Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 6402-IN

STAFF APPRAISAL REPORT

INDIA

TALCHER THERMAL POWER PROJECT

may 28, 1987

Energy DivisionSouth Asia Projects Department

This document has a restdicted distrbution and may be used by tecipients only in the p' 5ormance oftheir officil dutes Its contents may not otherwise be disdosed without Wodd Bank th n

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CURRENCY EQUIVALENTS

Currency Unit a Rupees (Rs)Rs 1.00 Paise 100US$1.00 = Rs 13.00Rs 1.00 - US$0.0769Rs 1,000,000 US$76,923

MEASURES AND EQUIVALENTS

1 Kilometer (km) - 1,000 meters (m) = 0.6214 miles (mi)1 Meter (m) - 39.37 inches (in)1 Cubic Meter (m3 ) 1.31 cubic yard (cu yd) u 35.35 cubic feet (cu ft)1 Thousand Cubic Meter (MCM) = 1,000 cubic meters1 Thousand Cubic Meter (MCM) = 1,000 cubic meter1 Barrel (Bbl) - 0.159 cubic meter1 Normal Cubic Meter 3 37.32 Standard Cubic Feet (SCF)

of Natural Gas (Nm3)1 Ton (t) = 1,000 kilograms (kg) - 2,200 pounds (lbs)1 Metric a-* of Oil - 7.60 barrels

(39 APL)1 Kilocalorie (kcal) - 3.97 British Thermal units (BTU)1 Kilovolt (kV) - 1,000 volts (V)1 Kilovolt ampere (kVA) l,00O volt-amperes (VA)1 Megawatt (MW) = 1,000 kilowatts (kW) = 1 million watts1 Kilowatt-hour (kWh) 1,000 watt-hours1 Megawatt-hour (MWh) = 1,000 kilowatt-hours1 Gigawatt-hour (GWh) = 1,000,000 kilowatt-hours1 Ton of Oil Equivalent (toe)= 10 million kilocalories

ABBREVIATIONS AND ACRONYMS

CEA - Central Electricity AuthorityGOI - Government of IndiaEDF - Electricite de FranceICB - International Competitive BiddingIDC - Interest During ConstructionLCB - Local Competitive BiddingLSHS - Low Sulphur Heavy StockLPG - Liquefied Petroleum GasLRMC - Long Run Marginal CostMMCMD - Million Cubic Meter per DayMOU - Memorandum of UnderstandingNGL - Natural Gas LiquidsNHPC - National Hydro Electric Power Corporation, Ltd.NPP - National Power PlanNREB - Northern Region Electricity BoardNTPC - National Thermal Power Corporation, Ltd.PFC - Power Finance Corporation, Ltd.PIB - Public Investment BoardREB - Regional Electricity BoardREC - Rural Electrification CorporationSEB - State Electricity BoardSTG - Steam Turbo-Generator

Beneficiary's financial year ends March 31

FOR OrliICUL USE ONLY

INDIA

TALCHER THERMAL POWRU PROJECT

LWAN AND PROJECT SUMMARY

Borrower: India, acting by its President

8eneficiary: National Thermal Power Corporation Ltd. (NTPC)

Amount: US$375 million

Terms: Repayment over 20 years, ircluding 5 yearsgrace, at the applicable rate of interest.

Onlsnding Terms: From the Government of India (CCI) to NTPC,with repayment over 20 years, including 5years grace, at an interest rate of not lessthan 14.0Z per annum. GOI would bear theforeign exchange and interest rate risks.

Project Description: The Project's main objective is to assist inmeeting the electricity demnd in the EasternRegion of India through the addition of about1,000 KW of thermal capacity at Talcher inOrissa. The Project comprises the installa-tion of two 500 MK generating units, theconstruction of about 270 km of associatedtransmission lines, and the establishment of asatellite-based data processing comunicationnetwork. There are no unusual risks involvedin implemeating the Project as NTPC is familiarwith the design and construction of generationand transmission facilities and consultingsupport will be provided in those ares inwhich NTPC lacks experience.

This document has a mstcted distribution and may be used by recipiets onty in th performaof their offic duties Its contents may not otherwise be discle witout Worl Dank autoization.

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Estimated Cost: 1/Local Foreign Total---- US$ Million---

Bas. CostsPreliminary Works 46.2 - 46.2Civil Works 136.5 8.6 145.0Main Plant Equipment 202.7 191.2 393.9Other Mechanical Equipment 40.6 36.6 77.2Electrical Works 9.4 37.6 47.0Coal Handling & Transportation 42.9 18.0 60.8Consultancy-REngineering 6.9 0.8 7.7Satellite Communications Network 29.7 31.9 61.6Transmission Lines & Substations 31.5 15.1 46.6Engineering & Administration 46.7 - 46.7

Total Base Costs 593.0 339.6 932.7Physical Contingencies 34.2 17.4 51.6Price Contingencies 171.8 66.0 237.8

Total Project Costs 799.0 423.1 1t222.1

Interest During Constructions Bank - 101.1 101.1: Other 52.1 - 52.1

Total Financing Required 851.1 524.2 1,375.3=___ == =====

Financing Plan:Local Foreig Total…-----US$ Million- -

IBRD Loan - 375.0 375.0GOI/Etternal Borrowing 508.1 149.2 657.3NTPC 343.0 - 343.0

TOTAL 851.1 524.2 1,375.3

1/ Includes taxes and duties of about US$36.4 million.

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Estimated Bank Disbursement Batk Fiscal Year

FY8 FY89 FY90 FY91 PY92 PY93 FY94 FY95 FY96

Annual 7.5 22.5 41.0 64.0 75.0 67.0 49.0 34.0 15.0Cumulative 7.5 30.0 71.0 135.0 210.0 277.0 326.0 360.0 375.0

Rate of Return: About 101

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INDIA

TALCHER THERMAL POWER PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

Loan and Project Summary ..................................... i-ii

I. SECTORAL CONTEXT *...............................e............. 1

Commercial Energy Resources ........... . 1Electricity Supply and Demand 2................... .............. 2Organization of the Power Subsector ........................... 3Finance and Pricing ....... 0 **************** .............. 3Power Subsector Planning ....................................... 5Management and Operations 5.................................... 5OI's Strategy in the Power Subsector ......................... 6Bank Group Strategy in the Power Subsector .................... 8Bank Group Participation ........ 00000000000000040400000000000 9

II. THE BENEFICIARY *............................................. 10

Existing Facilities and Development Program ................... 10Organization and Management .................................. 11Recruitment and Training ...................................... 12Performance ............ ................................ ....... 12

III. THE PROJECT ..... .......... * 12

Project Setting ......... ......... 0000000000000000 *.,********,* 12Project Objectives ............... ............................. 13Project Description ......*... *0 .............................. 13Project Costs .......... O 14Project Financing .........,......... ........................ 15

This report has been prepared by Messrs. Luiz Gazoni (Senior PowerEngineer), Wynne P. Jones (Senior Economist), Paul tubbard (FinancialAnalyst), and A. Posada (Consultant).

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Page No.

Project Engineering ... *...***... 16Fuel Supply .......... 16Water Supply 16Land Acquisition and Resettlement 17Project Implementation 17Procurement oo000o0o00o0oo0e00000000o0000000o000oo00o9000ooo00 17Disbursement *00o00o00oe0ooo00 o0. o00e00000000000000000000000 19Ecology l**********,*****0,*** 00**O*,*, *O. ***......*g**.. 19Project Risks . 19Project Monitoring ..... oo* * ..o*oooooeoooo o 0000oo0ooooo0 20

IV. FINANCE 20

Accounting Organization and Systems ........................... 20Past Financial Performance *0o0000 ..... o.... oo*o..oo oo.o 20Accounts Receivable ......... oo.....0....0..0 .**..0....... .....0 22Future Financial Performance oo.......o.o.... o.........o o00oo 22Future Investment and Financing ............................... 24Tasation ...........ooee......o..* ................o.......... 0ooo 25

Audit o ..... o.o.... ...oo............. , .... o.................. 25NTPC's Regional Tariffs *000,0 oo.oo.ooooOOo0 26

On-Lending Arrangements for the Proposed Project *00oo.oo.*.o.* 26

V. PROJECT JUSTIFICATION AND ECONOMIC ANALYSIS ............... ** 27

Least Cost Analysis ..... 00000000000000000000000 000000 27

Internal Economic Rate of Return 27

Justification for Bank Involvement ............................ 28

VI. AGREEMENTS AND RECOMMENDATION 00 ..... o... 0 00 00*00000000 29

Agreements ........ **..... 29

Recommdenation *. oo...o...e.oo.o.ooo.oo..o..o.o..o.oooooo., 30

1.1 Electricity Generation, Sale and Pattern of EnergyConsumption - All India

1.2 Forecast of Regional Power Demand in India, FY86 - FY'921.3 Previous Loans and Credits to Indian Power Sector (April 22, 1987)

2.1 NTPC Organizational Structure

3.1 Project Description3.2 Detailed Project Costs3.3 Notes on Coal Linkage3.4 Implementation Work Schedule3.5 Transmission Line Implementation Schedule3.6 Estimated Schedule of Disbursements

4.1 Financial Annexes: Table of Contents4.2 Financial Performance Indicators4.3 Consolidated Income Statement4.4 Balance Sheets4.5 Statement of Source and Application of Funds4.6 Financing Plan4.7 Projected Regional Tariffs versus Long-Run Marginal Costs (LRMC)4.8 Rate of Return on Net Revalued Assets4.9 Investment Program4.10 Assumptions for NTPC Financial Projections

5.1 Electricity Demand and Supply - Eastern Region5.2 Internal Economic Rate of Return

6.1 Related Documents in the Project File

NAP

IBRD 19618R

INDIA

TALCHER THERMAL POWER PROJECT

STAFF APPRAISAL REPORT

I* SECTORAL CONTEXT

Commercial Energy Resources

1.01 India's principal commercial energy sources comprise coal, oil, gas,hydro and nuclear energy. Of the nonrenewable resources, coal is the mostabundant. Reserves of thermal coal have been estimated at slightly more than100 billion tons, of which 25 billion are proven. Although reserves areample, the quality of coal produced is generally low and is deteriorating.The high ash content, up to 501, increases power station capital and operat-Ing costs and has exacerbated problems of coal transport. GOI's emphasis onconcentrated development of pithead stations helps to address transportproblems but will not reduce the other costs associated with poor coalquality. In any case pithead development will be constrained by pollutionand water availability. GOI appointed the Fazal Committee to examine theproblems of coal supply to thermal power stations. This committee, whichreported in October 1983, made a large number of recommendations, affectingall aspects of supply from coal preparation to railway operations(para 1.14); the great majority of these recommendations have been acceptedby GOI. The Bcnk is supporting GOI's efforts in this area through its lend-ing to the coal sector. The Dudhichua Coal Project includes studies toexamine coal linkages and identify potential improvements in handling andtransportation facilities. Coal quality is also being addressed, par-ticularly through the inclusion of appropriate quality incentives in coalsupply contracts.

