158.5 200.5 M38.5 192.5 158.5 18.5 212.6 176.5 268.3 168.5 335.6 325.1 AD Lea 28.8 27.5 19.2 17.7 9.6 8.9 - 18RD Lo~ne (Trombay) - - 93.7 62.0 245.2 79.1 638.0 254.6 863.7 559.5 903.0 770.8 976.4 other Financial Institutiona 3.3 - 19.8 20.0 229.6 189.7 498.7 368.8 529.5 450.0 609.7 66.7 $83.5 Unsecurod Loans 85.7 129.4 85.7 122.6 85.7 90.7 85.7 81.7 85.7 224.1 85.7 24. 242.9 Total 337.3 329.5 443.5 390.9 810.1 526.9 1.454.4 982.7 1.6.7 7 1.501.9 1,814.4 1.814.4 2.127.9 Conaers security Depoits - 2.0 30.0 28.2 80.0 52.8 130.0 48.5 150.0 49.9 150.0 52.1 - Sandr7 Creditorg 122.3 145.5 122.3 187.7 122.3 201.3 127.3 277.2 129.0 408.8 126.0 449.6 411.6 Other Liabilitiet 86.2 108.4 84.4 178.9 82.6 157.6 85.7 20.6 .. 2.8 243.4 102.9 218.7 349.1 Total - Current Liabilities 208.5 253.9 206.7 366.6 204.9 358.9 213.0 477.8 231.8 652.2 228.9 751.3 780.7 Cons.mera' Contributioaa 4.0 5.5 4.1 8.2 4.2 12.5 4.3 14.5 4.4 15.5 4.5 17.2 17.3 total - Liabilitit 96.3 1.054.2 1.140.0 1.288.0 1.563.9 1.482.4 2.365.0 I.108.5 1274.3 3.053.8 2.870.0 3.800.2 4.232.7 Debt/3quity Uatio - Unpaid Debt a* % or %aptal. fteoerveo aed a pt e 43.0 42,0 49.0 44.0 64.0 50.0 72.0 63.0 72.0 64.0 73.0 64.0 62.0 0~mtu amTt Curent aeto to Corrent Ligblities 1.5 1.5 1.6 1.2 1.6 1.3 1.7 1.0 1.6 1.0 1.7 1.0 1.0 TRID Tr16AY hU E. re~ ru PROIEC TATA N.ECTRIC 001PANIE8 Worecast and Actual Clear Profit. 1178-å184 (In Million Eseem. except wher, oteise stated) March 31 1978 1979 11 181 1182 1983 1984 ~ »Araisal Actual Aoaraisal Actual Amaisal Actual A~.raiaal ctuel raisl 4toaL pål Atual4 Actual ~-9L po~er Purebase 740.5 695.8 740.5 905.3 793.0 920.7 855.5 1127.7 892.5 997.1 681.0 1060.6 1449.2 Cost of Fuel 368.3 435.5 368.3 461.6 368.3 510.7 358.9 840.2 358.9 1060.9 501.3 1101.6 1276.7 Tax on Sala of Electricity 26.4 27.5 26.4 29.2 27.1 26.7 27.9 25.4 28.7 25.2 29.6 24.0 29.1 Exclo, buty on Generation - 5.8 - 67.0 - 59.7 - 60.3 - 61.6 - 58.8 64.: Operating ~xpenses 158.8 155.7 167.8 161.3 173.3 190.7 178.8 210.8 184.0 266.5 224.0 291.5 372.6 Ifterest - Vit 5 Security Deposite from Consumers - - 0.3 0.7 3.0 4.4 5.8 5.5 7.7 5.4 8.3 5.6 5.6 world Bank - - 11.2 4.7 22.9 12.9 48.8 21.5 78.1 36.4 92.0 53.2 68.4 EIo - - - - - - - - - - 2.6 4.2 Local Institutioms - - 6.9 3.5 20.2 13.5 47.6 24.0 64.6 56.8 73.3 61.9 65.9 Interest on Approved Lone - Others 1.1 1.5 - 2.9 0.3 3.4 1.7 4.2 2.8 11.4 3.9 - - Intreost oo Debaturec 14.0 12.6 17.6 12.6 16.8 12.6 19.7 18.9 (a) 18.9 27.0 (a) 18.0 37.7 38.2 luterest om Cagb Credite 4.5 4.4 2.6 6.9 5.4 5.8 7.1 5.4 6.9 10.4 7.1 5.6 4.9 Depreciatio 24.0 24.6 24.9 25.6 25.4 26.3 25.7 26.7 26.0 27.6 25.3 27.4 52.4 Tanation 28.7 64.2 24.2 70.0 35.3 80.1 50.8 69.1 66.0 148.8 - 7.8 (1.2) ffiscellmneon Ependiturc Tritte-off 0.3 0.3 0.3 0.2 0 2 0.2 - - - - - 0.4 2.2 Appropriation for Contingencies Roserve 2.4 2.2 1.3 1.8 1.2 1.3 1.3 0.5 1.2 1.1 7.2 8.6 8.5 Appropriation for Iwetmet Alloance Reserve 6.4 6.1 4.1 4.1 3.5 4.0 - 0.2 - 0.3 - 55.5 - Special Approp. re