BEFORE THE M.P. ELECTRICITY REGULATORY COMMISSION

BHOPAL

Filing No

Case No. of 2009

IN THE MATTER OF Proposal of M.P. Power Generating Company Ltd. for approval of Generation Tariff of Sanjay Gandhi (1x500MW) Thermal power Station for FY 09

PETITIONER M.P. Power Generating Company Ltd, Rampur, Jabalpur.

RESPONDENT 1. M.P. Power Trading Company Ltd., Rampur, Jabalpur 2. M.P. Poorv Kshetra Vidyut Vitaran Company Ltd., Jabalpur 3. MP Madhya Kshetra Vidyut Vitaran Company Ltd., Bhopal 4. MP Paschim Kshetra Vidyut Vitaran Company Ltd., Indore 5. M.P. Power Transmission Co. Ltd. Jabalpur. 6. M.P. State Electricity Board, Rampur, Jabalpur.

The above named petitioner, M.P. Power Generating Company Ltd, respectfully submits as under:-

1. Madhya Pradesh Power Generating Company Limited (MPPGCL), hereinafter referred as the Petitioner is a company incorporated under the Companies Act, 1956 and having its registered office at Shakti Bhawan, Jabalpur. Consequent to the implementation of power sector reforms in the State where under, amongst others, the activities of generation, transmission, distribution and retail supply of electricity carried out by erstwhile MPSEB have been restructured and transferred to the five successor corporate entities, wherein the function of power generation has been vested with MPPGCL. The functions of retail distribution of power has been vested with the three distribution companies v.i.z. M.P. Poorv Kshetra Vidyut Vitaran Company Ltd., Jabalpur (hereinafter referred as Respondent 2) MP Madhya Kshetra Vidyut Vitaran Company Ltd., Bhopal (hereinafter referred as Respondent 3)

and MP Paschim Kshetra Vidyut Vitaran Company Ltd., Indore (hereinafter referred as Respondent 4). The responsibility of power transmission has been vested with M.P. Power Transmission Co. Ltd., Jabalpur (hereinafter referred as Respondent 5 )

2. The M.P. State Electricity Board (MPSEB), (hereinafter referred as Respondent 6), was constituted under, Section- 5 of the Electricity (Supply) Act, 1948, is a body corporate. It was vested with the general duties under Section-18 of the said Act. After implementation of the Power Sector Reforms in the State, its scope of operation was limited to act as trader of power in the State and manage cash flow on provisional basis. Subsequently, GoMP vide its notification dated 3rd Jun 06 has incorporated MP Power Trading Company Limited (MP Tradeco) (hereinafter referred as Respondent 1) and transferred the responsibilities of power trading to it. Now MPSEB is primarily managing Cash Flow amongst six successor companies in accordance with the “Cash Flow Mechanism” notified by GoMP vide notification dated 3rd Jun 06. Since all power generated by MPPGCL from the capacity allocated to it, is to be purchased by MP Tradeco and MPSEB shall be making payments on behalf of MP Tradeco to MPPGCL, both of them are affected parties and hence made respondent to the petition. The power generated by MPPGCL and sold to MP Tradeco shall be transmitted through the transmission network of MP Transco and shall be ultimately sold to the above mentioned three discoms. Hence all the four companies are also affected parties and hence made respondent to the petition.

3. As regard to the power generated from SGTPS Birsinghpur 500 MW, the recently commissioned plant, GoMP vide its notification dated 3rd Jun 06 has categorically provided that petitioner will sell entire power generated by the Sanjay Gandhi Thermal Power Station to the Respondent 1 at a rate determined by Hon.ble MPERC. A Power Purchase Agreement to this effect has also been signed between MPPGCL and MP Tradeco on 29th Nov 2006 and has already been submitted to the Hon.ble Commission on 30th Nov 2006.

4. Earlier as the 1x500 MW unit of SGTPS, Birsinghpur was synchronized on 18.6.07, a tariff petition for determination of tariff for Extn. Unit No.5 was submitted to Hon.ble MPERC vide Petition No.51 of 2007 on 19.9.2007, envisaging its commercial operation w.e.f. Nov.2007. Hon.ble Commission vide order dated 18.1.2008 has disapproved the MPPGCL.S request for approval of provisional Tariff saying that the unit has not started generating

the electricity commercially and allowed MPPGCL the recovery of infirm power charges till the CoD of Unit. Further, Hon.ble Commission has issued the directive to file the petition for determination of provisional tariff for 1x500 MW Extn. Units, as soon as CoD is achieved.

The CoD of SGTPS units No.5 has been achieved on 28th Aug.2008. In view to prepare the petition project cost details including the details of revenue against sale of infirm power were to be ascertained. The requisite data related to sale of infirm power could only be gathered after Hon.ble Commission clarified the issues raised by SLDC in the month of October 2008. The data related to expenditure towards generation of infirm power was gathered during Nov.-Dec.2008, which included O&M, Administrative & Gen. Expenses and cost of the fuel. In the meantime Joint Secretary, GoI, MoP vide letter dated 18.11.2008, forwarded through Addl. Secretary, GoMP, Department of Energy (dated 28.11.2008), regarding import of coal during 2009-10, forwarded CEA.s target sheet indicating the utility wise target for import of coal during 2009-10 due to lack of Indian coal availability. In view of the above MPPGCL vide letter No. 19 dated 12.1.2009 has requested Hon.ble MPERC to kindly accord in-principle approval for procurement of imported coal and admissibility of additional cost. As per the directives issued by Hon.ble MPERC vide letter No.173 dated 20.1.2009, to intimate cost benefit analysis and other related information, MPPGCL has submitted a brief note vide No.52 dated 5.2.2009. The approval of Hon.ble MPERC is still awaited. The petition has been prepared considering the actual expenditure incurred (on fuel) till CoD. The petition is based on Hon.ble MPERC.s Terms & conditions of Generation Tariff Regulations, 2005, for generation of power for FY07 to FY09. The petitioner humbly submits before Hon.ble Commission to determine the tariff for the station.

5. It is pertinent to mention that the Hon.ble Commission has issued a tariff order dated 7th March 2007, for the plants from which MPPGCL is already generating power, on Multi Year Tariff principle for a period of three years. The tariff block shall be over by March 2009. This unit has been synchronized in mid of the tariff block and hence, with a view to maintain similarity in the tariff block periods, MPPGCL is submitting the tariff petition for this plant for FY 09. It is proposed that after this time block, the petition shall be submitted

by MPPGCL for determination of generation tariff along with other existing units.

6. It is pertinent to mention that, in pursuance with "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)", tariff for sale of electricity from a thermal power generating station shall comprise of two parts, namely, the recovery of Annual Capacity (Fixed) Charges and Energy (Variable) Charges, which shall be worked out in the following way:

a. The annual capacity (fixed) charges shall consists of

i. Interest on Loan Capital ii. Depreciation including Advance Against Depreciation iii. Return On Equity iv. Operation and Maintenance Expenses v. Interest on Working Capital

b. The Energy (Variable) Charges shall cover Fuel Cost

7. Also principles of Operation and Norms as prescribed by CERC vide its order dated.26.03.04 shall be guiding. The station shall also be eligible for incentive on the rate specified in "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)", for ex-bus scheduled energy corresponding to scheduled generation in excess of ex-bus energy corresponding to target Plant Load Factor (PLF). At this stage MPPGCL would like to pray before Hon.ble Commission that MPPGCL.s efforts are confined and limited to make the plant available for generation. The actual generation shall depend upon the dispatch instructions issued by SLDC depending upon system requirement, which are neither determined by MPPGCL nor in control of MPPGCL. Thus, the efforts of MPPGCL in making the plant available for generation at the discretion of SLDC does not get due recognition and in long run may affect the motivation of the company to optimize the performance from the plant. This ultimately will affect the interest of consumers adversely. Thus, with a view to safeguard the interest of consumers, MPPGCL humbly submits before the Hon.ble commission to consider permitting incentive on deemed generation with normative auxiliary consumption over and above the target availability. It is prudent to mention that the penalty for not being able to maintain the desired availability of plant always lies with MPPGCL and commensurate fixed cost shall be got deducted from the monthly bill. Thus providing incentive on deemed generation on marginal availability above target also synchronizes with the principles of natural justice. Thus, MPPGCL humbly submits before Hon.ble Commission to kindly permit the same.

8. Since the scheduled energy and ex-bus energy can be determined only after annual actual performance of the plant, MPPGCL has determined Fixed cost on target PLF only. Incentive / Penalties shall be affected in pursuance with

the specified norms and order considering above request of MPPGCL in the final order in this regard by Hon'ble Commission.

9. MPPGCL has also considered tax holiday during initial five years of operation of the plant. Min. Alt. Tax (MAT) @11.33% has been considered. In case, due to change in Government policy or otherwise, if any, liability of tax and duties (except on incentive or additional profit over and above RoE) arises, the same shall be charged extra. Similarly, Water Charges are payable to Govt. on the rates as specified by GoMP, the same shall be chargeable extra. Fringe benefit tax, if payable on the project shall be chargeable extra on actual basis.

10. The performance parameters and other cost elements have been duly elaborated in the enclosures to the petition, and based on these, the cost of generation works out as under:-

Generation Cost of 1x500 MW Birsinghpur

Table No. 1 Particulars FY 09

Net Generation MU 1920

Depreciation Cr.Rs 49.12

Interest on Loan Cr.Rs 102.87

Return on Equity Cr.Rs 51.78

Advance Against Depreciation Cr.Rs

0.00

Interest on Working Capital Cr.Rs 15.17

MPERC Fee Cr.Rs. 0.15

O&M Expenses Cr.Rs 33.64

Total Fixed Cost Cr.Rs. 252.72

Variable Charges Cr.Rs 238.33

p/u 124

Total Cr.Rs 491.05

Indicative Average Rate p/u 256

Amount Charged as MAT Cr.Rs 6.62

Total + Taxes Cr.Rs 497.67

Indicative Average Rate p/u 259

PRAYER

I. Consequent to the implementation of power sector reforms in the State where under, amongst others, the activities of generation, transmission, distribution and retail supply of electricity carried out by MPSEB have been restructured and transferred initially to the five successor corporate entities, the function of power generation has been vested with MPPGCL. Subsequently, the MP Tradeco (the sixth company) has been vested with the responsibility of Power trading and MPPGCL is required to sell its entire generation from existing capacity to MP Tradeco at a rate determined by Hon.ble MPERC.