1.02 Proven and probable petroleum reserves comprise approximately 510million tons of oil and 390 million toe of natural gas. Despite recentincreases in domestic production, India still imports aboit one third of itsoil requirements, which in FY84 cost the equivalent of 401 of its merchandiseexports. GOI has therefore given high priority to oil and gas explorationand, at the same time, has implemented measures, including economic pricing,to restrain the rapidly growing demand for oil products, particularly middledistillates. In the past, C0- has generally limited natural gas to premiummarkets such as petrochemicals and fertilizer; however, delays in the con-struct-on of gas infrastructure have resulted in substantial volumes of gasbeing flared. The Bank has encouraged GOI to develop the necessaryinfrastructure and to allow other economic uses of gas including power gener-ation. In response, GOI has begun to invest in pipelines and has recentlyrevised its policy on the use of gas for power generation (paras 1.14 and1.15).

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1.03 India's hydroelectric potential is equivalent to about 100,000 MW.At present only 14,000 MW have been developed, 4,700 MW are under construc-tion and a further 23,000 MW are being studied for future development. Theprominent role of hydro generation in regional least-cost power developmentplans has led GOI to emphasize the need to accelerate hydro development;however, progress has been slow owing to the lack of financial resources ofstates with the greatest hydro potential, the time required to resolve waterrights and environmental issues, and the limited technical resources avail-able for the simultaneous preparation of a large number of hydro schemes.Attempts to address these issues through increased central sector involvementhave so far met with limited success (para 1.07).

1.04 The country's uranium reserves could support a modest nuclear program(8,000 - 10,000 MW), and thorium reserves are enough for a large fast breederprogram. India's nuclear power generating capacity is currently 1,095 MW.

rlectricity Supply and Demand

1.05 In 1984/85 utilities' gross power generation amounted toapproximately 157,000 CWh from an installed capacity of just over 42,000 MW.Almost 60% of generation was from coal, 34% from hydro, and the rest fromoil, nuclear energy, and natural gas. Electricity losses have risen slowlybut steadily over the last few years and now exceed 26% of gross generation.The deteriorating quality of coal has increased station-use and the largeexpansion in very low load iensity rural electrification, together withinadequate investment in other transmission and distribution, have increasedsystem losses. The Bank has stressed the importance of balanced investmentto reduce system losses and improve service quality and will continue tosupport transmission and distribution investments designed to achieve theseobjectives.

1.06 Over the past two decades, the consumption of electricity has grownapproximately twice as fast as total commercial energy consumption and nowaccounts for more than 30X of the latter. Even though the power subsectorreceives 20-25% of total public investment, electricity supply has not keptpace with demand and shortages have been prevalent throughout the country.Total consumption has grown at an average annual rate of 8% although theincreasing severity of power shortages indicates that potential demand hasgrown more rapidly. The Central Electricity Authority (CEA) has forecastdemand growth in the range 10-11 per year between 1984/85 and 1994/95(Annex 1.2). owoever, actual growth will continue to be supply constrained.The principal sectoral shares of total electricity consumption are:industrial, 57%; agriculturalt 18%; and domestic, 13%, (Annex 1.1). Agricul-ture's share has grown steadily owing to increased electrical irrigationpumping made possible by rural electrification and encouraged by heavy sub-sidies.

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Organization of the Power Subsector

1.07 Responsibility for the supply of electricity is shared between theCentral and State Governments. The state electricity boards (SEBs) and theregional electricity boards (REBs) are controlled by states; CEA isadministered by the Department of Power within the Ministry of Energy and theNational Thermal Power: Corporation (NTPC), the National Hydro-Electric PowerCorporation (NHPC), and the Rural Electrification Corporation (REC) arecentral sector corporations responsible to the Department of Power. SEBswere instituted under the Electricity (Supply) Act, 1948 (the Act), topromote the development of the power subsector and to regulate private licen-sees such as the Tata Electric Companies. Although SEBs are supposed to beautonomous in managing their day-to-day operations, in practice they areunder the control of State Governments in such matters as capital investment,tariffs, borrowings, pay, and personnel policies. As a first step towardsnational integration, the SEBs have been grouped into five regional systems,each coordinated by an RIB. Coordination responsibilities include overhauland maintenance programs, generation schedules, interstate power transfersand concomitant tariffs. CEA was craated in 1950 to develop national powerpolicy and to coordinate the various agencies involved in supplying elec-tricity. It is formally responsible for vetting investment proposals,providing consulting support to SEBs, assisting in the integration of supplysystems, training of personnel, and research and development. However, inits execution of these responsibilities, CEA has been severely limited byshortages of skilled staff and other resources. Without any direct respon-sibility for the provision of finance it has been unable to assume a verypositive role in the developmeut of the subsector. In view of this, GOI hasdecided recently to form the Power Finance Corporation to complement CEA infostering development of the subsector (para 1.16). NTPC and NHPC wereformed in 1975 to construct and operate large power stations and associatedtransmission facilities. They sell bulk power to the SEBs for distribution.FMPC has had marked success and although it accounts only for about 52 ofinstalled capacity it is growing rapidly. In contrast, NHPC is still strug-gling to establish a role for itself; the states control water rights and arereluctant to relinquish hydro sites to the Center. This has prompted GOI toexplore joint ventures between the Center and states for the development ofhydro schemes. BEC was established in 1969 to coordinate rural electrifica-tion and provide financial and technical expertise for SEB schemes. Cur--rentlyt. DC finances more than 70X of total.rural electrification investment.At. present there is -no organization with responsibility for the developmentof a national transmission grid, although GOI is contemplating the formationof such a body (para 1.17).

Finance and Pricing

1.08 The SEBs as a whole are estimated to have made a combined loss in1984/85 of approximately Rs 11,230 million (US$935 million) exclusive ofsubsidies, corresponding to a return on historically valued net fixed assets

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of 2.3X before interest and -8.1X after interest. Internal cash generaLlon,which was eqnivalent to only about 2.7X of capital expenditure in 1984/85,has been correspondingly poor. Almost all SEB capital expenditure isfinanced by debt, primarily loans from state governments. Recognizing theunsatisfactory state of SEB finances GOI has, through an amendment to the Actnotified in April 1985, required SEBs to earn an annual return, after meetingoperating expenses, taxes, depreciation and interest, of at least 3% on theirhistorically valued net fixed assets (GOI does not accept the principle ofrevaluation of assets). The Bank supports this initistive by GOI and haschanged the form of its financial covenant to reflect this. Although, interms of the Bank's conventional method of calculation, the return specifiedin the Act generally corresponds to a modest return on revalued assets in therange of 4 to 61, it, nevertheless, represents a very sub3tantial improvementon current performance. Many SEBs, particularly those of the poorer states,are expected to experience considerable di£:iculty achieving this level ofperformance. NTPC a tariffs are approximately equal to its long-run marginalcosts (LIMC); however, there are deficiencies in tariff structure and GOIhas agreed to undertake in close cooperation with the Bank such studies asmay be necessary to address these. As is to be expected from their currentfinancial performance, SEBs' tariffs do not adequately reflect their LRMCs.An analysis of 1981 SEB tariffs indicated that they were on average only justover 50% of LRMC. A preliminary analysis of 1986 tariffs suggests that theyare now 60-70% of LRMC and achievement of the stipulated rate of return wouldimprove the average ratio still further. However, the structure of tariffsis still unsatisfactory. Tariffs are frequently excessively complex and verylittle has been done through tariffs either to achieve load management or totap selectively consumers' willingness to pay, which in many cases substan-tially exceeds existing tariff levels. At the instigation of the Bank, LRMCtariff studies were carried out for almost all of the states in the late1970's. However, these istudies were generally of poor quality and the Bankhas since endeavoured to agree with GOI on a methodology for LMC tariffstudies. Progress has be-en slow because, despite espousing energy prices"which reflect true costs" its both the Sixth and Seventh Plans, GOI and thestates continue to oppose economic pricing of power for reasons associatedwith social and agricultural objectives. In lending to individual SEB's theBank will continue to address state-specific programs to improve resourcemobilization, for example, by developing financial programs capable, as aminimum, of achieving the rate of return specified in the Act. Where higherreturns are both feasible and desirable the Bank will press state governmentsto use their discretion under the Act to notify a higher rate of return. Sofar as tariff structure is concerned the Bank will continue to require SEBsto carry out tariff studies wherever tariff structures appear to be badlydistorted, in order to impress on the relevant authorities the true costs ofcross-subsidization. This has been done under both the Chandrapur ThermalPower Project (Loan 2455-IN) and the Kerala State Power Project(Loan 2582-IN). However, resistance to economic pricing is such thatprogress in pricing reform is likely to be slow (para 1.18).