DOealuation Incress 5.2 5.2 4.8 4.4 4.7 4.0 2.1 1.3 - - - - 1.6 Special Approp. re ~ ~ferred Tax Reserve - 13.3 - 16.3 - 15.6 - - - - - - Special Approp. r* Project Cost - - - - - - - - - 25.0 - 106.6 125.1 Spedial dpprop. ro .P. Intereat Differential - - - - - - - - - - -5.7 AdiNible Exp~on. 1380.6 1454.7 1401.7 1778.1 1500.6 1892.6 1631.7 2441.7 1736.3 2761.5 1671.0 2915.1 3573.3 iitio l i for Clear Profit * 41.5 45.1 35.7 48.1 36.4 50.1 47.9 56.0 60.8 102.3 62.6 140.4 1192. .otal to be Cvered by Rowent 1422.1 1499.8 1437.4 1826.2 1537.0 1942.7 1679.6 2497.7 1797.1 2863.8 1733.6 3056.5 3692.5 Dedct Other Incone 6.7 11.6 6.8 14.7 6.9 13.9 7.0 17.2 7.1 14.3 7.2 13.6 79.6 Total ReVeme to be Cowered by Tariff 1415.4 1488.2 1430.6 1811.5 1530.1 192.8 1672.6 2480.5 1790.0 2849.5 1726.4 304.9 3612. Ener salta (Whr ffillioa)(b) 6350.0 6754.0 6350.0 7385.0 6540.0 6947.0 6735.0 7299.0 6940.0 6&375.0(b)7145.0 5382.0(0)6257.0 . Average Price (paise/b) 22.25 22.03 22.53 24.53 23.40 27.77 24.83 33.98 25.79 44.70 24.16 56.52 57.74 e Recsonable return plos permisaible excess, vberever available. It differa from *distributiou profits" obeun in the Incom Statement, since these inelade itons of incowe and expenditure outside the definitioa of elear profit. (a) Inelades interest on Pebeturers - Unit 5 4.0 10.8 20.2 (b) *et of Energy wbeeled for IB 957.0 1790.0 THaD tUoM taRMAL POWEs ROMT TATA .acrtcIG COuRsanS Porecast and Actual Canital Base and Reasonable Return. 78-F84 (In illion Rupees) March 31 1978 1979 1980 1961 1982 1983 Apraisal Actual Apyraisal Actual Avrsaal Actual Agaraisal Actual Appraisal Actual aapraiel Actal ,tajl Capital Rose CoAutation Original Cost of Fixed Assets 943.2 938.9 973.8 975.5 998.8 1001.3 1023.8 1013.2 1047.8 1039.5 2871.8 1711.6 3361.2 gst: Capital Contributions from Consumers 4.0 5.5 4.1 8.2 4.2 12.5 4.3 14.5 4.4 15.5 4.5 17.2 .. 939.2 933.4 969.7 967.3 994.6 988.8 1019.5 998.7 1043.4 1024.0 2667.3 1694.4 3343.7 Cost of Licenses and Capital Issue Expenses 6.4 6.5 6.4 6.5 6.4 6.5 6.4 3.3 6.4 20.0 6.4 25.8 25.8 Cost of Works-ia-Progress System 35.6 40.4 30.0 30.9 30.0 27.0 30.0 34.9 30.0 47.3 30.0 40.0 40.7 Cost of Works-in-Progress Unit 5 3.3 - 143.5 177.6 550.2 364.4 1332.7 930.9 1696.7 1681.3 - 1623.8 197.0 Contingencies Reserve Investments 45.0 45.3 47.4 47.5 48.7 49.3 49.9 50.7 51.2 51.5 52.4 52.5 61.1 Average Stores & Toole Balance 108.0 109.4 110.0 115.5 112.0 126.0 114.0 145.5 116.0 168.3 132.0 172.2 287.6 Average Cash & bank Balances 4.0 33.8 4.0 24.8 4.0 52.4 4.0 49.8 4.0 98.8 6.0 $4.5 63.9 Average Cash Credit Balances (14.9) (23.1) (17.0) (34.0) (36.0) (21.3) (47.51) (16.5)* (45.9) (52.6) (47 S) (6.1) _A6,L) A 1126.6 1145.7 1294.0 1336.1 1709.9 1593.1 2509.0 2217.3 2901.8 3038.6 3046.6 3657.1 1013.7 1 Deduct ions o Depreciation Fund 369.6 373.6 390.5 398.7 411.9 424.3 433.6 442.9 454.8 470.9 475.3 493.2 546.5 License 4 Capital Issue Expenses Written-off 5.9 5.9 6.2 6.1 6.4 6.3 6.4 2.7 6.4 2.7 