II. CoD of 1x500 MW Birsinghpur Extension Unit has been declared as 28th Aug 2008. Actual generation shall be available only for 7 months approximately in FY 09. As per GoMP notification entire power of this station is intended to be sold to MP Tradeco for onward sale to Discoms, at a rate determined by Hon'ble Commission

III. In view of the above, the petitioner respectfully prays that Hon.ble Commission may kindly:-

a. Accept the tariff (Fixed and the Variable Cost) as elaborated in para 7 to 10 above and permit recovery in equal monthly installments. b. Accept and permit recovery of Incentive on the terms specified in "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" and on availability factor, as requested in para 8. Deduction on account of under achievement shall also be applicable as specified in the above regulation. c. Permit additional recovery on account of Water Charges, Cess, taxes, duties and levies on actual basis, over and above the amounts elaborated in the table above. d. Permit the recovery of full charges at actual parameters considering the impact of factors beyond control of the utility. e. To allow an estimated expenditure of on account of construction of new ash bund separately, this shall be considered as additional capital expenditure. f. Permit recovery of expenses understated / not considered in this petition e.g. cost, interest and finance charges, depreciation, balance works to be executed after CoD etc at a later stage, if required. g. Permit recovery of fixed/ variable charges as proposed above w.e.f 28th Aug. 2008 on provisional basis, till issue of final order and effect

reconciliation based on the rates approved by Hon'ble Commission at a later stage. h. Condone any inadvertent omissions / errors / short comings and permit the applicant to add / change /modify / alter this filing and make further submissions as may be required at later stages. i. Pass such orders as Hon.ble MPERC may deem fit and proper and necessary in the facts and circumstances of the case, to grant relief to petitioner.

-Sd-

Date : 23 March 2009 (S. P.Soni) Place: Jabalpur S.E. (CP: MPPGCL)

MPPGCL:JABALPUR

Index

Page

1. Brief Introduction of MPPGCL 11

2 Premise 19

3 Background of the Project 21

4 Brief Introduction of the Project 25

5 Cost of the Project 33

6 Funding of the Project 41

7 The Principles/Norms of Operation 44

8 Annual Capacity Charges 45

9 O&M Charges 46

10 Depreciation 48

11 Return on Equity and Tax 50

12 Interest on Working Capital 51

13 Variable Charges 52

14 Other Expenses 54

15 Generation 55

16 Cost of Generation and Billing 56

17 Financial Statements 58

18 Tariff Formats 61

Brief Introduction of MPPGCL

1.1.The State of Madhya Pradesh has implemented power sector reforms in the State where under, amongst others, the activities of generation, transmission, distribution and retail supply of electricity carried out by MPSEB have been restructured and transferred to the following corporate entities.

1. M.P. Poorv Kshetra Vidyut Vitaran Company Ltd., Jabalpur MPPKVVCL Jabalpur, Sagar and

Rewa Regions

2. MP Madhya Kshetra Vidyut Vitaran Company Ltd., Bhopal MPMKVVCL Bhopal and

Gwalior Regions

3. MP Paschim Kshetra Vidyut Vitaran Company Ltd., Indore MPPKVVCL Indore and Ujjain

Regions

4. MP Power Transmission Company Ltd., Jabalpur MP TRANSCO Whole State

5. MP Power Generating Company Ltd., Jabalpur MPPGCL Whole State

6 MP Power Trading Company Ltd, Jabalpur MP TRADECO Whole State

1.2. The function of power generation has been vested with Madhya Pradesh Power Generating Company Limited (MPPGCL), a company incorporated under the Companies Act, 1956 and having its registered office at Shakti Bhawan, Rampur, Jabalpur. The company has been assigned the assets and liabilities (on provisional basis) to discharge the function of power generation vide GoMP.s notification dated 31st May 05. In this notification, GoMP is provided with a right to amend, vary, modify or otherwise change the values or terms and conditions or any one or more of them during provisional period upto 31st May 06. Subsequently, the period has been extended by another eight months. However, the GoMP vide its notification Dtd.12th June 2008 has issued final Opening Balance Sheet of MPPGCL along with other restructured utilities of erstwhile MPSEB. The petition is based on the final Opening Balance Sheet.

Status of Generating Company

1.3. The Government of Madhya Pradesh (GoMP) notified the provisional transfer scheme vide its notification No. 3679/FRS/18/13/2002 dated 31st May 2005 according to which MPPGCL was assigned assets and liabilities, on a provisional basis, as per the table given below:

As Provided by GoMP Vide Notification Dated 31st May 05 Table 1-i Opening Provisional Balance Sheet

Liabilities Amount Cr.Rs.

Assets Amount Cr.Rs.

Equity From GoMP 1278

Fixed Assets

Gross Assets 4453

ProjectSpecific

Liabilities

PFC 1120 Less

Accumulated

Depreciation

1576

LIC 488

CSS 3

REC 334 Total 2878 2878

Total 1945

1945

Capital Works in Progress 1040 Loan from MPSEB (Generic) 259

CurrentLiabilities

Fuel Liabilities

191

Current Assets

stock 244

Staff Related 29 Cash and Balances

11

Towards Suppliers

143 Loan Advances

3

Intt. Accrued but not Due

21 Sundry Receivable

34

Others 342 OthersTotal 727 727 Total 292 292

Total Liabilities 4210 Total Assets 4210

1.4. The provisional transfer scheme was modified and finalised by the State Govt. and the final Opening Balance Sheet was notified by the GoMP on 12 June 2008. This final Opening Balance Sheet as on 12 June 2008 is presented below.

Assets Cr.Rs

1

Fixed Assets

Gross Block

4,506.29

2 Less : Accumulated Depreciation

1,801.31

3 Net Fixed Assets 2,704.99

4 Capital Works in Progress 1,109.75

5 Investments -

6

Current Assets

Stocks 252.60

7 Receivables against Supply of Power

-

8 Cash and Bank Balances

32.06

9 Loans & Advances 98.22

10 Sundry Receivables 642.20

11 Total Current Assets (6 to 10)

1,025.08

12 Intangible Assets 0.64

13

Deferred Costs 1.27

14 Subsidy Receivable from GoMP Total Assets

- 4,841.73

Liabilities Cr.Rs 1 Security Deposits from Consumers -

2 Other Current Liabilities 924.18

3 Total Current Liabilities (1+2) 924.18

4 Borrowings for Working Capital -

5 Payments Due on Capital Liabilities 124.03

6 Capital Liabilities 1,875.04

7 Funds From State Govt.

(a) Equity 1,915.08

(b) Loan 3.40

Total(a+b) 1,918.48

8 Consumers' Contributions,Grants & Subsidies towards cost of Capital Assets

-

9 Reserves and Reserve Funds -

10 Accumulated Surplus / (Deficit) 0.00

11 Total Liabilities 4,841.73

1.5. The MP Power Generating Company Ltd. is presently headed by the Chairman and Managing Director, Shri D.N. Prasad and brief of other Directors of the Company are:-

1. Shri D.K. Jain CGM, SBI

2. Shri S.B. Agrawal ED(WR), NTPC

3. Shri Ashok Gupta ED, PFC

4. Shri G. Venkataraman Ex-Director, NTPC

5. Shri Sanjay Bandopadhaya, IAS Secretary (Energy), GoMP

6. Smt Alka Upadhyay, IFS Secretary (Finance) GoMP

1.6. Installed Capacity & Expansion Plan

Total installed capacity of the MPPGCL, as on 31.03.2006 is 2984.7 MW (including its share in bilateral interstate projects), consisting of 2147.5 MW thermal and 837.2 MW Hydro power. The plant wise details are as under:-

Generation Capacity Table No 1.6.1

Power StationInstalled Capacity (MW)

Total MPPGCL Share

The

rmal

Pow

er S

tati

ons

1 Amarkantak Thermal Power

Station (Chachai)

PH 1 30 + 20 =

50.0 100.0% 50.0

PH 2 2 x 120 =

240.0 100.0% 240.0

Complex 290.0 100.0% 290.0

2 Satpura Thermal Power Station (Sarni)

PH 1 5 x 62.5 =

312.5 60.0% 187.5

PH 2 200 + 210 =

410.0 100.0%

410.0

PH 3 2 x 210 =

420.0 100.0% 420.0

Complex 1142.5 89.1% 1017.5

3Sanjay Gandhi Thermal

PH 1 2 x 210 =

420.0 100.0% 420.0

Power Station Birsinghpur PH 2 2 x 210

= 420.0 100.0% 420.0

Complex 840.0 100.0% 840.0

4 Total Thermal Generation 2272.5 94.5% 2147.5

Power Station Installed Capacity (MW)Total MPPGCL Share

Hyd

ro P

ower

Sta

tion

s

1

Chambal HPS

Gandhi 5 x 23 = 115.0 50.0% 57.5

R.P. Sagar

4 x 43 = 172.0 50.0% 86.0

Jawahar Sagar

3 x 33 = 99.0 50.0% 49.5

Complex 386.0 50.0% 193.0

2 Pench Totladoh HPS 2 x 80 = 160.0

66.7% 106.7

3 Bansagar Tons HPS

Tons 3 x 105 = 315.0 100.0% 315.0

Silpara 2 x 15 = 100.0% 100.0% 30.0

Devlond 3 x 20 = 60.0 100.0% 60.0

Complex 405.0 100.0% 405.0

4 Birsinghpur HPS 1 x 20 = 20.0 100.0% 20.0

5 Bargi HPS 2 x 45 = 90.0 100.0% 90.0

6 Rajghat HPS 3 x 15 = 45.0 50.0% 22.5

7 Total Hydro Generation 1106.0 100.0% 837.2

8 Total Generation 3378.5 88.3% 2984.7

1.7. Generation Capacity Operated by MPPGCL

As on 31.03.2006 MPPGCL is operating 3107.5 MW, consisting of 2272.5 MW thermal and 835.0 MW Hydro power. Out of this 258.3 MW capacity belong to other States. The plant wise details are as under:-

Generation Capacity Operated by MPPGCL Table No 1.7.1 MW

StationInstalled Capacity

MP Share

Other State's Share

MW % State's Name

ATPS Chachai 290.0 290.0 0.0

STPS Sarni PH1 312.5 187.5 125.0 40.0% Rajasthan

STPS Sarni PH 2&3 830.0 830.0 0.0

SGTPS Birsinghpur 840.0 840.0 0.0

Total Thermal 2272.5 2147.5 125.0 5.5%

Gandhi Sagar 115.0 57.5 57.5 50.0% Rajasthan

Pench 160.0 106.7 53.3 33.3% Maharashtra

Bansagar Complex 405.0 405.0 0.0

Birsinghpur 20.0 20.0 0.0

Bargi 90.0 90.0 0.0

Rajghat 45.0 22.5 22.5 50.0% Uttar Pradesh

Total Hydro 835.0 701.7 133.3 15.8%

Total Capacity 3107.5 2849.2 258.3 8.3%

1.8. Similarly, MPPGCL also has a share of 135.5 MW in hydro generation capacity installed in neighboring States, as under:-

MPPGCL’s Share in Generation Capacity installed in Other States Table No 1.8.1 MW Station Installed

Capacity MPPGCL Share Other

State's NameMW %

R.P. Sagar 172.0 86.0 50.0% Rajasthan

Jawahar Sagar 99.0 49.5 50.0% Rajasthan

Total 271.0 135.5

1.9. Capacity Addition and Future plan

All-out efforts are being made to meet the growing demand of power in the State. The MPPGCL had a plan of adding 790 MW during 10th plan as elaborated in the table below, however these projects are Still under execution. Capacity Addition Plan Table No. 1.9.1

Station Type Planned Capacity

MP's Share

Planned COD Status

Jhinna (Bansagar IV)

Hydro 2x10=20 100% FY 07 Commissioned

Madhikheda Hydro 3x20=60 100% 2x20=40 MW during FY 07 & 20 MW subsequently

Units are commissioned

SGTPS Birsinghpur V

Thermal 1x500=500 100% End of FY 07 Commissioned on 28th Aug 2008

ATPS Chachai V

Thermal 1x210=210 100%

End of Jun FY 09

Under Construction

Total 790.0

1.10. Thus, installed capacity of MPPGCL is increasing gradually and likely to reach 3774.7 MW during FY 09, consisting of thermal and Hydro shares as elaborated below:

Mix of Generation Capacity Table No 1.10.1 S. No Particulars 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

Actual Actual .