Power Subsector Planning

1.09 The Bank has consistently encouraged GOI to pursue integrated plan-ning and coordinated operation of the country's electricity supply systems.In response, GOI has prepared a set of regional least cost development plans,published as the National Power Plan (NPP) in 1983. Although the NPP repre-sents a good first step towards integrated planning, it needs further refine-ment and regular updating. In addition, such a plan can only lead to effec-tive improvements if complemented by measures to bring about coordinatedsystem operation. At present only the Northarn Region is achieving this.0OI is encouraging states to reach the necessary agreements on operatingparameters but progress is likely to be slow so long as severe powershortages exist. Even if coordinated intra-regional operation is achieved,inter-regional transfers will be very difficult without the use of directcurrent facilities to overcome problems of frequency control. The first suchfacility, a link between Northern and Western Regions, is a component of theCentral Power Transmission Project (Loan 2283-IN). A second direct currentlink has been included in the Rihand Power Transmission Project(Loan 2535-IN). To facilitate further integration GOI has agreed, under thelatter project, to undertake a study of the long-term development of anational transmission system and to examine related institutional and commer-cial issues. Disparities between the long-term NPP, national five-yearplans, short-term budgets and actual performance have been substantial. Owingto the lack of resources, fewer projects have been included in the five-yearplans than in the NPP and, as a result of inadequate allowance for escalationand delays in project implementation, still fewer have been executed. Theresulting power deficit has undermined rational planning by necessitatingrapid expansion of supply rather than long-term least-cost development; forexample, shorter gestation thermal plant has been favored at the expense oflower cost hydro. Furthermore, it has prompted overinvestment in captiveplant, a second best measure leading to excessive use of high value petroleumproducts for power generation. In addition to supporting GOI's efforts toincrease the supply of power, the Bank will continue to stress to GOI therole of pricing and load management in eliminating the deficit, and theimportance of integrating planning and pricing.

Management and Operations

1.10 In contrast to the good performance of NTPC, the SEBs' management andoperational capabilities have not kept pace with the expansion of supply. Ingeneral, SEBs have adequately qualified engineering staff, but lackexperienced personnel in financial planning and control. The relatively lowstatus and pay of these personnel exacerbates the already significant paydifferential between the public and private sectors and makes it difficult torecruit competent staff. Management practices are generally outmoded andinadequate. Accounts have been maintained principally to track cash receiptsand expenditures, and there has been little use of accounting information formanagerial purposes. Consequently, the Bank has encouraged GOI to develop a

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new uniform accounting system for 8EBs. After initial delays, implementationis now proceeding. In addition, the Bank will continue to support institu-tional development programs through lending to individual SEBs.

1.11 The operations of many SE8s are hampered by the poor condition oftheir plant and equipment. Factors that have contributed to the poor stateof thermal plant include inadequate maintenance (in part due to capacityshortages), deficiencies in manufacture, lack of spares, and the poor qualityof coal; in general, these problems have been recognized by the relevantauthorities and corrective steps are being taken. Distribution systems havesuffered from inadequate maintenance and overloading owing to inadequateinvestment. Rehabilitation, particularly of thermal plant and distributionnetworks, appears to be a very cost-effective way to improve efficiency andaugment system capacity. GOI has recently started to implement a rehabilita-tion program for thermal plant but is less able to effect improvements indistribution. The Bank will continue, whenever appropriate, to includerehabilitation components in its projects.

OI's Strategy in the Power Subsector

1.12 In essence the Five Year Plan constitutes the only formal statementof OI's energy and power policies. Although formalization of power policy,in particular, is made difficult by the constitutional arrangement in whichresponsibility for power is shared between Center and states (para 1.07),the Seventh Plan, nonetheless, reflects a broad consensus of the objectivesof energy and power policies. The principal objectives of GOI's energypolicy are to: (a) develop energy supplies economically at a rate commen-surate with growth in the economy and social needs; (b) substitute indigenousenergy resources for imported petroleum wherever this is both technically andeconomically feasible; and (c) encourage the rational and efficient use ofenergy resources. Although power policy is governed by essentially the sameobjectives, alleviation (or at least containment) of acute power shortagessuffered nationwide dominates GOI's short-term strategy. Over the longerterm, achievement of least-cost development assumes greater importance. Inaddition to the initial steps of its long-term strategy, GOI's short-termstrategy provides for a number of specific measures to address powershottages, including:

(a) rehabilitation of thermal plant - a program involving some 30 plantsis currently being implemented (para 1.11);

(b) accelerating the implementation of ongoing projects - a recent reor-ganization of Government created a new ministry specifically tomonitor and improve implementation of public sector projects;

(c) a more liberal attitude towards captive generation;

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(d) permitting the construction of shorter gestation gas or oil-firedplants (para 1.02); and

(e) improving the quality and reliability of coal supplies, throughimplementation of the majority of the recommendations of the FazalCommittee (para 1.01).

1.13 GOI's long-term strategy requires a blend of policies designed toaddress investment, organizational institutional and financial issues. Withrespect to investment, resource constraints severely limit the quantum ofinvestment available to the power subsector. The Seventh Plan allocation isalmost exactly half the sum sought by the Working Group on Power, a sum whichwas itself inadequate to eliminate power shortages. Long-term invectmentpriorities are:

(a) accelerated hydro development (para 1.03);

(b) an increased proportion of investment in transmission and distribu-tion (para 1.05);

(c) the formation of a national grid (para 1.09);

(d) coal beneficiation to improve both quality and homogeneity(para 1.01);

(e) diversification of the modes in which coal for power generation istransported, possible examples include the introduction of coastalshipping or slurry pipelines;

(f) diversification of the fuels used for power generation, GOI nowrecognizes that gas fired plant, especially combined cycle, has aneconomic role to play in system development (para 1.02); and

(g) steady growth in the development of nuclear power (para 1.04).

1.14 Long-term organizational/institutional and financial issues are morecontroversial and GOI still needs to identify clearly defined strategies inthese areas. GOI recognizes the institutional and financial weakness of manyof the SEBs but constitutional constraints limit the rate at which the Centercan bring about improvement. Measures which Q01 is following include:

(a) increasing the role of efficient central sector institutions, par-ticularly NTPC (para 1.07);

(b) implementation of a uniform system of commercial accounting for allSEBs (para 1.10);

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(c) requiring, through recent amendment of the Act, that SEls earn a rateof return of not less than 31 after all expenses and interest(para 1.08), a significantly more stringent financial requirementthan hitherto; and

(d) a more receptive treatment of private sector proposals for powergeneration, particularly when it can be demonstrated that suchdevelopments are mobilizing resources which would not otherwise beavailable to the public sector.

In addition, GOI has decided to form the Power Finance Corporation as afinancial intermediary serving the subsector (para 1.07). It is expectedthat funds lent by the Corporation would be attractive to SEBs because, atleast in part, they would be additional to agreed plan outlays. However,loans would be subject to conditionality designed to improve the efficiencyand financial strength of beneficiaries.

1.15 GOI recognizes that the development and operation of an integratednational grid will be difficult to achieve with the present organization ofthe subsector and GOI is contemplating the f^rmation of a separate body withresponsibility for the grid (para 1.07). However, many commercial andinstitutional problems remain and, as yet, GOI has no strategy for theirsolution; although, under the Rihand Power Transmission Project, QOI hasaccepted that these aspects of grid development need to be addressed(para 1.09).

Bank Group Strategy in the Power Subsector

1.16 The Bank supports the elements of GOI's strategy identified above butfeels that, while each of these elements is desirable, they do not addressall of the serious deficiencies in the subsector. In particular, additionalefforts are needed to address problems in the areas of planning, pricing/loadmanagement, institutional development and finance. The prevalent nature ofthese problems suggests that a sector-wide approach should be sought.However, the comparative autonomy of the states/SEBs from the Center makes itdifficult to achieve progress in this way. With the exception of the intro-duction of uniform commercial accounting in SEBs, few improvements at thestate level have been realized through umbrella projects coordinated by CEAor REC, primarily owing to the very weak control that these institutions areable to exercise over SEBs. Consequently, the Bank is changing the mix ofits lending away from such umbrella projects towards a more direct involve-ment with individual SEBs, where state-specific programs can be designed toaddress areas of deficiency. Initial experience with individual SEBes sug-gests that the prospects for impravement are encouraging. Pricing and financeare the most problematic areas (para 1.08) and the Bank has indicated that itwill only work with those SEBs that are prepared to improve their financialperformance.

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1.17 In parallel with lending to individual SEBs the Bank proposes con-tinued support for expansion of the central sector, because: (a) increasedreliance of the states on central sector generation appears to be the bestway to encourage decisions at the state level consistent with the nationalinterest; and (b) a higher proportion of total generation provided ateconomic tariffs by the central sector will help to improve tariffs to finalconsumers. The difficulties that COI has experienced in bringing hydroprojects into the central sector mean that NTPC will continue to ui the mainvehicle for the Bank's support of the central sector. NTPC's recorA to dateis impressive. However, it is still far from being a mature institution and,owing to its rapid development, it will continue to face problems in which itcould benefit from Bank support. In the wider context, the Bank feels thatan institutional review of the power subsector is needed and it is desirablethat this should include a review of the organization and functions of CEA.The Bank will also pursue with GOI the possibility of Bank-financed technicalassistance to improve CEA's capabilities.

1.18 In addition to addressing areas in which GOI's strategy appearsdeficient, it is appropriate that the Bank should focus on aspects of thestrategy already adopted, where the Bank can do most to catalyze progress.In this respect specific aspects identified include:

(a) integration of power supply including the formation of the nationalgrid - the Bank will continue to support projects such as the Centraland Rihand Power Transmission Projects, the latter will afford theBank the opportunity for an active involvement in studies oflong-term transmission development (para 1.09);

(b) accelerated hydro development - by broadening lending operations toencompass individual SEBs the Bank is able to support hydro projectsand, where the additionality of the Bank's funds to plan outlays iscrucial, it is able to bring about developments which might nototherwise take place; and

(c) elements of strategy that involve concerted action by organizations,both inside and outside the power subsector - the Bank can coordinateits own lending operations within the different subsectors in orderto improve intersectoral cooperation. Priority examples concernimprovements in coal quality and transportation, and the use ofnatural gas for power generation.

Bank Group Participation

1.19 The Bank has made 22 loans (US$2,709 million) and 17 IDA credits(US$2,409 million) for Indian power projects (Annex 1.3). Nineteen projectshave been completed: 13 generation, 5 transmission, and 2 rural electrifica-tion. Projects currently under implementation include 12 generation, 3 ofwhich are hydro, 2 transmission, 1 rural electrification, and the Kerals

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Power Project, which includes a broad spectrum of generation, transmissionand distribution. With respect to NTPC projects,. the first-phase projects atSingrauli, Korba, and hamagundam were commissioned on or ahead of schedule.The second-phase extension at these sites, the Parakka, Rihand Power Trans-mission and Combined Cycle Power Projects are proceeding satisfactorily. TheThird Rural Electrification Project, which has suffered significant procure-ment problems, is about three years behind schedule.