6.4 3.0 5.2 Consumers' Security Deposits - 2.0 30.0 28.2 80.0 52.8 130.0 48.5 150.0 49.9 130.0 52.1 54.4 Approved Loans - Unit 5 World ank - - 93.7 62.0 245.2 92.4 638.0 264.1 863.7 562.1 903.0 770.8 876.8 BCGD - - - - - - - - - - - 41.7 43.3 Local 3.3 - 19.8 20.0 225.0 160.0 477.2 337.5 508.0 450.0 572.0 525.0 542.9 Approved Loans - Others - 10.0 - 25.2 4.6 29.7 21.5 31.3 21.5 - 37.7 - - Debeaturps - Unit 5 - - - - - - - 77.5 - 100.0 - 172.1 166.9 Debentures - Others 208.5 158.5 200.5 158.5 192.5 158.5 184.5 135.1 176.5 168.3 168.5 163.5 158.2 Tariffs & Dividends Control Reserve 14.2 14.1 16.8 16.3 16.8 18.5 16.8 20.6 16.8 8.4 16.8 0.5 6.5 Coosumers' Benefit Account 3.6 3.5 6.2 5.7 4.4 7.8 2.6 10.0 - 10.0 - 10.0 16.0 Investment Allowance Reserve 16.0 16.1 10.1 20.2 23.6 24.2 23.6 24.3 23.6 24.6 23.6 80.1 - 80.1 Special Appropriation re Deferred Tax 30.4 42.9 30.4 59.2 30.4 74.8 30.4 74.8 30.4 74.8 30.4 74.8 74.8 Special Appropriation re Project Cost - - - - - - - - 0 - 131.6 -.? B 651.5 626.6 814.2 800.1 1240.8 1049.3 1964.6 1469.3 2251.7 1946.7 238.7 2518.4 2828.3 o-d oo 00 Capital Base (A - a) 475.1 51).1 479.8 536.0 469.1 543.8 544.4 748.0 650.1 1091.9 662.8 1138.7 1138.7 a Reasonable Return oI01 72 on Capital Base of Re 475 million as of 3/31/65 33.2 33.1 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 " 11/122 on balance of Capital Base - 4.9 0.6 6.8 - 7.6 7.7 30.1 19.3 67.9 20.7 79.7 85.3 , Other Income 0.3 0.4 0.3 0.5 0.3 0.5 0.4 0.6 0.6 0.7 0.6 0.7 1.1 1/22 on approved loans from World Bank - - 0.5 0.3 1.2 0.5 3.2 1.3 4.4 2.8 4.4 3.9 4.4 1122 on approved loons from local institutians - - 0.1 0.2 1.1 0.9 2.5 1.8 2.& 2.3 2.9 2.6 2.7 1122 on ECMD Credit - - - - - - - - - - - 0.2 0.2 1/2Z on Debentures 1.0 0.8 1.0 0.8 1.0 0.8 0.9 1.1 0.9 1.3 0.8 1.J 1.6 1121 on Investment Allowance Reserve - 0,1 - 0.1 - 0.1 - 0.1 - 0.1 - 0.4 . Amount of Reasonable Return 34.5 39.4 35.7 41.9 36.4 43.6 47.9 68.2 60.8 108.3 62.6 122.4 128.9 Annex 7 Page 1 of 2 -31- INDIA THIRD TROMBAY THERMAL POWER PROJECT - LOAN 1549-IN PROJECT COMPLETION REPORT Internal Economic Rate of Return (Ex-Post) Assumption I. COSTS 1. Capital Costs of the Project, expressed in constant 1977 rupees, are as follows: Year Foreign Local Total 78/79 62.0 114.9 176.9 79/80 29.0 158.0 187.0 80/81 175.0 411.3 586.8 81/82 304.9 425.5 730.4 82/83 208.6 394.2 602.8 83/84 130.1 67.4 197.5 2. Local Costs were expressed in the equivalent border prices using the following conversion factors: labor - 0.75; and material - 0.8. 3. Annual Operating and Maintenance Costs were calculated at 2% of the capital cost. 4. 