Actual Actual .

Actual .

Actual .

Actual .

Proj.

Thermal Capacity 2147.5 2147.5 2147.5 2147.5 2147.5 2147.5 2147.5 2857.5

% of Total 72% 72% 72% 72% 72% 71% 70% 76%

Hydro Capacity 837.2 837.2 837.2 837.2 837.2 837.2 917.2 917.2

% of Total 28% 28% 28% 28% 28% 29% 30% 24%

Total (Share of MPPGCL)

2984.7 2984.7 2984.7 2984.7 2984.7 3044.7 3064.7 3774.7

Thermal / Hydro Ratio

2.57 2.57 2.57 2.57 2.57 2.39 3.12 3.12

1.11. Further, Govt. of M.P. has given In Principle Clearance for installing . Shri Singaji Thermal Power Project

The administrative approval has been accorded by GoMP in May2001 for installation the Project near Village Purni in Distt. Khandwa. Project has to be implemented through ICB in two packages specifying the unit size as 2x 600 MW (i) Main Power Block & (ii) Complete BoP with respective civil works. GoI has accorded Mega Power Project Status to this Project. 23 TMC water allocated by NVDA & NoC also issued by CWC, GoI. All the clearances for the project have been obtained. M/S PFC has sanctioned

loan amount to the tune of 80% (Rs. 3242 Crores) of the estimated Project

Cost (Rs. 4053 Crores). For execution of Main Power Block an order has been placed on 12.12.2008 to M/s. BHEL.

. Satpura Thermal Power Station Extn. Unit 10 & 11(2 x 250 MW)

Units at Satpura Thermal Power Station as Extension, Unit no. 10 & 11 are planned for installation. Administrative approval has been accorded by State Govt., in Jun. 06. MOEF clearance also received recently in Mar.2009. For execution of Main Power Block on EPC basis, orders have been issued on 10.3.2008 to M/s. BHEL.

. 2x800 MW Bansagar Thermal Power Project near village Tikuratola in District Shahdol (MP) using Super Critical Technology through Joint Venture with M/s BHEL or by other method. As per Energy Department GoMP Bhopal.s letter No. 8020/13/2008 dated 31.12.2008, the GoMP has also accorded administrative approval for implementation of this project.

Premise

2.1. this section contains certain key issues which may have impact on the generation cost of 1x500MW Birsinghpur Thermal Power Project of MPPGCL and on the assumptions / rationale applied by the applicant for determination of generation cost.

2.2. The State of Madhya Pradesh has implemented power sector reforms in the State where under, amongst others, the activities of generation, transmission, distribution and retail supply of electricity carried out by MPSEB have been restructured and transferred (initially to the five then to) six successor corporate entities. Accordingly, the function of power generation has been vested with Madhya Pradesh Power Generating Company Limited (MPPGCL), a company incorporated under the Companies Act, 1956 and having its registered office at Shakti Bhawan, Rampur, Jabalpur. The company has been assigned the assets and liabilities (on provisional basis) to discharge the function of power generation vide GoMP.s notification dated 31st May 05. The Govt. of MP vide its notification dated 12th June 2008 has issued Final Opening Balance Sheet of MPPGCL along with other restructured utilities of erstwhile MPSEB. The petition is based on Final Opening Balance Sheet. The petition is being submitted under the provisions of "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)", wherein the Hon'ble Commission can determine the tariff of new capacities on provisional basis. The truing up of Project cost and tariff can be done within one year after CoD. Project cost has been provisionally determined after consolidating the available data for various expenses actually incurred on best available basis.

2.3. Multi-year Tariff: Hon.ble Commission vide its "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)” has determined terms and conditions for determination of generation tariff for first block of Multi Year Tariff i.e. FY 07 to FY 09. The petition is prepared in accordance with the provisions of the regulation and prevailing CERC orders.

2.4. Return on Equity and Taxes: As per the provisions of "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)” return of 14% post tax has been considered on the equity contribution for the project. Further, present level of corporate tax is 30% + 3.0% Surcharge and 3% Education Cess. However, there will be a tax holiday on the project for first

five years. MPPGCL has, therefore, considered tax holiday during initial five years of operation of the plant and has not loaded any incidence of the same. In case, due to change in Govt. policy or otherwise, if any liability of taxes, duties and Cess (except on incentive of additional profit over and above RoE) arises, the same shall be charged extra. Similarly, Water Charges are payable to Govt. on the rates specified by GoMP. The same shall be chargeable extra. Minimum Alternate Tax (MAT), Fringe benefit tax etc., if payable on the project shall be chargeable extra on actual basis.

2.5. Provision for Bad and Doubtful Debts

The company has just started its functioning and hence the risk associated and trends are not available. In the tariff petition submitted by MPPGCL (dated 23rd Jan 06) for determination of tariff of existing plants, with a view to cover-up such associated risks a provision of about 1% of closing amount of receivables was provided as provision for bad debt. In the Tariff order for FY 06 (Dated 25th Jan 06), Hon'ble Commission has not considered the same mentioning that the company has not formulated any policy for writing-off of bad debts. It has been mentioned that the write offs may be considered at the time of truing up. Thus, the provision is not considered at this stage; however, MPPGCL will approach Hon'ble Commission when such policy is approved at a subsequent stage. MPPGCL humbly submits before Hon'ble Commission to permit the same.

2.5.1. Terminal Benefits and Pension Payment

Hon.ble Commission in the philosophy for bench marking of O&M charges vide its draft terms and conditions for determination of generation and transmission tariff has excluded the amount of pension payments and terminal benefits to be paid to the employees from O&M charges. Accordingly while determining the O&M charges these expenses have been excluded from O&M charges. As per earlier arrangement, till the policy regarding payment of pension and terminal benefits was due to finalize, these expenses were to be paid by Transco. Now, provision has been made to consider the same in the annual statement of the accounts of MPPGCL w.e.f from FY 07. Accordingly no amount has been considered in this petition. MPPGCL humbly submits before Hon'ble Commission to permit the same, if any at the time of finalization of project cost at a subsequent stage.

Background of the Birsinghpur Project

3.1. The installation of new power generating units in the State of Madhya `Pradesh has lagged behind the load growth and, therefore, power shortage is being experienced in the State. The power crisis has further worsened after the formation of the new state of Chhattisgarh. At present several medium and large hydro electric projects are under construction but due to hydro electric project.s long gestation period, the power demand of the State could not be met appropriately. In order to meet the power demand of the State in the shortest possible time, it is necessary to take up thermal generation projects as the gestation period is considerably less in comparison with hydro electric projects.

3.2. The State had identified number of projects for addition of generation capacity. Due to resource crunch, some of these projects were offered to private investors for implementation. Some of these projects progressed to obtain CEA techno-economic clearance in the past. These projects have, however, not proceeded further as the issue of Escrow arrangement against IPP.s payment from MPSEB for power supply could not be finalized till date. Keeping in view uncertainties of IPPs availability to the MP grid, which would drastically worsen the Power situation in the State in the coming years, erstwhile Madhya Pradesh State Electricity Board has proposed to augment the generation capacity by addition of new generating unit at Sanjay Gandhi Thermal Power Station through State Sector taking advantage of lower capital cost of new power station due to utilization of many of the existing infrastructural facilities like land, reservoir, intake, gate complex, support oil system, marshalling yard, railway line etc. with some modifications only.

3.3. Government of Madhya Pradesh have accorded administrative approval for the setting up of 1x500 MW additional unit at Sanjay Gandhi Thermal Power Station, Birsinghpur vide their letter No.10197/F.3/31/13/97 dated 24.12.1997.

3.4. Power Scenario in MP For assessing the power requirement in the state of Madhya Pradesh, 16th Electric Power Survey forecast of Madhya Pradesh (composite) was bifurcated by Central Electricity Authority into recognized States of Madhya Pradesh and Chhatisgarh on the basis of segregated data for Chhattisgarh and rest of Madhya Pradesh collected from Madhya Pradesh Electricity Board and supplemented by the data subsequently supplied by Chhattisgarh State Electricity Board. It was appreciated that the State will have shortage in “Peak Load” and in “Energy” requirement for considerable period, even after considering all the proposed units of state and Govt. Sector are commissioned. The proposed addition in generation through 1x500 MW will bridge the growing gap between power supply and demand to that extent. Government of Madhya Pradesh had accorded administrative approval for the setting up of 1x500 MW additional unit at this site vide their letter No.10197/F.3/31/13/97 dated 24.12.1997. All other clearances were also been obtained and formalities for installation of project were completed. The brief detail/status of various clearances is as follows:-

a) Publication under Section 29 ES Act 1948. Erstwhile MPEB published the scheme for 1x500 MW coal based power plant at Sanjay Gandhi Thermal Power Station in Local Hindi daily News Paper “Deshbandhu” dated 6.4.98 and “Nav Bharat” dated 8.4.98. This scheme was also published in M.P. State Gazette dated May 29, „98.Further, as per requirement of CEA a Corrigendum was also published in various News Papers in April.03.