1.20 A performance audit conducted in 1980 for the Second Power Transmis-sion Project (Credit 242-IN) concluded that the project succeeded in helpingthe nine beneficiary SEBs extend their transmission systems to meet theirgrowing power requirements. Utilization of generating capacity in these SEBsexceeded the appraisal forecast. However, the audit highlighted the dif-ficulties of effecting institutional improvements in the absence of a closeworking relationship between the Bank and beneficiary SEBs. Another perfor-mance audit, conducted in 1985 for the First and Second Rural ElectrificationProjects (Credits 572-IN and 911-IN), concluded that India's rural elec-trification program, of which the projects were a part, has helped thecountry to achieve food self-sufficiency, alleviate poverty, and transformthe rural economy. In common with the previous audit this also emphasizedthat the Bank should devote resources to deal with the SEBs individually.

II. THE BENEFICIARY

2.01 NTPC, the beneficiary of the proposed loan, was established in 1975as a publicly owned utility, under the general supervision of the Ministry ofEnergy. It is responsible for designing, constructing, and operating largethermal power stations and transmission lines, and for the sale of powergenerated to the SEBs. NTPC has broad powers to carry out its operatiensexcept for decisions on investment plans and financing which require Govern-ment approval before implementation. NTPC is also subject to periodicexamination by the Committee on Public Undertakings, a body established byGOI to monitor the performance of public sector enterprises.

Existing Facilities and Development Program

2.02 NTPC commenced generating electricity in 1982 and, by the end of.1985/86, operated 11 new 200 MS units (5 at Singrauli, 3 at Korba and 3 atRamagundam) and 2,130 km of 400-kV transmission lines. In addition, it hasunder construction 7 power plants with a total capacity of 8100 NW and11,000 km of transmission lines. NTPC also operates the 720 MW Badarpurstation near Delhi, and is responsible for construction of the 270 MW captivepower station being established at Korba for the Bharat Aluminium Company, ona management-fee basis. NTPC expects to commission some 6000-7000 MW duringthe Seventh Plan and, on the basis of starts provided for under the Seventh

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Plant will commission a further 5000-6000 MW during the Eighth Plan. NTPC'spower stations and linest both existing and planned, are generally in remoteareas which have inadequate communication facilities. NTPC's massive logis-tical effort is seriously hampered by this communication constraint and theproposed Project includes a satellite-based communications network to over-come this problem.

Organisation and Management

2.03 In response to the rapid increase in NTPC's operational and construc-tion activities, a study to develop a decentralized organizational structurewas initiated in 1981, with assistance from power utilities/ consultants inthe UK and the USA. On the basis of this study, NTPC adopted a regionalorganizational structure in August 1982, with each Region under the charge ofan executive director responsible for the design, construction and operationof generation and transmission facilities. Regional headquarters have nowbeen established for:

(a) the Northern Region, with responsibility for the power stations atSingrauli and Rihand, together with the associated transmissionsystem;

(b) the National Capital Region, with responsibility for the power sta-tion at Badarpur and the planned station at Dadri;

(c) the Western Region, with responsibility for the power stations atKorba and Vindhyachal, together with the associated transmissionsystem;

(d) the Southern Region, with responsibility for the power station atRamagundam and the Southern Regional Transmission System;

(e) the Eastern Region with responsibility for power stations at Parakka,Kahalgaon and Talcher, together with the associated transmissionsystem.

Recently, UTPC has centralized design and procurement in order to utilizetrained manpower more efficiently. It has also created the post of Director(Projects and Operations) to ensure that adequate attention is given to powerplant operations.

2.04 With decentralization, the corporate headquarters is progressivelyconcentrating its role on policy-making and the provision of functionalguidance to the Regions and operating divisions. The principal corporatefunctions are finance, personnel and administration, planning and monitoringdesign, procurement and commercial. The finance, personnel and design groupsare headed by Directors who are members of NTPC's Board. The procurementgroup is responsible to the Executive Director (Corporate Contracts and

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Materials). The planning and monitoring group reports to the Chairman andManaging Director and the commercial group to Director Finance. The presentcorporate organization structure is shown in Annex 2.1.

Recruitment and Training

2.05 Recruitment is progressing satisfactorily and is expected to meetNTPC's expanding operational needs. In 1985, NTPC had about 14,200employees. This number is expected to reach about 32,000 by 1990. Initially,NTPC emphasized the recruitment and training of executives, engineers andsupervisors, who account at present for nearly 40% of its staff. However,with the increase in operating plant, the emphasis has been gradually shift-ing toward the recruitment and training of skilled workmen and plantoperators, who will account for about 70% of staff by 1988/89. Trainingcenters have been established at NTPC's plant locations. These centers, withworkshops, training materials, and hostel fasilities, are designed to trainyoung graduates, diploma holders and operating staff. NTPC also providesspecialized training in management and other aspects of the power sector atthe Centre for Education in Power Management in Delhi, the Central Instituteof Training at Badarpur and other academic institutions. In addition,specific programs are organized in collaboration with power organizations ofinternational repute, e.g. the Central Electricity Generating Board (U.K.).

Performance

2.06 NTPC's construction performance has been satisfactory with most ofthe generating units and transmission lines being completed within theplanned construction time. Such delays as have arisen in projects have beenprimarily due to delays in placement of orders for the major equipment(boiler and turbo-generators) and not in actual construction. Transitionfrom construction to operation is also being carried out successfully. NTPChas, with che assistance of Central Electricity Generating Board (U.K.),prepared detailed procedures for plant commissioning, operation and main-tenance. Major emphasis has been placed on the introduction of maintenanceplanning using computers and standard work procedures. Generating units underoperation have achieved satisfactory generation levels. A Research andDevelopment unit has been established to carry out applied research and toassist in outage analysis.

III. THE PROJECT

Project Setting

3.01 India continues to face severe power shortages and GOI's strategy forthe power subsector, outlined in the Seventh Plan, calls for the accelerated

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exploitation of indigenous energy resources to alleviate these shortages.The Eastern Region, comprising Bihar, West Bengal and Orissa, three of thepoorest states in India, continues to suffer from chronic shorteges of power.This has led to substantial pressures to postpone maintenance of equipment inorder to keep plants in operation. Consequently, plant availability is nowsubstantially lower than in any other region in India. CEA has prepared arehabilitation program, which has funding under the Seventh Plan, to improvethe efficiency and increase the output of existing thermal plants, and thisis currently being implemented (para 1.11). However, despite this program,the Eastern Region will still need substantial new generating capacity. Theproposed Talcher Thermal Power Station is the first phase of a 3,000 MWdevelopment, which forms part of the least cost power development plan forthe Eastern Region. The power station would utilize coal from the extensivereserves in the Talcher coalfield, whL:h will be cheap to exploit but which,in common with many other coals in India, his a rather high and abrasive ashcontent. The executing agency for the project would be NTPC, which would beless subject than SEBs to pressures to maximize present generation at theexpense of future plant performance.

Project Objectives

3.02 The principal objectives of the proposed Project are to:

(a) increase power generation capacity and hence alleviate powershortages in the Eastern Region;

(b) introduce to India the technology of "tower boilers" which are suitedto the abrasive high ash coals prevalent in India; and

(c) improve the operational performance of NTPC by providing on-linecommunications between NTPC's power stations and its headquarters inDelhi (para 2.02).

Project Description

3.03 The proposed Project comprises:

(a) the construction of the first stage (2x500 NW) of a 3,000 NWcoal-fired steam power station in Taicher, Orissa, involving boilers,turbogenerators, electrical and mechanical auxiliaries, associatedcivil works and switchyard;

(b) construction of about 230 km of double circuit 400-kV transmissionlines to link the power station with the Eastern Region grid atRengali and Rourkela and 40 km of 220-kV transmission line for thestart-up of the power station;

(c) installation of the earth stations, microwave links and data process-ing equipment for a dedicated satellite-based data communicationnetwork connecting NTPC's corporate offices in Delhi with its thermal

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power stations, consisting of six INSAT Type "B" satellite earthstations at Singrautis Korba, Ramagundam, Farakka, Kahalgaon andTalcher communicating with a central INSAT Type "A" Delhi Regionsatellite earth station. In addition, the communication networkincludes two long-haul terrestrial microwave links to interconnectthe Rihand and Vindhyachal thermal power stations with Singrauli; and

(d) consulting services for the review of the engineering of the proposedpower station.

A detailed description of the proposed Project is given in Annex 3.1.

Project Cotts

3.04 The estimated cost of the proposed Project, including contingenciesbut excluding duties and taxes, is US$1,185.7 million. Taxes and dutieswould amount to about US$36.4 million and interest during construction wouldamount to about US$153.2 million. Thus, the total financing requirementwould be US$1,375.3 million, of which about US$524.2 million would be directand indirect foreign exchange. Details of the estimated costs of the Projectare set out in Annex 3.2 and summarized in Table 3.1.

Table 3.1S Estimated Project Costs /a

Local Foreign Total Local Foreign TotalRs Million -------- ------US$ Million--

Base CostsPreliminary Works 601 - 601 46.2 - 46.2Civil Works 1,774 111 1,885 136.5 8.6 145.0Main Plant Equipment 2,635 2,486 5,121 202.7 191.2 393.9Other Mechanical Equipment 527 475 1,003 40.6 36.6 77.2Electrical Works 122 488 610 9.4 37.6 47.0Coal Handling & Transportation 557 233 790 42.9 18.0 60.8Consultancy-Engineering 90 10 100 6.9 0.8 7.7Satellite Communications Network 386 414 800 29.7 31.9 61.6Transmission Lines & Substations 409 196 606 31.5 15.1 46.6Engineering & Administration 606 - 606 46.7 - 46.7

Total Base Costs 7,709 4,415 12,124 593.0 339.6 932.7Physical Contingencies 444 226 670 34.2 17.4 51.6Price Contingencies 2,233 858 3,091 171.8 66.0 237.8

Total Project Costs 10,386 5,500 15,886 799.0 423.1 1,222.1

Interest During Construction: Bank - 1,314 1,314 - 101.1 101.1: Other 677 - 677 52.1 - 52.1

Total Financing Required 11,063 6,814 17,877 851.1 524.2 1,375.35=== -_ uu== =m== = =5S Q _ tuu

La Figures may not add due to rounding.