1/ Fuel Cost. The power plant is being operated on associated gas and LSHS instead of coal as was originally planned. Since at the margin, small quantities of associated gas continue to be flared and since no alternative uses for this gas were envisaged, its opportunity cost is assumed to be zero. It is further assumed that the power plant would continue to use this gas until 1990 when it would be displaced by domestically produced coal from Singrauli. The economic cost of this coal at the pithead is estimated at about Rs 200/ton and that of delivering it to Trombay at about Rs 320/ton, which amounts to about Rs 1,184/toe (1 ton of coal = 0.44 toe). In constant 1977 prices, the cost of coal is about Rs 750/toe. 1/ Amended in light of comments of the Borrower. -32- Annex 7 Page 2 of 2. II. BENEFITS 5. Benefits are based solely on electricity sales and existing tariff. Allowance is made of station consumption and transmission losses of about 8% of gross generation. The existing tariff is about 66.4 paise/kWh which, in constant 1977 prices, amounts to 39.7 paise/kWh. III. INTERNAL ECONOMIC RATE OF RETURN Capital Operation & Fuel Total Electricity Net Year Expenditure Maintenance Cost Cost Sales Benefits Benefits 78/79 150.8 150.8 -150.8 79/80 133.0 133.0 -133.0 80/81 383.0 383.0 -383.0 81/82 465.6 465.6 -465.6 82/83 359.1 359.1 -359.1 83/84 122.2 16.2 0 138.4 920 365 226.6 84/85 32.3 0 32.3 1,840 730 697.8 85/86 32.3 0 32.3 2,760 1,096 1,063.7 86/87 32.3 0 32.3 2,760 1,096 1,063.; 87/88 32.3 0 32.3 2,760 1,096 1,063.7 88/89 32.3 0 32.3 2,760 1,096 1,063.7 89/90 32.3 0 32.3 2,760 1,096 1,063.7 90/91 32.3 531 563.3 2,760 1,096 532.7 2013/2014 32.3 531 563.3 1,096 532.7 IERR = 30.5% ATTACHMENT A Page 1 of 2 COMMENTS FROM THE GOVERNMENT -33- 3166175 FINE IN 248423 WORLDBANK FROM SHRI SUMIT BOSE DEPUTY SECY ECOFAIRS NEW DELHI TO SHRI CM VASUDEV ADVISER TO ED (INDIA) WORLD BANK WASHINGTON REGARDING PROJECT COMPLETION REPORT - INDIA: THIRD TROMBAY THERMAL POWER PROJECT (LOAN 1549-IN) (.) KINDLY PASS ON THE FOLLOWING COMMENTS TO MR. YUKINORI WATANABE DIRECTOR OPERATIONS EVALUATION DEPARTMENT (.) QUOTE: MR. MANAKTALA MANAGING DIRECTOR TATA ELECTRIC COMPANIES HAS FOR- WARDED HIS COMMENTS ON THE DRAFT PCR OF THIRD TROMBAY THERMAL POWER PROJECT (.) WHILE CONCURRING WITH THE COMMENTS CONTAINED THEREIN WE HAVE THE FOLLOWING OBSERVATIONS TO MAKE (.) (1) PARA. 5.05 ON PAGE 12 - WHILE IT IS TRUE THAT GOM WERE UNABLE Amended Footnote TO MEET THEIR COMMITTMENT OF RS, 73 MILLION TO TEC IN 1983-84, TEC Page 13 WERE ABLE TO IMPROVE THEIR LIQUIDITY POSITION BY CONTRIBUTING TWO PAISE/KWH ON ALL POWER SOLD TO A SPECIAL APPROPRIATION FOR PROJECT COST AND THEREFORE DID NOT PURSUE THE RELEASE OF THE BALANCE AMOUNT WITH GOM IN 1984-85 (.) IT HAS BEEN CONFIRMED BY TEC THAT THEY DID NOT NEED THE BALANCE AMOUNT PLEDGED BY GOM SUBSEQUENTLY (.) REQUEST THAT THE WORDINGS IN THIS PARA MAY BE AMENDED SUITABLY TO REFLECT THIS FACT (.) (2) PARA 9.01 ON PAGE 15 - AS ALREADY POINTED OUT BY TEC THE EXTENSION OF LICENSE WAS MERELY COINCIDENTAL AND NOT AN INTENDED OBJECTIVE OF THE PROJECT (.) THE GOVERNMENT COVENANT TO THIS EFFECT IN THE AGREEMENT WITH THE BANK WAS AIMED AT ENSURING THAT THE LICENSE WAS NOT TERMINATED. WE MAY ALSO POINT OUT THAT THE Amended Footnotes EXISTENCE OF SUCH PRIVATE COMPANIES FOR GENERATION AND DISTRIBUTION