b) Water Availability

(i) Water Resources Department Government of Madhya Pradesh, Bhopal, vide letter No.19/31 / MPS / 90 / 285 dated 22.10.1990 & No. 29/12/96/ Madhyam/ 31-2189, dated 21.12.1999 has reconfirmed allocation of 3 TMC consumptive water towards the requirement of various existing and proposed units at the Birsinghpur Project of MP State Electricity Board. However the

same was revised to 2.85 TMC vide OSD (WRD.s) L.No.29/12/96/ Madhyam/31/399 dt.26.4.2002. (ii)Ministry of Water Resources, Government of India, New Delhi vide their letter dated 1.3.2002 have issued “No Objection Certificate” for use of 3 TMC or the Quantity as may be worked out by CEA whichever is less, water from Johilla Sub basin of Sone basin for circulating and consumptive water requirement for SGTPS having 4x210 MW units (existing) & 1X500 MW unit (proposed).

c) Environmental clearance Erstwhile MPEB has obtained NOC for environmental clearance from State Pollution Control Board for setting up 1x500 MW Thermal Power unit vide letter No. 6491/TS/EZ/MPPC/96dated 19.4.96 read together with 20718/TS/MPPCB/97 dated 2.12.97. EIA study for setting up 1x500 MW Thermal Power unit at SGTPS had already been carried out and MOEF were approached for according necessary environmental clearance. Subsequently, revised EIA study has also been carried out & the same along with other information was resubmitted to Ministry of Environment & Forest (MOEF) in December, 2001. Environmental clearance was there after given by MoEF vide their letter dated 19th July 2002.

d) Civil Aviation Clearance MPSEB has obtained Civil Aviation Clearance from Airport Authority of India for a Chimney with height of 275 M vide letter No. AAI/NAD/ 20012/35/9-ARI dated 26.11.97. The clearance was valid up to November, 2001 and therefore extension was applied. Airport Authority of India, New Delhi has granted the extension to NOC.

e) Land

The power station was to be located within the existing plant boundary as an extension to the existing power station. Major land already acquired earlier in Phase-I has been used for installation of main plants and equipments however, due to change in the scheme of Coal Handling Plant, and for laying of ash

pipe line, forest land to the tune of 4.7 Ha was only additionally required, same was granted by MoEF, Regional office, Bhopal on May.04. Regarding the requirement of forest land for ash disposal (292 Ha), the Ministry of Agriculture, Department of Agriculture & Co-operation had allowed 100 Ha of land in phase – I and also allowed to consider balance 192 Ha of land in further two phases to avoid large number of trees from being clear felled at a time and also to avoid excessive soil erosion. In view of the above award, MPSEB has already approached State Forest Department for the transfer of 100 Ha of land in the II2nd phase required for SGTPS complex including the extension unit of 500 MW. Subsequently Forest Department has awarded the 100 Ha Forest land in the 2nd phase Ash Bund in Nov..o6.

The existing ash disposal area of 100 Ha is still sufficient for (4 x 210 MW + 1 x 500 MW) i.e. 1340 MW for about next 2 years. Therefore, the ash generated by new unit of 500 MW can also be dumped into this area during initial years of operation. By that time the second phase of ash dyke shall be ready for disposal of ash generated by all units of SGTPS.

f) Fuel Coal being obtained from Korba Coal fields for which linkage of coal was granted to the tune of 2.8 mtpa from the year 2003 by the Standing Linkage Committee (LT), Ministry of Coal, GoI during the meeting of the committee held on 15.12.2000 and 07.09.2001.

g) Transportation of Fuel

Fuel being transported by railways from Korba coalfields for which representative of Ministry of Railways had already agreed during the meeting of SLC(LT) held on 15th Dec 2000.The coal being transported to Power house through existing private siding laid between Mudariya crossing station of Katni-Bilaspur section of SE Railways and our SGTPS complex . This private siding has been suitably augmented to accommodate one more unloading facility for meeting out additional requirement for 500 MW Unit.

Brief Introduction to 1x500 MW Birsinghpur Thermal Power Project

4.1. Sanjay Gandhi Thermal Power Station which is located in Umaria, District of Madhya Pradesh, was envisaged to install 6 units of 210MW each, is a coal based plant presently have 4 units 210 MW commissioned (having 100% share of MP only). With the advent of technology and availability of 500 MW Units was decided by MPSEB to set up 1x500 MW capacities in lieu of balance 2x210 MW Units in the space available in the Birsinghpur Plant site. With the addition of 500 MW capacity at SGTPS, Birsinghpur it has become largest Thermal Power Station of MPPGCL. The geographical Map of the project is as under:-

4.2. Accordingly the project was taken up after obtaining requisite following clearances (copies enclosed as annexure) as follows:- . Administrative approval of State Govt. vide letter No. 10197/F-3/31/13/97 dated 24.12.97 for setting up of 1 x 500 MW additional unit at Sanjay Gandhi Thermal Power Station, Birsinghpur.

. ─ Approval for supply of Water by Deptt. Of Water Resources No. 29/12/96/M/31/399 dated 26.4.2002 from River Johilla.

. ─ Approval of M.P.P.C.B. No. 1558/TS/MPPCB/2002 dated 13.9.2002 granting permission to establish the unit.

. ─ Environmental clearances from Ministry Environmental Forest vide their letter dated 19th July 2002.

. ─ Approval of S.L.C. for grant of linkage of coal from Korba Coalfields vide O.M. dated 16th January 2001.

. ─ Techno-economic clearance of the project granted by CEA vide O.M. No. 2/MP/46/96-PAC/11280 – 302 dated 20th Dec. 2002 at a total estimated cost of Rs. 2093.75 Crore as under:-

1. Land & RR 6.50 Cr.2. Turnkey cost 1629.93 Cr.3. Non EPC cost 69.84 Cr.4. Overheads 82.43 Cr5. IDC + Fin. Cost 305.05 Cr.

-------------------------------------------------------------Total project cost 2093.75 Cr.

-------------------------------------------------------------

4.3. The brief description of some of major systems of the 500 MW plant envisaged is described below:- 4.3.1. Steam Generator ─ . The steam generator is outdoor, two pass, tap supported, reheat,

controlled circulation, single drum, balanced draft, dry bottom type designed for burning pulverized coal as principle fuel. It is provided with oil support burners and adequate number of coal mills.

─. Steam generators are designed to operate with the HP Heaters out of service condition and deliver steam to meet the Turbo Generator electrical output at 100% MCR.

─ Steam generator is suitable for operation with HP-LP turbine by-pass system. Four regenerative air pre-heaters with electric motor main drive and air motor as standby drive are provided at back end, which are connected with gas duct bifurcated to two air heaters. The boiler is provided with a set of soot blowers for on load cleaning of heat transfer surfaces i.e. water walls, super heaters, re-heaters, economizers and air heaters.

4.3.2. Boiler Feed Pump

Three number of Boiler Feed Pumps each having 50 % capacities, horizontal, multistage, barrel cashing, centrifugal type are provided. Out of three pumps two are steam driven and one is electrically driven. Each pump is supported by a single stage booster pump.

4.3.3. Milling Plant The boiler is provided with 10 (8+2) Bowl Mills type XRP 1003, with 5 on either side. Three Nos. primary fans of axial reaction single suction type, driven by direct coupled motors are also provided.

4.3.4. Electrostatic Precipitator The steam generating unit is provided with one set of Electrostatic Precipitator having four passes .Each pass comprises of nine fields in series for collection of fly ash, of which, eight fields would be in service and the other one would remain as standby. The ESP is having adequate number of ash hoppers for storing ash collected in operation of the Boiler. The ESP is equipped with automatic voltage control to minimize power consumption.

4.3.5. Steam Turbine Generator Unit . Steam Turbine

The steam turbine is a 500 MW MCR, three cylinder (one HP one IP and one LP cylinders), dual flow, 3000 RPM, multistage, tandem compound, condensing, and reaction

turbine type. All essential controls and safety inter-locks are provided. It is having all the essential auxiliaries.

. Condensing Equipment Two pass, rectangular, box type, surface condenser, with 5 minute hot well capacity, capable for maintaining the required vacuum while condensing steam at the maximum rating of the turbine, is provided with on load tube cleaning equipment (without debris filter) and an arrangement of On-load maintenance of one half of the condenser at a time. Three vertical centrifugal, multistage condensate pumps, each of 50% capacity, are provided to pump condensate from condenser hot well to the Deaerator. Two number vacuum pumps with 100% capacity each are provided to maintain the vacuum in the condenser by expelling the non-condensable gases.

. Deaerator and Feed Heater

The unit is provided with a variable pressure spray type/ spray-cum-tray-cum-re-boiling type deaerating heater with a feed water tank. The high pressure closed heaters are horizontal type and provided with both drain cooling and de-superheating zones in addition to the normal condensing zone. The low pressure feed water heaters are also horizontal/vertical type and are equipped with only drain cooling and condensing zones.

4.3.6. Generator

The generator is directly connected, horizontal shaft, cylindrical rotor, commensurately rated for the turbine outputs. The generator is provided with brushless excitation with PMG. It is capable of operating in isolation or in parallel and with the power grid, with voltage variations of (+) 10% and frequency variations between 47.5 Hz to 51.5 Hz.

The excitation system is capable of supplying excitation current of the generator under all conditions of operation of load, voltage and power factor.

4.3.7. Coal Handling System

The unloading conveyor system through Track hopper has been provided with Primary Crusher House (PCH), from where it shall be taken to Secondary Crusher House # - 2. The crushed coal either taken to fill Boiler bunkers or stacked in crushed coal stock piles by using conveyor for feeding boiler bunkers or Stacker for stacking in stock yard.

4.3.8. Ash Handling System Bottom Ash (BA) will be collected in water impounded BA hopper located beneath the boiler. Bottom ash from water impounded BA hopper will be removed and send to ash slurry pump house using jet pumps. The bottom ash so collected in the slurry sump shall be pumped in slurry form to ash pond. Fly ash, collected in Economiser /APH /ESP hoppers, shall be extracted and pneumatically conveyed dry, to the transfer tanks through vacuum, created by Vacuum Pumps. Dry fly ash from transfer tanks shall be conveyed to RCC silos through Pressure Conveying System and unloaded into trucks for disposal to cement industry/ brick making plants & balance Ash shall be disposed off in wet form to Ash Dyke Area. Ash handling system has also been provided with Ash Water Recovery System to meet out the requirement of Environmental norms in this regards. This system comprises of barge mounted recovery water pumps to recycle the excess water from Ash Pond through recovery water pipes leading to clarifier in PH premise for subsequent treatment and utilization.

4.3.9. Fuel Oil (FO) System

HFO / LDO system is envisaged for boiler start-up and flame stabilization and has been taken from existing oil unloading station for 4x210 MW units. However for 500 MW unit, one no. additional storage tanks each for HFO and LDO are provided with separate Fuel Oil Pump House to meet out the requirement.