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Cost estimates for the proposed power plant are based on indicative proposalsmade by prospective bidders and are comparable with recent prices for similarworks in India. Cost estimates for other equipment and materials are basedon the most recent quotations received for similar projects. Prices forcommunications and data processing equipment are based on actual orders orproforma offers. The estimated cost for consulting services is based oncurrent experience with other projects in India. Base prices were updated toMarch, 1987. Physical contingencies of 10 on civil works and 5S on equip-ment were assumed on the basis of experience with similar projects and amountto about 6Z of the base cost. Price cnntingencies, which amount to about 25Xof the base cost, are based on the following expected annual inflation rates:(a) local costs - 1986/87 to 1994/95, 6%; and (b) foreign costs - 1987 to1995, 41.

Project Financing

3.05 A Bank loan of US$375.0 million would cover about 31% of the totalcost of the proposed Project, net of duties and taxes, and would amount to71% of the estimated foreign exchange financing requirements. The balanceof the foreign exchange financing requirements, amounting to about US$149million, is expected to be met from external borrowing or GOI foreignexchange resources. The financing of local costs amounting to aboutUS$851 million equivalent would be met from NTPC's internal cash generation(US$343 million), plus equity and loans from G00 (US$508 million). Table 3.2shows the proposed financing plan.

Table 3.2: Project Financing Plan

Source Local Foreign Total- …-----(US$ million)…---------… -

IBRD - 375.0 375.0OI/External Borrowing 508.1 149.2 657.3NTPC 343.0 - 343.0

Total 851.1 524.2 1,375.3

OI may consider suppliers or export credits for the major equipment packagesif a successful bidder or other agency provides an acceptable financingproposal for the lowest evaluated bidder in cash terms. In this event, GOI'scontribution would be reduced accordingly and, if required, the Bank wouldreallocate the funds no longer needed for the financing of these items toother items in the Project, as appropriate.

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Project Engineeris

3.06 ITPC has completed the site investigations, the plant layouc, andthe technical specifications for most of the equipment. The specificationsfor the turbogenerator sets have already been reviewed by the Bank. AlthoughNTPC has considereble experience in the design and construetion of thermalpower stations and and associated high voltage transmission systems, it wouldrequire external assistance for the review of modifications to earlier powerstations' designs and for the preparation of concomitant specifications. Inparticular, as NTPC has not desi,ned tower-type boilers before, it requiredthe services of consultants to review the boiler design and assist in thepreparation of the specifications. Electricite de France (EDF) was retainedby NTPC to review the boiler design and specS fications. The consultingservices for the power station engineering review and the above assistance inboiler design and preparation of specificstions would require about; 100man-months, which will be covered under tne proposed Project.

Fuel Supply

3.07 Coal for the Talcher power station will be supplied from the LingrajBlock of the Talcher Coalfield. Coal would be transported about 30 km fromthe mine to the power station by means of a captive merry-go-round railwaysystem. So far 700 million tons of coal reserves have been proven in theLingraj Block and another 300 million are in the indicated category. (A noteon the Talcher Coalfield appears in Annex 3.3.). The proven reserves in thisblock of the coalfield would be sufficient to operate the 3,000 MS powerstation at an 80X plant factor for 40 years, i.e. well beyond its usefullife of about 30-35 years. The Talcher Coalfield would be exploited by CoalIndia Limited through its subsidiary, South Eastern Coalfields Limited. Theadvance action proposal for the development of the Lingaraj Block wasapproved in December, 1986. GOI has provided to the Bank a mine developmentprogram indicating major milestones, e.g.: government approval; land acquisi-tion; bid invitation, contract award, and delivery for major mining and coalhandling equipment; and schedules for overburden removal and coal production.During negotiations, NTPC agreed to enter into a coal supply contract atleast one year before the operation of the first unit. The contract would besubject to prior review and comment by the Bank (para 6.02(c)).

Water Supply

3.08 The cooling water requirements for the power station will be met by aclosed-circuit system with cooling towers, the most economical arrangementfor the selected site. Make-up water for the cooling water system will besupplied from the reservoir created by the Samal Barrage on the BrahamaniRiver. The Department of Irrigation of Orissa is constructing the Barrageand expects to complete it in 1989, well ahead of the power station. Thisconstruction schedule is realistic. The Department of Irrigation has agreedto provide the 10 cubic meters per second of make-up water required for the

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ultimate development of the power station and has also confirmed that theminimum river flow available at Samal throughout the year would not be lessthan 115 cubic meters per second.

Land Acquisition and Resettlement

3.09 NTPC conducted a survey of the population affected by the construc-tion of the Project and has prepared Land Acquisition and Resettlement planswhich were discussed during negotiations. It was agreed that certain minormodifications were required in relation to the Resettlement plan and NTPCagreed to furnish to the Bank by December 319 1987, a satisfactory Resettle-ment plan incorporating the agreed modifications. Furthermore, NTPC agreedto implement the Resettlement plan, as revised, in cooperation with theconcerned government authorities (para 6.02(a)).

Project Implementation

3.10 NTPC has adequate experience in managing construction of large powerstations and transmission lines. The organization for construction would besimilar to the one established for the second stage of the Farakka powerstation (2x500 MW) presently under execution. The Project would be imple-mented over a period of about eight years starting in June 1987. The firstunit would be commissioned in June 1993 and the second unit in June 1994.The construction schedule for the power station and its associated transmis-sion system is shown in Annexes 3.4 and 3.5. Construction by NTPC of thesatellite-based data processing communication network is expected to requirethree years and would be completed in June 1990.

Procurement

3.11 The power-grade coal obtainable from the Talcher Coalfield is ahigh-ash coal (up to 451 ash) and this ash has a high silica content (up to601). To minimize abrasion with this type of coal, NTPC has proposed steamgenerators of a special design known technically as "tower boilers."Experience with this type of boiler world-wide confirms its suitability forhandling abrasive ash. GOI has decided that Bharat Heavy Electricals# Ltd.(BHEL), the major Indian manufacturer of power plant equipment, shouldacquire this new technology in view of the potential future application inIndia, given the poor characteristics of Indian coals. GOI has thereforeindicated that NTPC would negotiate directly with BHEL for the supply of theboilers, and that BHEL would in turn enter into a technology transfer arran-gement with a foreign manufacturer experienced in tower boiler technology.BHEL is currently negotiating a license to manufacture tower boilers designedby a French manufacturer, Stein Industries. The tower boilers would not befinanced by the Bank loan. This arrangement for the supply of the steamgenerators is not expected to affect the project implementation or costadversely. NTPC expects to sign the boiler contract shortly but, in anyevent, before June, 1988.

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3.12 The procurement arrangements are summarized in Table 3.3 below andthe major milestones of the procurement process are shown in Annexes 3.4 and3.5. Major contracts for mechanical and electrical equipment procurementwould be on a supply-and-erect basis and some contracts would also includecivil works (e.g. coal handling. substation structure and transmissionlines). This would ensure better contract coordination during implementa-tion. Procurement of equipment, materials and works, estimated to cost aboutUS$550 million, would be tendered on the basis of international competitivebidding (ICB), in accordance with Bank's guidelines. Documents forindividual contracts estimated to cost above US$3.5 million equivalent wouldbe subject to prior review by the Bank. This would cover about 90% of thevalue of the contracts, Local manufacturers would be expected to bid formost categories of equipment. A domestic preference of 15% or the cor-responding import duty, whichever is less, would be applied in bid comparisonfor eqjipment contracts. Consultants for the project engineering would beselected and employed in accordance with Bank guidelines.

Table 3.3: Procurement Arrangements(in US$ million) a/

Procurement Method b/Project Element ICB LCB Other Total

Preliminary & Civil Works 20.0 186.2 49.8 256.0(10.0) (10.0)

Steam Gen. & Auxiliaries - - 287.5 287.5

Turbo-Cen. & Auxiliaries 144.2 - - 144.2(104.4) (104.4)

Other Mechanical Equip., 150.0 36.2 - 186.2(93.2) (93.2)

Coal landling & Transport 72.0 11.2 - 83.2(68.1) (68.1)

Other Electrical Equip. 55.8 5.0 - 60.8(49.3) (49.3)

Transmission System 54.5 1.2 - 55.7(29.3) (29.3)

Satellite-Based DPCN 54.3 11.8 - 66.1(19.5) (19.5)

Consultancy Services - - 10.2 10.2(1.2) (1.2)

Engineering & Admin. - - 72.2 72.2

TOTAL 550.8 251.6 419.7 1,222.1(373.8) (1.2) (375.0)

a/ Figures between brackets indicate Bank-financed portion.b/1 ICB: International Competitive Bidding.

LCB: Local Competitive Bidding.Other: Direct Negotiations or not subject to commercial procurement.

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Disbursement

3.13 Disbursement from the prQposed loan would be made against 1001 ofthe cost of consultants for the boilee engineering and engineering review(para 3.06), 1001 of the CI? price of imported equipment and materialsprocured abroad through ICB, and 10OZ of the ex-factory cost of equipment andmaterials procured in India subject to ICB. Estimated disbursements, shownin Annex 3.6, correspond to the Bank's standard disbursement profile forthermal power projects in India. The closing date for the loan would beMarch 31, 1996. The Bank has authorized retroactive financing of up to US$15million to cover expenditures after Jaauary 1, 1987, and prior to Loan sign-ing, on consultancy for the design and speiLfications of the boilers and onequipment for the satellite communicatios- network. Disbursements would befully documented. To facilitate disbursements a special account would beestablished for the loan with an authorized allocation of US$18.0 million.