Pages iv, OF ELECTRICITY IS NOT REPUGNANT TO OUR POLICY AND THAT SOME PRIVATE 14 and 15 COMPANIES OTHER THAN TECS ARE ALSO OPERATING IN THIS FIELD (.) WE THEREFORE DIFFER FROM THE BANK'S CONCLUSION QUOTE MOST IMPORTANTLY THE PROJECT HAS BEEN INSTRUMENTAL IN ENABLING TEC TO EXTEND ITS ATTACHMENT A -34- Page 2 of 2 LICENSE THEREBY PRESERVING A CRITICAL PRIVATE SECTOR ELEMENT IN THE COUNTRY'S POWER SUBSECTOR UNQUOTE AND WOULD REQUEST THAT THIS MAY BE DELETED FROM THE REPORT (.) REGARDS (.) UNQUOTE (.) DATED 11/4/1986 KEWAL ATTACHMENT B -35- Page 1 of 3 S. P. MANAKTALA TATA ELECTRIC COMPANIES, MANAGING DIRECTOR BOMBAY HOUSE, FORT, BOMBAY 400 023. March 20, 1986. COMMENTS FROM THE BORROWER Dear Mr. Watanabe, Trombay 500 MW Unit 5 Project Loan 1549 - IN This has reference to your letter of February 13, 1986 addressed to Mr. K.M. Chinnappa, Vice Chairman, enclosing the Bank's draft Project Completion Report. We find the report to be satisfactory except for some comments which are separately listed and forwarded with this letter. Referring to the last para of the Highlights and Conclusions (P. 15), we find more importance being given to Amene the project having been instrumental in enabling TEC to extend Footnotes its license thereby preserving a critical private sector element Pages iv, in the country's power subsector. We would view this more as 14 and 15 coincidental with the other benefits listed in thesp paras viz. transfer of technology to the country's power sector, training facilities in operation of 500 MW Units, development of Training Simulator etc. being more important. With kind regards, Y rs sincerely, S. P. Manaktala Mr. Y. Watanabe, Director, Operations Evaluation Department, The World Bank, Washington D.C. 20433, U.S.A. ATTACHMENT B -36- Page 2 of 3 THE TATA HYDRO-ELECTRIC POWER SUPPLY GO., LTD. THE ANDHRA VALLEY POWER SUPPLY CO., LTD. THE TATA POWER COMPANY LIMITED Commonts on Project Completion Report Third -rombay Thermal Power Project (Loan 1549-IN) Amended I* Page I s Delete 220 KV In 1.03 line 7 as there were no 220 KV Footnote Page 1 lines in TEC system in 1977. Amended 2, Poo* 2 s 3.10 line 14 'Ra. 38 million' should read 1b. 88 million. Footnote Page 7 3. Project Costs : Pare 2 and Page ft) of preface, Page Iv) of Highlightes Page 8 and Annexure 4 refer to a final project post of S 280.4 million. We presume this has seen derived by converting the b. 241.2 croree indicated in P. 13 of our report into dollars at 1 $ w 8.6 Re. the exchange rate prevailing in 1978. We bblieve this does not reflect the true project cost as all expenditure has been converted to rupees by us at the exchange rate prevailing at Amended the time of payment and takes into account the general depreciation Footnotes in the rupee till project completion, resulting in the final cost Pages , 11 of lh. 241.2 crores. iv and 7 To illustrateg I S of equipment in original project cost has been booked when incurred at 10 lb. in the final cost but the Bank reconverts this to dollars at I S a 8.6 lb. i.e. $ 1.16 whereas only 1 $ has been incurred. This method gives the picture that project costs increased by 34% whereas a more fair view would be to also present the project cost as having increased from S 209.3 million to $ 241.2 million i.. 15.3% as given in P. 13 of our report. 