4.3.10. Plant Water System

Water drawn from Johila Reservoir shall meet requirements of CW for Condenser and other Auxiliaries, Ash water make up, Fire water make up, Coal handling plant dust suppression, Service water system (Plant / colony washing & gardening, Air washer and AC system make up, seal water for Ash handling plant, ESP/APH washing), Water treatment system (DM Water, DMCW system make up and potable water). A channel tapped off from the existing intake canal, shall draw water to meet complete water requirements of 1x500 MW Unit, through the water screening plant. A common pump house shall be located downstream of Water Screening Plant from where the cleaned water will flow to the once through CW/ACW system and to other needs of the plant after proper treatment as required for the relevant services. CW system is once through system employing a siphon head recovery arrangement across the condenser for cooling water flow. The CW system delivers cooling water to the condenser for its cooling. The hot return water from Condenser and ACW system leads to seal pit for further discharge to raw water reservoir through discharge channel. The CW system comprises of 4x33.33% vertical wet pit type CW pumps. Whereas raw water system comprises of 3x100% vertical wet pit type Raw Water Pumps. Raw water is supplied to Traveling Water Screen spray system, CW chlorination system, Ash handling plant, Fire water tank and to Pre-treatment plant and then to Clarified Water tank for further services. Water from Clarified tank shall also be drawn for meeting out the requirement of DM plant.

4.3.11. Electrical System

The power evacuation facilities available for evacuation of power from Sanjay Gandhi Thermal Power Station 4x210 MW are give below: . 220 KV DCDS linking between Amarkantak and Birsinghpur . 220 KV DCSS outlet between Birsinghpur & Satna . 220 KV DCSS outlet between Birsinghpur & Reva . 220 KV DCDS Traction feeder through MPP TC sub station . 400 KV Birsinghpur – Katni-Damoh DCDS line(Charged at 220 KV initially) . 220 KV DCDS line between 220 KV Sub Station of MPPTCL, at Birsinghpur and Jabalpur . 220KV-4 Nos. Interconnections have been provided between

SGTPS and 220 KV sub-station of MPPTCL at Birsinghpur For evacuation of power from 500 MW extension unit first of all 400 KV SGTPS-Katni-Damoh 400KV DCDS line has been charged at 400 KV along with creation of 400 KV S/s by PGCIL at Damoh. A 400 KV DCDS line is proposed between Korba and Bina via Katni.

This line will pass through at a distance of about 15 Kms. from SGTPS. It is proposed to LILO this 400 KV DCDS line through SGTPS. Thus there will be four 400 KV feeders available for power evacuation from SGTPS towards Katni. A 220 KV DCDS line is proposed between Katni and Narsinghpur to evacuate SGTPS power towards Narsinghpur area. To strengthen 220 KV system to absorb power, generated at SGTPS, second circulating of Damoh-Tikamgarh 220 KV DCSS line and installation of 160 MVA 220/132 KV transformers each at 220 KV S/S Tikamgarh, 220KV S/S Damoh and 220 KV S/S Narsinghpur is also proposed. It is also proposed to lay a 400 KV DCDS line between Damoh and Gwalior via Tikamgarh to evacuate power towards Gwalior area. It is hoped that above mentioned power evacuation power system along with existing system will be sufficient to evacuate power from SGTPS 4x210 MW and 1x500 MW generating stations.

A total of seven bays have been provided for the 400KV Switchyard, with a two main and transfer bus. Existing 220KV Switchyard has been extended by including two more bays complete with all equipments including metering protection and control panel and bus bar protection system. Further, spaces for 4 nos. additional bays have also been provided to accommodate feeders of proposed LILO to Birsinghpur through 400 KV Korba – Bina lines. Four single phase, 207 MVA, 21/420 KV, oil-Immersed, outdoor, Generator Transformers are being used for feeding power to 400KV grid. The inter-connecting transformer, will comprise three single phase auto transformers rated 166.7 MVA, 400/220/33KV, oil-immersed, outdoor type, with graded, star-connected primary & secondary windings and open delta-connected, uniformly insulated, tertiary windings. It is proposed to derive auxiliary power for unit start up/emergency and for station auxiliaries by stepping down from existing 220KV system and/or from proposed 400KV system through 2 Nos. 63 MVA station transformers (one connected to 220KV and the other to 400KV). Each station transformer will have two secondary transformer one for 11KV and the other for 6.6 KV. 415 V supply shall be obtained from 11KV/ 6.9 KV bus through step down distribution transformers of 2 MVA and 1.6 MVA as required.

4.3.12. Instrumentation and Controls

A Distributed Digital Control and Management Information System (DDCMIS) with CRT / Keyboard operation for SG and TG controls and hard-wired back-up controls with monitoring and controlling devices needed for operation is provided. For systematic and sequential start-up shutdown and safe operation of Boiler, Burner Management System (BMS) with fail-safe cards is a part of DDCMIS.

Cost of the Project

5.1. An estimate of the total cost of the Project was prepared on the basis of prices appearing in BHEL.s Commercial offer No. MS-1-01-E-0021, dated 10.4.2002 & 11.4.2002. For the works not covered in BHEL.s scope (Non EPC items), prices had been estimated separately. Cost towards overheads/others had been worked out on the basis of scope settled with M/s BHEL and taking into account the requirement of Project.

5.2. Techno-economic clearance of the project has been granted by CEA vide O.M. No. 2/MP/46/96-PAC/11280 – 302 dated 20th Dec. 2002 at a total estimated cost of Rs. 2093.75 Crore as under:-

Total Estimated Cost Table No. 5.2.1. Particulars Cr.Rs.

1 Land & RR 6.50

2 Turnkey cost

1629.93

3 Non EPC cost 69.84

4 Overheads 82.43

5 IDC + Fin. Cost 305.05

6 Total project cost 2093.75

5.3. The above project cost was estimated based on the following :-

Financing of the Project shall be arranged through PFC, New Delhi up to the extent of 80% of the total Project cost, and balance 20% shall be arranged by Board.

. Supply prices of main equipments/plants were considered as offered by BHEL. The prices being on PVC basis, hence price variation on supply prices had also been considered. . Cost towards Erection, Testing & Commissioning had been taken as offered by BHEL. The prices being on PVC basis, hence price variation over this cost had also been considered. . Cost towards freight charges had been taken as offered by BHEL. This cost being firm no P.V. had therefore been considered on this account. . Prices towards various insurances were inclusive in the offered prices, hence the same had not been considered separately.

. Cost towards Civil works (for the scope settled with BHEL) had been taken as offered by BHEL. The prices being on PVC basis, hence price variation had also been considered. .For the balance Civil works including preliminaries (not covered in BHEL.s scope) cost estimation had been made separately. No P.V. has been considered separately towards these works. This cost also includes cost of construction power, water, lighting, telephone/communication charges etc.

. The offered prices of BHEL were exclusive or inclusive of Excise Duty, Sales Tax & Exit tax as per the description given below:-

o The supply prices of bought out item indicated by BHEL included the excise duty and concessional sales tax at the then applicable rates of 16 % and 4% respectively on the items directly dispatch-able to site from indigenous sources.

o In case of dispatches from BHEL works except their works located in Bhopal, the excise duty and central sales tax at the prevailing rates of 16 % and 4 % respectively payable as extra at actual by MPPGCL.

o In case of dispatches from BHEL works at Bhopal, the excise duty, MPGST and exit tax at the prevailing rates 16%, 4.6% and 0.1% respectively payable as extra at actual by MPPGCL.

o Any variation in the above rates of excise duty, central sales tax, and MPGST and exit tax at the time of actual dispatch be paid extra by MPPGCL.

. Customs Duty at Project import rate being inclusive in the supply prices; hence the same had not been shown separately. CIF value in respect of imported materials had been indicated as Rs. 212 Crs. (equivalent to U$ 39.4 million) on exchange rate of 1 U$ = Rs. 48.85 as on March 2002.

Cost of initial spares had been taken @ 3% of supply cost as the spares have not been offered by BHEL along with their instant offer. . The provision had been made for augmentation of railway track within and outside of power house complex. . Interest during construction had been taken as weighted average rate of 11% for long term loan. 80% debt & 20% equity financing had been proposed, and interest incurred during construction period was assumed to be capitalized.

5.4. Revised Project Cost

The estimated approved project cost during Dec.02 was Rs. 2093.75 Cr., which has been updated to Rs. 2300 Cr. The breakup of original project cost and revised project cost is as under:-

Original Project Cost Vs Revised Project CostTable No. 5.4.1. Cr.Rs. Particulars Original Revised

1 Land & RR 6.50 13.702 Turnkey cost 1629.93 1861.12

3 Non EPC cost 69.84 99.44

4 Overheads 82.43 56.40

5 IDC + Fin. Cost 305.05 269.00

6 Total project cost 2093.75 2300.00

5.4.1. The various reasons for revision in project cost (above) have been indicated in the earlier petition. The same are reproduced now.

5.4.1.1. Land and RR Cost

This cost has been revised due to change in scope and rise in prices.

5.4.1.2. EPC Cost

The base EPC cost has remained constant. However estimated provision for price variation has been increased so as to take care of inflation in the price indices of material and labour components as per terms of EPC contract placed in BHEL. Amount towards work contract tax on civil works has been revised downwards due to exercising of option for composition mode as per provisions of Commercial Tax Act 1994. Amount estimated towards taxes & duties on materials purchased have increased due to change in Price Variation amount and imposition of education Cess. Additional provision was required to be made due to imposition of service tax on civil works and erection contracts.

5.4.1.3. Non-EPC Cost

Under this cost the major head covered are spares and railway siding. It has been increased due to increase in price inflation for spares and change in scope and design of railway-siding during approval by railways.

5.4.1.4. Overheads This cost was reduced while re-appropriating “The Project Cost Approved as per TEC” to enhance the EPC Cost. It has now been revised due to increase in provision towards contingency.