Ecolog

3.14 NTPC completed an environmental impact assessment in January 1986.This assessment has been submitted to the GOI's Department of Environmentfor issuance of an environmental clearance certificate for the power station.In principle clearance for the proposed Project was given in April, 1987.The environmental assessment was discussed during negotiations and NTPCagreed to provide the Bank with additional information December 31, 1987(para 6.02(b)). In addition, the formal environmental clearance for theProject would be a condition of effectiveness of the proposed loan (para6.01(b)). The power station does not involve forest land and hence noclearance is required from GOI's Department of Forests and Wildlife. Incontrast the associated transmission lines may involve forest land, although,as the alignment of the associated transmission lines has not yet been final-ized, there is no accurace estimate of the forest area affected by these.Final alignment for the transmission lines and clearance from the GOI'sDepartment of Forests and Wildlife is not on the critical path for theproject. However, to minimize any risk of delay, NTPC agreed during nego-tiations to complete the route surveys for the lines and submit applicationsfor forest clearances by March 31, 1988 (para 6.02(d)). In addition, theabsence of Department of Forest and Wildlife clearances after December 31,1989, would be an event of suspension (para 6.03).

Project Risks

3.15 go unusual risks are foreseen in the execution of this project. Riskof damage due to fire, explosion, etc., would be covered by the respectivecontractors during the construction phase, an4, after commissioning, by NTPC,through its insurance policies which are satisfactory. Technical risks wouldbe minimized by the use of consultants where NTPC has inadequate experience,e.g., in the review of the design of the boilers.

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Project Monitoring

3.16 NTPC will submit, starting with the quarter in which the loan issigned, quarterly reports covering the work of consultants, physicalprogress, costs, disbursements and administrative aspects of the proposedProject. In addition, there will be annual financial and administrativereports. A completion report will be prepared by NTPC not later than sixmonths after the closing of the Loan.

IV. FINANCE

Accounting Organization and Systems

4.01 In 1979, NTPC, assisted by A.F. Ferguson Co. (India), designed andsubsequently implemented well conceived systems for financial and costaccounting, project accounting, inventory control, billing, fixed assetsaccounting, and payroll. The corporation has established decentralizedautonomous accounting units at the site of each plant in operation.A.F. Ferguson Co. has monitored the implementation of these systems and hasassisted in the training of accounting staff. Well designed managementinformation and budgetary control systems were also introduced in 1979 andthese have been effective in providing the inputs needed for planning andmonitoring. An internal audit unit has been established with adequate sys-tems and qualified staff. Training of accounting staff is well organizedt,and recruitment of qualified staff is adequate to meet forecast requirements.NTPC's accounting operations are functioning in a satisfactory manner.

Past Financial Performance

4.02 NTPC initiated its development program in 1977/78 and commercialactivities began in 1982/83. During 1983/84, 1984/85, and 1985/86 Nt?C'sfinancial performance has been satisfactory and financial results comparefavourably with the forecasts prepared by NTPC and approved by the Bank.NTPC's financial statements for 1982/83-85/86 are given in Annexes 4.2 to4.5 and a summary of financial results is shown in Table 4.1.

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Table 4.1 Highlights of NTPC's OperationalResults for 1982/83-85/86.

(Rs. Million)

1982/83 1983/84 1984/85 1985/86

Electricity Sales (GWh) 1,034 3,835 8,316 12t839Operating Revenues 334 1,398 3,326 5,233Operating Expenses 214 723 1,954 2,782Operating Income 120 675 1,372 2,405Interest 65 221 492 570Net Income 46 449 875 1,830Average Revenue (P/kWh) 32.3 36.1 38.8 39.8Operating Ratio 64X 52% 59X 541Debt/Debt*Equity Ratio 21/79 26/74 32/68 36/64Current Ratio 0.5 0.8 1.0 1.2Rate of Returnon historical assets 6.6X 11.31 12.51 17.21on revalued assets 4.4X 9.3% 10.1% 13.5X

8elf Financing Ratio 5.0X 3.0% 11.7X 10.71

4.03 Electricity sales amounted to 3835 GWh in 1983/84 and more thandoubled to 8316 GWh in 1984/85 after the commissioning of the first threeunits (3x200 MW) at Ramagundam. In 1985/86 sales increased by another 54% to12,839 GWh as a result of an improvement in NTPC's plant load factor to 741from 581 in 1984/85, at the 200 MW units of the Ramagundam, Korba andSingrauli power stations. This increase in plant load factor occurred due tothe stabilization of the Ramagundam units, increased availability of theSingrauli unit due to the completion of scheduled maintenance and because ofa sustained high level of performance by the Korba units.

4.04 In 1983/84, NTPC realized a net income of Rs 449 million and earned arate of return on historical net fixed assets in operation of 11.31 whichexceeded the covenanted requirement of 71 for 1984/85-89/90 agreed with theBank. In 1984/85, NTPC's sales revenues amounted to Rs 3,326 million and arate of return on historical net fixed assets in operation of 12.51 wasrealized. As a result of the improved plant load factor, sales revenuesincreased to Rs.12,839 million in 1985/86 and the rate of return was 17.2t.NTPC's returns in 1983/84, 1984/85, and 1985/86 correspond to rates of returnon revalued assets of approximately 9.31, 10.11 and 13.51 respectivelyt whichare satisfactory. NTPC's cash generation as a percentage of investment was31, 121 and 11% in 1983/84, 1984/85 and 1985/86 respectively. Growth insales, combined with adequate tariffs, and control over operating expenseshave accounted for the overall sound financial performance of NTPC. The lowcontribution to investment is temporary and is acceptable in view of the fact

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that NTPC continues to have a small sales volume in its early years of opera-tion relative to the very large capital investment program under implementa-tion. Assets in operation at the end of 1985/86 amounted to Rs 16,047 mil-lion, representing only about 34% of total fixed assets including Rs 32,569million of assets under construction. UTPC's debt equity ratio of 36/64,current ratio of 1.2 and debt service coverage of 5.0 times in 1985/86 weresatisfactory.

Accounts Receivable

4.05 NTPC's collection of accounts receivable during its first two yearsof operation was poor but significant improvements have occured since then.The outstanding receivables of 7.2 months sales equivalent at the end of1983/84 declined to 5.2 months at the end of 1984/85 and have recentlydropped further to about 2.8 months in May 1987. Several initiatives wereimplemented to achieve these reductions. NTPC has taken action to reducereceivables through provisions in its bulk supply agreements which requirethat each concerned SEB open an irrevocable letter of credit equivalent toone months power purchases and remit payment for power purchases not coveredby letters of credit within 30 days of receiving bills from NTPC. Althoughin some cases the amounts of these are less than the amounts required by theterms of the bulk supply agreements the arrangement has proved effectivewhere implemented, and NTPC is pressing for all SEB customers to open lettersof credit in the required amounts. In addition, GOI has recently takenaction, through diversion of central assistance to the states, to settle 80%of the amounts owed by SEBs to NTPC, which are undisputed and more than twomonths overdue. After the remaining amounts are paid to NTPC in 1987 underthis arrangement, the overall level of accounts receivable would be below theequivalent of two months sales. During negotiations NTPC agreed to maintainits accounts receivable, arising from sales of electricity at a level notexceeding the proceeds of its power sales for the two preceding months (para6.02(e)).

Future Financial Performance

4.06 NTPC's projected financial statements for 1986/87 through 1995/96and related assumptions are presented in Annexes 4.2 to 4.10. A summary ofprojected financial ratios and financial indicators is given in Table 4.2.

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Table 4.2: NTPC's Key Financial Indicators, 1985/86-1995/96

85/86 86/87 87/88 88/90 91/92 93/94 95/96

Electricity Sales (GWh) 12,839 12,628 16,395 39,907 59,489 71,318 87,695Average Revenue (P/kWh) 40 51 57 64 74 83 94Rate of Returnon historical assets Z 17 15 12 13 17 18 17on revalued assets X 14 11 8 9 11 10 9

Self Financing Ratio Z 11 12 8 29 49 50 84Operating Ratio X 54 55 55 47 46 45 46Debt/Debt + Equity 34/66 37/63 41/59 44/56 41/59 40/60 42/58Current Ratio 1.2 .6 .9 2.0 2.0 1.8 6.9Debt Service (times) 5.0 3.2 2.8 2.7 2.9 2.4 2.4

4.07 The financial forecasts for NTPC indicate that electricity sales areexpected to increase from 12,839 GWh in 1985/86 to 87,695 GWh in 1995/96,representing an average annual rate of growth of about 21%. During the sameperiod average revenue is expected to increase from 40 paise/kWh to 94paise/kWh in accordance with the projected tariff increases outlined underthe bulk supply agreements with SEB's. These agreements allow for adjust-ments in the basic tariff rate to reflect changes in fuel prices and othercosts (Annex 4.10(g)). The projected increase in average revenue representsan average annual growth rate of about 8.9Z which is higher than the expectedrate of inflation in India of about 6.0% up to 1996. As a result, averagerevenue would be maintained at a level marginally above the estimated LRMC(para 4.13). The forecast decline in electricity sales of 1.6% from 1985/86to 1986/87 reflects the expectation that the high plant load factor achievedduring 1985/86 would decrease to a normal level and this effect woulddominate the increased sales from newly commissioned plants (para 4.03). Theforecast increase of 21X in average revenue from 40 paise/kWh in 1985/86 to51 paise/kWh in 1986/87 is largely a result of an increase in the proportionof sales made to SEB's that are charged higher tariff rates because of thehigher capacity costs associated with the plants which provide the power.During 1986/87 increased sales are anticipated to SEB's in the SouthernRegion and power would be sold to SEB's in the Eastern Region for the firsttime. For SEB's in these two Regions the generation costs are higher and asa result the applicable tariff rates would be more than for SEB's in theNorthern and Western Regions (Annex 4.7).