4. Page 6 s Pare 3.06 refers to delay in delivery of valves and rehesters for Steam Generator "because of takeover of Bharat Heavy Electrical Limited's subvendor in Europe Amended by another Company'. Footnote The reference to SHEL may be deleted and the following Page 6 may be included Obecause of takeover of the valve supplier in Europe by another Company*. S. Page 7 s Para 3.09, line 6, US $ I million should read as Amended US $ 3 million. The reference to US $ I million in our report was to the CIF cost of the Simulator. Footnote Page 7 ... 2 ATTACHMENT B -37- Page 3 of 3- THE TATA HYDRO-ELUCTRIC POWER SUPPLY CO.. LTD. THE ANDHRA VALLEY POWER SUPPLY CO.. LTD.. THE TATA POWER COMPANY LIMITED s2s 6* Pgge 9 s Para 3.17 and Page 5, 3.03 refer to. 3 months' delay in finalisation of steam generator centract. In Pege 9 of our report what was implied was that the appfaisal report had envisaged that contracts would be awarded by June/July 1978. However, though the loan agreement Amended was signed only in June 1978, TEC en their own initiated Footnotes action and fthalised the steam generator contract in a Pages 5 and 9 short period of 3 months. Therefore, the reference to delay in finalisation of steam generator contract should preferably be linked to the loan agreement being signed in June 1978 rather than delay in contract finalisation as such. Para 3.18, line 7, "Parent Company" to read "AssociatesM. 7* Page 10 t Para 3.19 (b), line 5, *by the borrower" to read "with the assistance of the borrower. Pare 4.01 to read 'As noted in Pare 3.03 the project was completed in January 1984, and after initial trials the unit was first synchronised on January 25, 1984. After correcting manufacturing deficiencies the unit attained full load on 27th April, 1984, i.e. 92 days after synchronisation. The Unit had also to be taken out for three weeks in Amended October 1984 to install baffles in the second pass to Footnote overcome the problem of duct resonance on the Steam Page 11 Generator. During the first year of operation in 1984-85 the unit availability was over 85% and generated 3108 MUS corresponding to an utilisation factor of T1% which for first year of operation of a new unit is commendable. During the year under reference the unit was shutdown three times and tripped seventeen times; most of these trips occured while correcting and optimising protective and control circuits. The Unit, however, was brought back on line within two hours of each shutdown, because of the provision of a- turbine bypass. 8. Page 30 : Pare 4, line 1, insert after associated gas 'and LSMS'. Amended Footnote Page 31