5.4.1.5. IDC & FC

This cost was estimated to be less as compared to original provision due to change in rate of interest by M/s PFC from time to time. The rate was originally stated to be 11% and has changed from time to time. As may be seen from the Form 16, weighted average works out to 11.52%. The total estimated completed cost of Rs.2093.75 Cr. as per TEC was based on Debt equity Ratio of 80:20 and IDC of Rs.305.05Cr. with RoI as 11% per annum. This calls for a debt of Rs. 1675 Cr., however, as against this PFC sanctioned a loan of Rs.1560 Cr. only. Now with the revision in project cost from Rs.2093.75 Cr. to Rs.2300 Cr. the fund requirement would increase by about Rs.215.77 Cr. The funding arrangement envisaged for the same was as detailed below:-

1 Total revised Project Cost Rs. 2300 Cr

2 Equity So far sanctioned by GoMP Rs. 611 Cr

3 Equity induced by MPSEB Rs. 14 Cr

4 Total Equity so far tied up Rs. 625 Cr

5 Funds tied with PFC Rs. 1560 Cr

6 Total funds tied up Rs. 2185 Cr

7 Balance Fund Requirement (PFC) Rs. 115 Cr

It may be seen from the Form 16 that till January 2007computed IDC works out to Rs. 340.47 Cr., as against the drawl of about 1165 Cr. In the revised estimated project cost the estimated IDC is only Rs. 269 Cr. At the same time actual drawl of the loan is Rs. 1165 Cr only as sanctioned loan of Rs. 1560 Cr and revised requirement of Rs. 1675 Cr. This is because of the fact that as per agreed packages with the venders and BHEL a considerable portion payment is to be made on competition of work and closure of contracts. With a view to optimize the project cost, MPPGCL has drawn the loan as per the actual progress of the project, rather than schedule of drawl. At the same time, there was a clause in the contract agreement for deduction of Liquidated Damages from BHEL on delay of project, attributable to them. This will be settled in due course of time and the final reconciliation of project cost including IDC is proposed to be done at the time of determination of Final Tariff, for which MPPGCL will submit the petition before Hon.ble Commission within one year of CoD. It is therefore, humbly submitted to kindly consider the revised project cost as the base for determination of provisional tariff.

5.4.2. Hon.ble Commission vide order dated 18.01.2008 allowed MPPGCL the recovery of infirm power charges till the CoD of the unit. Now, as per Clause 37 of the MPERC (Terms & Conditions for Determination of Generation

Tariff) Regulation 2005:-

“Any revenue other than the recovery of fuel cost earned by the generating company from sale of infirm power shall be taken as reduction in capital cost and shall not be treated as revenue”. As such, it is necessary to find expenditure against generation of infirm power viz a viz amount received through infirm power charges so as to ascertain the project cost as on CoD.

The details of amount recoverable through infirm power charges are as indicated below:-

S. No

Infirm power generated during the period 1st Oct.07 to 27th Aug.08

Month INJECTED POWER in KWH

BILLING AMT in Rs.

1 Oct-07 38971854 39497974

2 Nov-07 60127496 60939217

3 Dec-07 162136706 164325552

4 Jan-08 183756285 607764040

5 Feb-08 186119486 750010430

6 Mar-08 51225928 208528892

7 Apr-08 120916605 463946733

8 May-08 222207820 716539105

9 Jun-08 237100493 807896035

10 Jul-08 197448607 775419524

11 up to27/08/2008

113826578 389204364

Total 1573837858 4984071866

FY 07-08 682337755 1831066105

FY 08-09 891500103 31530057614984071866

.

The expenditure incurred on O&M, Administrative and Generation Expenses and Fuel cost are as indicated below:- in Rs. lakhs

S.No. Expenditure incurred on O&M, Administrative & General

Expenses during Trial Operation

Name of site Office

A&G/Estt. Expenses

Works Total

1 S.E.(EMCI) 2.64 2.64

2 S.E.(OPN-III) 56.71 40.81 97.52

3 S.E.(MM-III) 46.9 187.59 234.49

4 S.E.(ET&I) 13.78 9.3 23.08

5 S.E.(Services) 27.93 150.07 177.99

Total 145.31 390.41 535.72

SL. No.

Fuel Cost during the period

MONTH COAL CONS.

COAL RATE

COAL COST

HFO CONS.

HFO RATE

HFO COST

LDO CONS.

LDO RATE

LDO COST

MT Rs./MT LAC. Rs. KL KL / Rs

LAC Rs

KL KL / Rs.

LAC Rs.

1 Oct-07 35248

1331 469.15 3637 22334 812.29 1054.42 28249 297.86

2 Nov. -07

47650 1339 638.03 2699 25026 675.45 478 28344 135.48

3 Dec. 07 132558 1420 1882.32 1211 24064 291.42 214 28344 60.66

4 Jan-08 153447 1473 2260.27 572 29511 168.80 90 28788 25.91

5 Feb. -08 161227 1431 2307.16 260 29511 76.73 109 28788 31.38

6 Mar-08 43002 1397 600.74 118 28899 34.10 36 29869 10.75

7 Apr-08 94802 1424 1349.98 1104 28897 319.02 307 29868 91.69

8 May-08 174948 1408 2463.27 371 28897 107.21 57 29868 17.03

9 Jun-08 189813 1319 2503.63 283 30328 85.83 103 32162 33.13

10 Jul-08 162864 1319 2148.18 221 30328 67.02 70 32162 22.51

11 Aug. -08 92625 1319 1221.72 447 37126 165.95 339 40548 137.46

Total 1288184

17844.46 10923 2803.82 2857.42 863.86

FY 07-08

573132 8157.6786 8497 2058.8 1981.42 562.04

FY 08-09 10733.64

715052 9686.7817 2426 745.04 876 301.82

17844.4603

2803.8 863.86

Further subsequent to submission of earlier petition, the following has been taken into consideration, for arrival at estimated project cost now:- Due to delay in the commissioning & completion of the project by BHEL, a sum of Rs. 93.04 Crores has been retained/ deducted from various claims of BHEL raised by them beyond Dec. 2006 towards Liquidated Damages. The 100% value of work in respect of the turnkey contracts placed on BHEL also include the deduction of Rs. 93.04 Crore made against LD. These deductions towards LD are still to be finally settled. Thus they shall be considered at the time of finalization of project cost. The delay in completion of the project had direct impact on the fund flow and hence the drawl & the schedule of drawl which ultimately culminated in the enhancement of IDC on the debt drawn. The IDC amount has thus increased by about 125 Crore (from estimated amount of Rs. 269 Crore to Rs. 394 Crores).

Earlier the requirement of construction of new ash bund was sought by CEA,which was deferred saying provision for construction of new ash dyke, if required at a later date, will be allowed as capital addition based on assessment of the requirement by concerned regulatory authority. As the exiting ash bund is getting exhausted rapidly there appears necessity of a new bund, as has been intimated by MPPGCL vide letter no.77 dtd.20.02.2009 .Hon.ble MPERC is requested to allow an estimated expenditure of Rs.50 Cr. approx. on account of this separately, which shall be considered as additional capital expenditure.The provisional expenditure till CoD has been estimated as 2275.49 Cr. The value of balance works to be financed is approximately Rs. 158.20 Crores (List of works to be executed after CoD are annexed as Annexure).

Accordingly, the estimated project cost considered for the provisional tariff is as indicated below:-

Rs. Cr. Sanctioned Amount

Provisional Expenditure till CoD

Estimated value of Balance work

Estimated Project cost

2300 2275.49 158.20 2433.69

Less Profit from revenue earned through infirm power

Provisional expenditure on Fuel + O&M+A&G+Estt during Trial operation

220.45

Total amount billed for infirm power 498.41

Revenue earned on A/c of infirm power 277.95

Provisional project cost as on CoD 2155.73

Funding of Project

6.1. The project is funded in the following manner:-

Funding of 1x500MW Birsinghpur Table 6.1.1. Amount in Rs.Cr.

PROJECT FUNDING EXPENDITURE INCL. O&M

HARD IDC TOTAL EQUITY DEBT TOTAL

Year 2003-04 242.9 10.6 253.52 10.77 242.8 253.52

Year 2004-05 301.9 19.4 321.23 21.21 300.0 321.23

Year 2005-06 613.4 64.9 678.33 219.21 459.1 678.33

Year 2006-07 303.8 91.8 395.57 232.56 163.0 395.57

Year 2007-08 146.3 117.7 371.75 270.62 101.2 371.77

Year 2008-09 31.8 89.3 233.85 181.94 51.9 233.85

Year 2009-10 399.9 399.88 187.10 212.8 399.88

2040.0 393.7 1,123.42 1530.733 2,654.15

2433.7 INFIRM P -498.41 -498.41

625.01 1530.733 2,155.73

6.2. The details of PFC loan, vide No. 20101011, identified with this project are available and have been provided as Form -7 in this petition. The cost of the project estimated during FY 03 as Rs. 2094 Cr which has been revised as Rs 2300 Cr. PFC has sanctioned a loan amounting to Rs.1560 Cr. The table above elaborates that starting from FY03-04, the total loan amount drawn for the project is Rs. 1531Cr. This shall be revised subsequently as soon as the Project Cost shall be finalized, in view of the profit attained through sale of infirm power, which has been estimated as of now Rs.278 Cr.

6.3. As per terms of PFC loan, each drawl of the loan carries specific rate of interest applicable at the date of drawl. Considering drawls till CoD amounting to Rs.1300Cr. weighted average rate of interest works out as 11.52% and IDC for the period amounts to Rs. 394Cr. The working has been elaborated in Form 16. It has already been elaborated in the previous section that the differences in project cost may be considered at the time of determination of final tariff, within one year of CoD (as per regulations).

6.3.1. Based on the available details, MPPGCL submits before Hon.ble Commission to consider project cost as Rs. 2156 Cr. on provisional basis. It is considered that full amount of loan is made available by PFC (Rs. 1531 Cr). Further, as per the available records, there is no amount of grant provided by any agency for this project neither any consumer has extended any contribution. Thus the balance amount can be reasonably considered as equity contribution. MPPGCL humbly submits before Hon.ble Commission to permit the same.

Particulars Cr.Rs. %

Loan 1531 71%

Equity 625 29%

Project Cost 2156 100%

6.4. It is obvious from the above that, with the present level of cost estimates, equity contribution is about 29% and is well within the specified norms of 30%. MPPGCL, as per Hon'ble Commission.s regulation "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" has therefore, considered the return on equity @ 14%.

6.5. Major terms of loan of PFC loan are

1. Sanctioned amount : Rs. 1531 Cr. 2. Sanctioned Date : 2nd May 2003 3. Number of installments … 40 Nos. 4. Repayment period … 10 years 5. Weighted average rate of interest … 11.52%

6.6. Considering these terms interest and repayment liability works out as under :-

Interest & Finance ChargesTable No. 6.6.1 . Rs. In Cr

Particulars FY 09

1 Opening Balance 1531.00

2 Number of Installments Due 0

3 Repayment (Principal) 0.00

4 Closing Balance 1531.00

5 Average Interest Rate 11.52%

6 Interest Amount 102.87

7 Govt. Guarantee Rate 0.00%

8 Govt. Guarantee amount 0.00

9 Interest + Govt Guarantee 102.87

10 Total Liability (Principal + Interest) 102.87

The Principles/Norms of Operation

7.1 Hon.ble Commission, in "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" vide its Clause 3.6 has mentioned that the norms of operation applicable for a new thermal generating unit Commissioned after 1.04.2006 shall be as per the CERC regulation of year 2004. 7.2 Accordingly as per clause 16 of aforesaid CERC regulation based on the capacity of the unit following norms has been considered for the purpose of determination of the tariff:

Tariff Norms Table No. 7.2.1. S. No. Particulars

Ceiling Norm

1 Target availability for recovery of full capacity charges (%) 802 Target PLF for Incentive (%) 80

3 Heat rate (Kcal/Unit) During Stabilization 2550

Subsequent Period 2450

4 Secondary fuel oil Consumption (ml/Unit)

During Stabilization 4.50

Subsequent Period 2.00

5 Aux Consumption with Steam driven BFP & with out Cooling tower (%)

During Stabilization 7.50%

Subsequent Period 7.00%

While the unit has achieved CoD during Aug 2008 (i.e. later to 1.04.2006) stabilization period & relaxed norms has been considered. This is in view of the fact that the 1x500 MW Extn. Unit at SGTPS, Birsinghpur is the first 500 MW unit of MPPGCL. The persons are still required to gain experience in operation. It is therefore requested that it may be permitted to consider stabilization period & relaxed norms beyond 1.4.2006. The petition has been prepared on the basis of the above.