4.08 NTPC's operating revenues are projected to increase from Rs 5,233million in 1985/86 to Rs 81,993 million in 1995/96. Operating expenses as apercentage of operating revenues are expected to remain at a satisfactorylevel of 451 to 551 Lhroughout the period, based on the projected regularadjustment of NTPC's tariffs as per the bulk supply agreements. NTPC'sprojected financial rates of return on historical net assets in operation

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vary between 12X and 171 during the forecast period according to the timingof work in progress being converted to assets in operation, and the con-comitant build up in generation, tariff rates and sales revenues. Theforecast rates of return compare favourably with the covenanted rates. Thesame rate of return requirement of 71 for 1984/85-89/90 and 9.51 for1990/91-94/95* and thereafter annual rates of return at levels satisfactoryto ensure the financial viability of NTPC reiterated under the Combined CyclePower Project (Loan 2674-IN) would be repeated for the proposed Project(para 6.02(f)). NTPC's rates of return on net revalued assets based on a proforma evaluation (Annex 4.8) are projected to be between 81 and 11 in theforecast period. NTPC's internal cash generation is projected to remain lowthrough 1989/90 as a result of rapid expansion of new investment relative toexisting commercial operations. By 1990/91 it will reach 43Z of estimatedcapital expenditures and remain at a satisfactory level thereafter. Thetariffs used in making NTPC's financial projections have been derived fromthe terms of the bulk sales agreements with the SEB's. These tariffs arehigher than actually required to satisfy the agreed revenue covenant. Whilethere is no reason to expect lower tariffs, financial performance at thecovenanted rates of return has been analyzed. During 1984/85 to 1995/96 thecovenanted rate of retuirn would still yield positive internal cash generationand a sm4ll contribution to investment. After 1989/90 NTPC's self financingratio is projected to continue to rise above 30X.

4.09 NTPC's projected balance sheet reflects the large investment programand anticipated rapid growth in operations. Total capitalization is expectedto increase from Rs 52,526 million in 1985/86 to Rs 418,777 million in1995/96 and corresponds with a rise in the debt/equity ratio from 36/64 to42/58 for the same years. Projected debt/equity ratios and debt servicecoverage are satisfactory. VTPC's net working capital position is expectedto remain satisfactory over the forecast period.

Future Investment and Financing

4.10 NTPC's financing plan for the period 1985/86 to. 1992/93 is presentedin Table 4.3. NTPC would finance about 301 of its investment program (includ-ing IDC) from internal cash generation. The proposed Bank loan would financeabout 21 and the balance of 68Z would be financed from long term loans andbonds (391) and GOI's equity investment (291). NTPC's financing plan hasbeen assured by GOI's undertaking to provide any necessary additional fundsto finance the investment program. In February 1986, NTPC made its firstpublic bond issue. One million secured, redeemable bonds of Rs 1,000 each,yielding 141 interest per annum, were issued and fully purchased. The amountof funds raised through the bond issue, equivalent to about US$76.9 millionprovides only about 0.41 of NTPC's financing requirements for 1986/87-92/93but represents a new source of financing made possible by NTPC's sound finan-cial performance. Additional bond issues are planned for future years.Total capital expenditures, including IDC, for the period are expected toamount to just over Rs 250 billion of which the estimated cost of Rs 17,877

-25-

million (including IDC) for the proposed Project would represent 72.Dividends on equity are not anticipated and it has been assumed that surplusfunds during the period would be applied to the investment program.

Table 4.3 NTPC's Financingl Plan 1985/86-92/93

Rs Million US$ Million ZSources of Funds

Net Income Before Depreciation & Interest 125,841 9,680 50Less - Net Increase in Working Capital 5,952 458 -2Less - Debt Service 45,740 3,518 18

Net Cash Available for Investment 74,149 5,704 30Bank Loan for Proposed Project 4,875 375 2Other Loans 99,328 7,641 39GOI Equity 74,336 _5,718 29

Total 252,688 19,438 100

Investment Program(including IDC)

Proposed Project 17,877 1,375 7Other Capital Expenditures 234,411 18,063 93

Total 252,688 19,438 100

Taxation

4.11 NTPC is liable for income tax. However, in view of its large capitalexpenditure program, no income tax liability would arise during the period ofthe financial projections. The investment and depreciation allowances per-mitted by GOI are greater than NTPC's projected amount of taxable income.A tax equalization reserve is, therefore, not necessary at this time.

Audit

4.12 UTPC's auditors are appointed by the Company Law Board, on the recom-mendation of the Comptroller and Auditor General of India and are members ofthe Indian Institute of Chartered Accountants. The auditors' report issubject to review and comment by the Auditor General. For 1984/85 theappointed auditors were P.K. Maheshwari & Co. and Goel, Garg & Co,, bothfirms of Chartered Accountants. The audited financial statements andauditors' report for 1984/85 were submitted to the Bank on time and werefound to be satisfactory. The auditors' reports contained no substantiverecommendations or adverse comments. As with previous Bank Group credits and

-26-

loans, NTPC agreed during negotiations to provide the Bank with auditedfinancial statements within seven months of the end of the financial year towhich they relate, together with a certified report by the auditors, andcomments of the Comptroller and Auditor General of India (para 6.02(g)).

NTPC's Regional Tariffs

4.13 A comparison of NTPC's projected regional tariffs with estimates ofthe generation and bulk transmission long run marginal costs (LRMC) over theperiod 1985/86-95/96 is provided in Annex 4.7. NTPC's average tariff foreach region is expected to remain reasonably close to 1001 of LRMC throughoutthe period. NTPC's tariffs are generally lower than the projected costs ofgeneration for the SEBs. However, there are likely to be times when someSEBs' short-run marginal costs would be lower than NTPC's full tariff. Thisissue is addressed below.

4.14 Under previous loans and credits, GOI and NTPC agreed to sell powerfrom NTPC's power plants under contracts satisfactory to the Bank. These havenow been concluded with the Delhi Electric Supply Undertaking, the DamodarValley Corporation, the Electricity Department of the Union Territory of Goa,and all SEBs designated to receive power from NTPC plants. The ElectricityDepartment of the Union Territory of Pondicherry is not expected to receivepower from NTPC until early 4988. A contract in respect of this entity istherefore not yet required but will be concluded at the appropriate time.NTPC's role in the generation and transmission of electricity is forecast toincrease substantially. This will impose new requirements on the bulk supplytariff structure and, in this context, issues which need to be addressedinclude: (a) the potential multiplicity of tariffs - the existing regionalbulk supply tariff is set on a station specific basis, reflecting the faccthat NTPC is presently operating only one station in each region. Thisapproach would result in a multiplicity of tariffs with the commissioning ofadditional plants in each region; (b) recovery of transmission costs - thereis no provision in the existing tariffs for recovering costs of transmissionfacilities now under construction that are not associated with specificgenerating stations; and (c) merit order operation - SEBs, which at timeshave surplus generating capacity (e.g., at night during the monsoon), find itcheaper to incur their own short-run marginal costs and avoid the "full" ITPCtariff even though NTPC's short-run marginal costs may be lower than those ofthe SEBs. This leads to operation of plant out of merit order, consequentlywasting resources. These potential deficiencies of NTPC's tariff structureare currently being addressed under Loan 2674-IN.

On-Lending Arrangements for the Proposed Project

4.15 An amount of $375 million from the proposed Bank loan would be onlentto NTPC by GOI in accordance with a Subsidiary Loan Agreement which willprovide for a maturity of 20 years, including a grace period of 5 years withinterest payable on outstanding balances at not less than 14X per year. This

-27-

minimum onlending rate provides sufficient margin over the current Bank rateof 7.922 to cover the foreign exchange, interest rate and guarantee riskswhich are to be borne by GOI. The conclusion of a Subsidiary Loan Agreementsatisfactory to the Bank would be a condt on of effectiveness of theproposed Bank loan (para 6.01(a)).

V. PROJECT JUSTIFICATION AND ECONOMIC ANALYSIS

Least Cost Analysis

5.01 With the aid of the optimization model WASP-III, CEA has prepared aleast-cost system expansion plan for the Eastern Region, based on the loadforecast given in Annex 5.1. The earliest feasible implementation of theTalcher Thermal Power Pro5e*nct forms an integral part of the least-cost plan.The assumptions used, including the load forecast, and the results of theoptimization modelling have been reviqwed by the Bank and found satisfactory.

Internal Economic Rate of Return

5.02 Benefits of the Talcher station cannot readily be separated fromthose of other investments in generation, transmission and distribution inthe Eastern Region. Therefore, having established that the station formspart of the least-cost expansion plan for the Eastern Region, it isappropriate to carry out a cost-benefit analysis on the plan as a whole inorder to ensure that the expansion envisaged is desirable. For this purpose,a "time-slice" of the Eastern Region's investment program has been analyzed.Capital costs of the investment program (covering generation, transmissionand distribution) together with incremental operating and fuel costs aregiven in Annex 5.2. The benefits of the investment program relate mainly tothe incremental consumption that it makes possible. I/ A minimum measure ofbenefit, ignoring consumer surplus, can be derived from incremental salesrevenue. In the absence of adequate class specific consumption conversionfactors, the standard conversion factor (estimated to be 0.8) has beenapplied to convert financial revenue into a measure of economic benefit. Onthis basis the minimum internal economic rate of return achieved by theEastern Region program is 4 .

1/ The program may also lead to benefits in terms of a reduction in the costof meeting existing demand, particularly through fuel savings. However,the energy deficit is such that by far the greater part of the outputavailable from plants in this program will lead to increased sales. Fuelsavings -esulting from this program are likely to be small and thiselement of the benefits has therefore been ignored.

-28-

5.03 However, this estimate is more a reflection of the inadequacy oftariffs than of the economic merit of the investment program. The estimatedminimum economic rate of return of 4% is less than the established oppor-tunity cost of capital, and this is indicative of the fact that tariffs inthe Eastern Region are presently less than LRMC (para 1.08). In reality theprogram will confer benefits in excess of those described above. There willbe consumer surplus associated with the incremental consumption; consumer'sreactions to the severe shortages of power experienced at present, andexpected for the foreseeable future, suggest that willingness to pay substan-tially exceeds present tariff levels. In addition there will typically beother external benefits.

5.04 In order to derive a more realistic internal economic rate of return,it is useful to estimate a measure of consumer surplus, at least forindustrial and agricultural consumers. Their willingness to pay will berelated to the costs of autogeneration and diesel pumping respectively. Manyconsumers are presently observed to find these options economic when publicsupply is not available. Annex 5.2 presents an estimate of dieselautogeneration costs at Rs. 1.12/kWh. It would, however, be unreasonable toassume that all industrial consumers would be willing to pay this price forthe whole of their consumption from the public supply system. Therefore, asa conservative measure, it has been assumed that the consumer surplusattributable to incremental sales in each Region can be derived from anaverage of the cost of autogeneration and the prevailing tariff. Similarly,for agricultural consumers the equivalent cost of diesel pumping has beenestimated at Rs. 2.21/kWh and average willingness to pay has been estimatedat halfway between the average agricultural tariff in each Region and thisalternative cost. This more realistic measure of the benefit of consumptionresults in an internal economic rate of return of 10% for the Eastern Region.However, it must again be stressed that this represents a lower boundestimate as domestic consumer surplus and other external benefits, have stillnot been included.