The Annual Capacity Charges

8.1. As mentioned earlier, in pursuance with "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)", tariff for sale of electricity from a thermal power generating station comprises of two parts, namely, the recovery of annual capacity (fixed) charges and energy (variable) charges.

8.2. The annual capacity (fixed) charges consists of :- 8.2.1. Interest on loan capital 8.2.2. Depreciation including advance against depreciation 8.2.3. Fee to MPERC 8.2.4. Return on equity 8.2.5. Operation and maintenance expenses 8.2.6. Interest on working capital

8.3. Detailed working of the Interest and Finance charges on loan capital has been elaborated in the foregoing section on “Funding of the project”. Working on remaining charges as per the aforesaid regulation is described in the following sections.

O&M CHARGES

9.1. Hon.ble Commission, in "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" has approved the rate for O&M charges for thermal and hydro stations for FY 07 to FY 09, for existing capacity, operated by MPPGCL.

9.2. For the new capacity, it has also been approved by Hon'ble Commission to permit O&M charges in clause 38 as under:

“38. For generating units /stations commissioned after 01/04/2006, principles and norms for O&M as prescribed by CERC vide its order dt.26/03/2004 shall be applicable.”

“2.27 Normative O&M expenses allowed at the commencement of the tariff period shall be escalated at the prevailing rates of inflation for the year as notified by the central government and shall be considered as a weighed average of whole sale price index and consumer price index in the ratio of 60:40 respectively.

For the first tariff period inflation had been allowed at 6%”

9.3. As per CERC order dt.26/03/2004 clause 21(iv):

“Normative operation and maintenance expenses shall be as follows, namely:

a) Coal-based generating stations except Talcher Thermal Power Station and Tanda Thermal Power Station of National Thermal Power Cooperation Ltd (Rs.Lakh/MW)

Year 200/210/250 MW sets

500 MW and above Sets

2006-07 11.25 10.12

2007-08 11.70 10.52

2008-09 12.17 10.95

As per "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" clause 25(2.27), the inflation rate has been considered as 6%.

9.4. Accordingly O&M charges have been computed and tabulated in the table below. It is prudent to mention that the plant shall be under O&M for 7 months, though is likely to generate almost 80% of design energy, as it is having its CoD during Aug 2008. This in turn reflects reduction of O&M charges for the first year on proportionate basis. The table below elaborates determination of O&M charges for FY 09.

O&M Charges Table No. 9.4.1.

Particulars FY 09

Capacity of Plant MW 500.00

Rate of O&M Charges L Rs/MW 11.37

Months of Operation No 7

Amount of O&M Charges Cr.Rs 33.64

Units Sent Out MU 1920

Rate of O&M Charges p/u 18

9.5. It is humbly requested before Hon.ble Commission to kindly permit the same.

DEPRECIATION

10.1. Hon.ble Commission in its regulation "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" has specified the principles of charging depreciation. Primarily they are –

10.1.1. Depreciation shall be chargeable on historical cost of project on straight line method.

10.1.2. Depreciation shall be charged till cumulative depreciation reaches to the ceiling limit of 90%.

10.1.3. The principles of Company Act are applicable and the depreciation canbe charged for the proportionate number of days during first year of its operation when the project is available for part of the year.

10.1.4. The rate of depreciation shall be weighted average rates based on element wise rate specified in Annexure I of "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" .

10.2. In the instant case, the project cost has not been finalized and hence it will be redundant to determine the weighted average rate of depreciation for this project based on cost elements. It is prudent to mention that advance against depreciation is also applicable for the project and the same has also been claimed for the project, enabling MPPGCL to ensure repayment of principal amount, thus the rate of depreciation in the initial years, till advance against depreciation is claimed, also become academic. In the instant case, for the purpose of computing depreciation, a consolidated rate of 3.85% has been considered. It is therefore, humbly submitted to kindly consider the same.

10.3. MPPGCL has considered the project operative for 216 days during FY 09.Thus the effective rate of depreciation, on annual basis works out to 2.27%.

10.4. Further, as per "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)", Advance Against Depreciation (AAD) is also permissible if the available cumulative depreciation up to the year is lower than the cumulative repayment till the year. Further ceiling of depreciation shall be 1/10th of the loan less depreciation for the year.

10.5. It is obvious from the table below that – 10.5.1. PFC loan has repayment period of 10 years and loan is to be

repaid in equal installments. Thus, in no case repayment requirement shall be more than 1/10th of the loan during the year.

10.5.2. The repayment/cumulative repayment during FY 09 are lower than

depreciation and cumulative depreciation requirements.

Depreciation and Advance Against DepreciationTable No. 10.5.2.1. Particulars FY 09

Months of Operation No 7

Annual Depreciation Rate % 3.85%

Effective Depreciation Rate for Year % 2.27%

Cumulative Depreciation % 2.27%

Project Cost Cr.Rs 2156.00Depreciation Amount Cr.Rs 49.12Cum Depreciation Amount Cr.Rs 49.12Loan Repayment Cr.Rs 0.00 Cum Loan Repayment Cr.Rs 0.00 Adv. Against Depreciation Required Cr.Rs 0.00

10.6. It is therefore, humbly requested to kindly permit depreciation as detailed in the table above.

RETURN ON EQUITY & TAXES

11.1. It has already been elaborated in the foregoing Para that the project cost (Rs. 2156Cr.) is funded by about 29% equity (Rs. 625 Cr.) and balance 71% through loan (Rs. 1531 Cr.). As per "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" MPPGCL is eligible to have 14% post tax return on equity. Present level of corporate tax is 30% and applicable surcharges thereon. Since the equity of the project is about 29%, full amount of the project is eligible for RoE.

11.2. It has also been assumed that a tax holiday shall be available to the project for initial 5 years. Min. Alt. Tax @11.33% has been considered. In case, MPPGCL become liable to pay any other type of tax /surcharge on RoE, the same shall be chargeable separately. Considering this RoE (proportionately for the period of operation in respective years) works out as under :-

Return on EquityTable No. 11.2.1

Particulars FY 09

Equity Amount Cr.Rs 625.00

Equity Amount as % of Project Cost % 29%

Rate of Return % 14%

Days of Operation No 216

Return on Equity Cr.Rs 51.78

Return Amount Cr.Rs 51.78

Rate of MAT % 11.33%

Amount of MAT Cr.Rs 06.62

Interest on Working Capital

12.1. Interest on working capital has been determined on the Working capital elements determined in pursuance with the norms as approved by Hon'ble Commission in "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)", as elaborated below:

.- Operation and Maintenance Expenditure 30 Days -. Fuel charges 60 Days -. Maintenance spares @ 1% of historical cost. In draft terms and conditions, - Hon.ble commission has permitted inflation of 6% per year from the date of Commercial operation. .- Receivable for two months

. - Interest rate consider is PLR +1%, (taken as 13.75%+1%= 14.75%)

12.2. Based on above norms the year wise working capital and interest on working capital works out as under:

Working Capital Requirement and Interest there onTable No. 12.2.1 Particulars FY 09

1 Coal Stock (60 Days) Cr.Rs 59.62

2 Secondary Oil Stock (60 Days) Cr.Rs 6.59

3 O&M Charges (30 Days) Cr.Rs 4.67

4 Maintenance Spares (1% of Project Cost) Cr.Rs 21.56

5 Receivables (2 Months) Cr.Rs 81.81

6 Working Capital Required Cr.Rs 174.24

7 Days of Operation No 216

8 Interest Rate % 14.75%

9 Interest on Working Cap. Cr.Rs 15.17

VARIABLE CHARGES

13.1 . Variable Charges cover cost of primary and secondary fuel. The landed cost of the coal includes price of the coal corresponding to the grade/quality of the coal inclusive of royalty, taxes and duties as applicable, transportation cost by rail/road, any other means and considering normative transit and handling losses as percentage of the quantity of the coal required.

13.2. The cost of secondary fuel has been arrived at considering norms of operation as per clause 36 of the MPERC Regulation – Terms and Conditions for determination of Generation Tariff.

13.3 .Accordingly Variable charges have been computed and tabulated in the table below. It is prudent to mention that the plant shall be under O&M for 7 months, as it is having its CoD during 28th Aug 2008. Due to relaxed norms of the operation considered for initial six months of operation, the variable charges for the first year re little more. It is submitted that the plant is first 500 MW unit of MPPGCL and till date MPPGCL has no experience of 500 MW. With a view to move along with the trends of technology, MPPGCL has ventured into installation of 500 MW Unit as against 210 MW units originally planned and traditionally accepted. Thus, in this case a little relaxation of the performance parameters is necessary. In case of CERC, the provision has been withdrawn, probably, considering adequacy of experience on technological improvements. It is humbly requested to kindly permit the same. The table below elaborates determination of O&M charges for FY 08 to FY 09.

Variable Charges Table No. 13.3.1. Sl. No. Particulars 2008-09

1 Capacity MW 500

2 For Effective Days No. 216

3 PUF % 80%

4 Gross Gen. MU 2074

5 Aux % 7.50%

6 Net Sale MU

1920

7 CV of Coal K Cal/kg 3350

8 Heat Rate K Cal/kWHr

2550

9 Sp Oil Consumption ml/kWHr

4.50

10 Specific Coal Consumption kg/kWHr 0.75

11 Transit & Handling Loss % 0.80% 12 Rate of Coal Rs/MT

1380

13Cost of Coal

Cr.Rs 214.63

14 p/u 112 15 Rate of Secondary Oil Rs/kL 28000

16Cost of Secondary Oil

Cr.Rs 23.71

17 p/u 12 18 Fuel Cost Cr.Rs 238.33

19 p/u 124

13.4. It is humbly requested before Hon.ble Commission to kindly permit the same.

Other Expenses

14.1. The other expenses like provision for bad debt, prior period charges and miscellaneous write-offs etc. are covered under this head.

14.2. Provision for Bad and Doubtful Debts

The company has just started its functioning and hence the risk associated andtrends are not available. In the tariff petition submitted by MPPGCL (dated 23rd Jan 06) for determination of tariff of existing plants, with a view to cover-up such associated risks a provision of about 1% of closing amount of receivables was provided as provision for bad debt. In the Tariff order for FY 06 (Dated 25th Jan 06), Hon'ble Commission has not considered the same mentioning that the company has not formulated any policy for writing-off of bad debts. It has been mentioned that the write offs may be considered at the time of truing up. Thus, the provision is not considered at this stage; however, MPPGCL will approach Hon'ble Commission when such policy is approved at a subsequent stage. MPPGCL humbly submits before Hon'ble Commission topermit the same.

14.3. Terminal Benefits and Pension Payment

Hon.ble Commission in the philosophy for bench marking of O&M charges vide its draft terms and conditions for determination of generation and transmission tariff has excluded the amount of pension payments and terminal benefits to be paid to the employees from O&M charges. Accordingly while determining the O&M charges these expenses have been excluded from O&M charges. As per the existing arrangement, till the policy regarding payment of pension and terminal benefits is finalized, these expenses are to be paid by Transco. Accordingly no amount has been considered in this petition. MPPGCL humbly submits before Hon'ble Commission to permit the same, if any at the time of finalization of project cost at a subsequent stage.

14.4. MPERC Fee

Hon.ble Commission has specified fee for Thermal station as Rs. 5000 / MW or part thereof for full year. Accordingly the fee for the plant for FY

09(Sep.08 to Mar.09) works out to Rs. 14,58,333/- for FY 09. It is humbly requested before Hon.ble Commission to kindly permit the same.

GENERATION

15.1. Installed capacity of the new additional Birsinghpur Unit is 500 MW. The targeted Plant Load Factor and Auxiliary Consumption have been considered as per "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)".

15.2. During first year the actual generation will be for around 216 days only. The table below elaborates possible generation from the station, considered for the purpose of determination of tariff:-

Generation Table No. 15.2.1

Particulars FY 09

1 Capacity of Plant MW 500

2 PUF % 80%

3 For effective Days 216 4

4 Gross Generation MU 2035

5 Auxiliary Consumption % 7.50%

6 Transformation Loss % 0.00%

7 Net Generation MU 1920

GENERATION COST & BILLING

16.1. In pursuance with "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)", thermal power stations are eligible for recovery of variable as well as fixed charges. The recovery of full fixed charges is permissible at target availability and below it on prorate basis in equal monthly installments. The station shall also be eligible for incentive on the rate specified in the above regulation, which shall be considered later on the basis of actual performance. 16.2. Accordingly, the cost elements have been computed in pursuance with "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" with relaxed norms for initial six months of operation and tabulated below:-

Generation Cost Table No 16.2.1.

Particulars FY 09

Net Generation MU 1920

Depreciation Cr.Rs 49.12

Interest on Loan Cr.Rs 102.87

Return on Equity Cr.Rs 51.78

Advance Against Depreciation Cr.Rs 0.00

Interest on Working Capital Cr.Rs 15.17

MPERC Fee Cr.Rs. 0.15

O&M Expenses Cr.Rs 33.64

Total Fixed Cost Cr.Rs. 252.72

Variable Charges Cr.Rs 238.33

p/u 124

Total Cr.Rs 491.05

Indicative Average Rate p/u 256

Amount Charged as MAT Cr.Rs 06.62

Total + Taxes Cr.Rs 497.67

Indicative Average Rate p/u 259

16.3. MPPGCL has also considered tax holiday during initial five years of operation of the plant and has not loaded any incidence of the same. In case, due to change in Govt. policy or otherwise, if any liability of tax (except on incentive of additional profit over and above RoE) arises, the same shall be charged extra. Similarly, Water Charges are payable to Govt. at the rates specified by GoMP, shall be chargeable extra. Fringe benefit tax etc, as payable on the project shall also be chargeable extra on actual basis.

16.4. Thus MPPGCL shall be Billing to MP TRADECO as under:

i. Variable cost as per monthly generation on the rates specified above ii. Fixed charges in equal monthly installment basis. iii. Adjustment on account of over/ under achievement of Plant Availability Factor and price of fuel. iv. Incentive @ 25 p/u as per "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005-Clause 43-

3.14)" v. Taxes including fringe benefit tax, Water Charges, admissible Income tax as per "MPERC (Terms and Conditions of

Generation Tariff) Regulations, 2005 (G-26 of 2005)" and any other tax if payable on actual basis.

While Petition has been prepared considering target parameters, this is to bring to kind notice of Hon.ble MPERC that the actual performance of the unit is far below the target parameters in respect of PLF (60-65%) & Station Heat Rate (3000-3050 Kcal/ Kwh). The specific reason for not achieving the target PLF is due to the shortage of coal, as already intimated vide this office letter no.52 dtd.5.2.2009. The availability if coal is beyond control of MPPGCL. However, this shall impact MPPGCL adversely by way of deduction in fixed as well as the variable charges. MPPGCL shall provide facts in this regard subsequently.

Hon.ble MPERC is requested to kindly consider the impact of factors beyond control of the utility and permit the recovery of full charges at actual parameters.

Financial Statements

17.1. The Financial Statements are important for assessing the financial health of the project, expected profit and liquidity. Since the project has just been commissioned, it will not be worthwhile to draw the balance sheets and cash flow statements prior to CoD. However the effect of cash drawl and asset capitalization prior to CoD has been considered at one point of time (i.e. at CoD in full) for computing projected balance sheet. Considering the assumption, P&L Account shall be as under :-

Projected Profit & Loss Account

Table No 17.1.1 Amount in Cr.Rs. Particulars FY-09

1

Inco

me

Energy Charges 238.33

2 Capacity Charges 252.72

3 Incentive

4 Tax 06.62

5 Total 497.67

6

Op

erat

ing

Exp

.

Fuel 238.337 O&M Charges 33.65

8 Depreciation 49.12

9 Adv. Against Dep. 0.00

10 Interest Cost 102.87

11 Intt on Work. Cap 15.17

12 Total 439.13

13 Operating Profit 58.54

14 Other Debits 0.00

15 Profit Before Tax 58.54

16 Income Tax 06.62

17 Profit After Tax 51.93

17.2. Projected Cash flow statement shall be as under :-

Projected Cash Flow Statement

Table No 17.2.1 Amount in Cr.Rs

Particulars FY-09

1 Opening Cash Balances 0.00

2 Capital Addition 624.99

3

Loan

Secured 1530.73

4 Unsecured (for W/C) 174.24

5 Creditor 0.00

6 Total 1704.97

7 Operating Income Before Tax

Income Accrued 497.67

8 Less Bill Receivables 138.24

9 Add Prev. Yr Bills Received 0.00

10 Less Operating Expenses 439.13

11 Net Income Before Tax (79.70)

12 Depreciation (Add Back)

49.12

13 Total Cash Available 2299.38

14Assets

Purchase of Assets 2155.72

15 Security Deposit -

16 Advance Payments -

17 Total 2155.72

18 Repayment of Loan

Secured -

19 Unsecured (for W/C) -

20 Creditor -

21 Total -

22Tax

Income Tax 6.62

23 Other Tax -

24 Total 6.62

25 Total 2162.34

26 Dividend As % of RoE 12%

27 Cr. Rs. 44.38

28 Closing Cash & Bank Balances 92.66

17.3. Projected Balance sheet of the company shall be as under :-

Projected Balance Sheet

Table No 17.3.1 Amount in Cr.Rs.

Particulars FY-09

1

Ass

ets

Fixed Assets

Gross Fixed Assets 2,155.72

2 Addition During Yr -

3 Less Depreciation 49.12

4 Net Fixed Assets 2,106.61

5 Loans & Advances (Deposits)

Loans & Advances -

6 Advance Payments -

7 Total -

8 Bills Receivables 138.24

9 Cash & Bank Balances 92.66

10 Total 2,337.51

11

Lia

bili

ty

Capital Equity 624.99

12 Acc. Profit After Tax

07.55

13 Total 632.54

14 Working Capital Loan 174.24

15 Secured Loans 1530.73

16 Current Liabilities (Creditors) -

17 Total 2337.51

17.4. Ratio analysis of the project at the end of financial year is a vital tool for financial experts for assessing the health of the project. Accordingly the same has been derived in the Form 14 and a summary of the same is listed below:-

Ratio Analysis Table No 17.4.1 Particulars FY-09

1 Debt Service Coverage Ratio 1.87

2 Debt Equity Ratio 71 : 29

3 Fixed Assets to Proprietor's Fund 333%

4 Fixed Assets to Funded Debt 138%

5 Profitability Ratio 10%

6 Return on Investment 8%

7 Interest Coverage Ratio (Times) 2.04

8 Fixed Asset Turnover Ratio (Times) 0.24

Tariff Formats

18.1. Hon'ble Commission in its "MPERC (Terms and Conditions of Generation Tariff) Regulations, 2005 (G-26 of 2005)" has specified the terms and condition for determination of tariff from Thermal Electric Plants and the petition is based on the norms specified therein. As regard to the formats prescribed for submission of tariff petition, it is to mention that Hon'ble Commission has specified the formats which are applicable for installed capacity as a whole and therefore for providing information in the instant case some modification of the format is necessary. MPPGCL has also made efforts to fill the formats as specified by CERC. While filling these formats, following limitations have been experienced.

18.1.1. CERC formats are designed for the stations having multiple trenches of loans from different agencies in different currencies. However in this case all the loans are in Indian rupee from PFC only. Therefore providing number of blank rows and columns in the formats will unnecessary complicate the disclosure of information.

18.1.2. CERC formats are primarily designed for determination of tariff when project cost is fully ascertained on various account codes. In the instant case the project cost is submitted on provisional basis duly elaborating the cost breakups. However, it could not be broken into different account codes because capitalization of the same is awaited. In any case truing up of the information submitted will be done at a subsequent stage and hence MPPGCL do not consider it appropriate to provisionally allocate the cost into various account codes. The depreciation is therefore charged on consolidated rate basis giving due justification for the same.

18.1.3. Considering the fact MPPGCL has not provided the forms exactly in the formats of CERC for which no information can be made available. It has however filled in the necessary forms necessary for determination of generation cost for this project.

18.2. All efforts have been made to recast the forms in the shape easily understandable by an average user adequately disclosing all available information.

18.3. MPPGCL further submits that in case any additional information in the format specified by Hon'ble Commission is required to be made available along with

this petition, MPPGCL will provide the same in the format specified by Hon'ble Commission.

18.4. It is humbly requested to kindly consider the information provided in the formats annexed.