Justification for Bank Involvement

5.05 In preparation of this Project, the Bank has helped to stimulate aneffective mechanism for recovery of NTPC's receivables (para 4.05). Throughits continued involvement, the Bank would be supporting GOI's efforts(para 3.02) to:

(a) augment generating capacity and alleviate the chronic powershortages in the Eastern Region;

(b) exploit the very large low cost coal reserves available in theTalcher coalfield;

-29-

(c) introduce into India the technology of tower boilers which aresuited to the abrasive high ash coals prevalent in India and

(d) improve the operational performance of NTPC by providing on-linecommunications between NTPC's power stations and its head-quarters in Delhi.

In addition to supporting the above objectives, the Bank would through itsinvolvement in this Project:

(a) support reinforcement of the Eastern Region's 400-kV grid; and

(b) contribute to the development of one of the poorest regions inIndia.

VI. AGREEMENTS AND RECOMMENDATION

Agreements

6.01 During negotiations, the following conditions of effectiveness wereagreed:

(a) the conclusion of a Subsidiary Loan Agreement between GOI and NTPC,satisfactory to the Bank specifying (i) an interest rate of not lessthan 14% per annum; and (ii) a repayment term of 20 years including 5years grace (para 4.15); and

(b) formal environmental clearance for the proposed Project from theDepartment of Environment (para 3.14).

6.02 During negotiations, NTPC agreed to:

(a) provide to the Bank by December 31, 1987, a satisfactory resettlementplan and thereafter implement the plan in cooperation with the con-cerned government authorities (para 3.09);

(b) provide to the Bank by December 31, 1987, and additional informationrequested with regard to the environmental impact assessment preparedby NTPC for the proposed Project (para 3.14);

(c) enter into a coal supply contract at least one year prior to thecommissioning of the first unit of the proposed power station. Thecontract would be furnished to the Bank for prior review and comment(para 3.07);

-30-

(d) complete the route surveys for the transmission lines included inthe proposed Project and submit applications to the Department ofForests and Wildlife for clearances, by March 31, 1988 (pars 3.14);

(e) maintain its accounts receivable at a level not exceeding theproceeds of its power sales for the two preceding months (para 4.05);

(f) achieve annual rates of return on unrevalued net assets in operationof not less than 7Z through 1989/90, 9.5Z in 1990/91 through 1994/95,and thereafter annual rates of return at levels satisfactory toensure the financial viability of NTPC (pars 4.08); and

(g) submit to the Bank audited financial statements within seven monthsof the end of the financial year to which they relate, together witha certified report by the auditors and comments of the Comptrollerand Auditor General of India (para 4.12).

6.03 The absence after December 31, 1989, of Department of Forests andWildlife clearances for the transmission lines under the proposed Project isspecified as an event of suspension in the remedies section of the proposedLoan Agreement (para 3.14).

Recommendation

6.04 The proposed Project is suitable for a Bank loan of US$375 millionequivalent.

INDIA

TALCHER THERM POWER PROJECT

Electricity Generation. Sale and Pattern of Iueray Consyumtion - All India

Description FY'51 FY'56 FY'61 rY'66 Y'69 FY'74 FY79 FYn80 FY'81 FY'82 FY'83 TFY84 FrY'85(Prova.) (Tenta-- (Tents--

tive) tive)

installed Capacity (Kw) 1.835 2.886 4.653 9.027 12.957 16,664 26.680 28.448 30.214 32.344 35.361 39.360 42.440(Utilities)

Blectricity Generated 5.858 9.662 16.937 32.990 47.433 66.689 102.523 104.627 110.821 122.010 130.211 19.896 156.633

Electricity Consmptico 4.793 7,959 13.953 26.735 37.352 50.246 77.293 78.124 82.473 90.237 95.917 102.684 IA(Glh) (Utilities oly)

Per Capita Generation 20.80 30.90 43.90 73.81 97.82 126.26 159.60 160.00 166.20 182.00 183.00 192.70 211.38(hh)

Per Cspita Consmption 12.30 20.70 31.90 53.70 70.80 87.15 120.48 119.40 123.70 132.00 135.00 141.48 NA(kWh) (Utilities only)

Consmption Pattern (5)

Domestic Ligbt & 12.40 11.70 10.70 8.80 8.50 p.20 9.80 10.76 11.28 11.50 12.48 12.88 "Amall Power

Comercial Light b 6.90 6.80 6.10 6.20 5.70 6.00 5.60 5.96 5.95 5.98 6.29 5.89 NAball Power

IndustriAl Power 63.70 66.90 69.40 70.60 69.30 64.60 61.35 58.86 58.75 58.75 55.80 56.68 NA

lailway/Trection 6.90 5.10 3.30 4.00 3.30 3.00 2.83 2.95 2.82 2.78 2.79 3.86 NA

Agriculture Pmps 4.30 4.00 9.30 7.10 9.30 12.60 15.56 17.23 17.48 16.71 18.55 17.72 NA

Public Water Works.Svage Puping. PuiblicLighting & Others 5.80 5.50 3.90 3.30 3.90 4.60 4.86 4.24 4.28 4.28 4.10 2.97 NA

Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 NA

NA - Not Available

sourcet Ck March 1986

INDIA

TALCIU THIIMAL POW= PRhJB

Forecast of lgnal Power Demand in Indi, FY'86 - FYf95

FY'86 FY'87 Y tas TV 89 FY'90 FY'91 FYn92 FY'93 FY'94 FY9S

(GWF

2brthelsa 54,549 61,375 67,538 74.073 81.086 89.2t8 98,178 108.055 118.945 130.953lestern 53,097 59.084 64.538 70.416 76,678 83.744 91,467 991913 109.148 119.245Southern 47,188 53.681 58,817 63,943 69,296 75.920 83.188 91.160 99.907 109.505"stern 25.869 29.525 32.440 35.650 38.8t9 42.831 47.194 52.021 57.366 63.287North-Eastern 1.991 2,407 2,712 3.038 3.389 3,744 4.135 4,563 5,035 5.550Andn and 23 26 30 33 37 41 46 52 S8 65Nicobar Zsladbll#abodweep 3 3 3 4 4 5 6 6 7 8All Ieaa (TOTAL) 182.720 206.101 226.078 247.157 269,379 295,503 324.214 355.770 390.466 428.613teak Load(NW)

Northern 10.643 11.975 13,179 14,455 15.825 17,415 19.167 21,098 23,227 25.576Western 9.184 10.220 11.245 12,273 13.459 14,701 16,058 17,542 19.165 20,938Southern 8.558 9,707 10,620 11,534 12,485 13.675 14.982 16.414 17.986 19.711astern 4.505 5.134 5.640 6.196 6.757 7.442 8,202 9,043 9,974 11.006Nortb-Bastern 432 536 599 667 740 814 895 983 1.080 1.165Andamand 7 8 8 9 10 11 12 14 16 18Nicobar IslandsLakhbadweep 1 2 2 2 2 2 3 34All India (TOTAL) 33.330 37.582 41.293 45.136 49278 54. 59.319 65,097 71.451 78.438

Source CIA

At*NEX 1 3

UALCM TERax" POER PRQCT

Previou ans and Creidit to Indian P 8M Sec-or (Anirl 22. 1987)

Approval Closing Loan AmountBgzXer IMRD Leans ll. _Date Date (4Aont Disbqri s4 !s)tatme

(V$million Equiv.)

India First DVC - Bokaro - Konar 23 4/50 2/56 18.50 16.72 CompleteIndia Second DVC - Ifaithon - Panchot 72 1/53 6/58 19.50 10.50 CompleteTata Trombsy Power 106 11/54 9/66 16.20 13.85 CompleteT ta Second Trombay 164 5/57 9/66 9.80 9.66 CompleteIndia Third DYC - Durgapur 203 7/58 6/65 25.00 22.00 CompleteIndia Koyus Power 223 4/59 4/65 25.00 18.70 CompleteIndia Power Transmission 416 6/65 12/70 70.00 50.00 CompleteIndia Second Kothagudem Power 417 6/65 12/70 14.00 13.97 CompleteTata Third Trombay Thermal Power 1549 4/78 12/84 105.00 42.04 CompleteIndia Ramagundau Thermal Power (*) 1648 1179 12/86 50.00 42.19India Farakka Thermal Power (W) 1887 6/80 3/87 25.00 0.00lndia Second tamagundam Thermal Power (*) 2076 12/81 6/88 300.00 125.13India Third Rural Blectrification 2165 6/82 6/86 304.00 216.09India Upper Indravati 8ydro 2278 5/83 6/91 156.40 .39India Central Power Transmission (*) 2283 5/83 3/89 250.70 4.96India Indira 8arovar 2416 5/84 6/92 157.40 4.27India Second Farakka Thermal Power (*) 2442 6/84 12/91 300.80 6.71Tats Fourth Trombay Thermal Power 2452 6/84 6/90 135.40 35.12India Chandrapur Thermal Power 2544 5/85 12/92 300.00 24.63India Riband Power Transmission (*) 2555 5/85 12/89 250.00 23.31India Rerala state Power 2582 6/85 9/91 176.00 0.03India Combined Cycle (*) 2674 4/85 12/91 485.OO -

Total 3,194.20(Total Loans for JTPC Projects) (1,711.50)

IDA Credits

India Fourth DVC - Durgapur 19 2/62 12/69 18.50 19.88 CompleteIndia Second toyaa Power 24 8/62 9/70 17.50 21.10 CompleteIndia Kothasudem Power 34 5/63 12/68 20.00 24.13 CompleteIndia Beas Equipment 89 6/66 6/74 23.00 26.32 CompleteIndia Second Power Transmission 242 4/71 3/77 75.00 72.93 CompleteIndia Third Power Transmission 377 3/73 9/78 85.00 85.00 CompleteIndia Rural hlectrification 572 7/75 12/80 57.00 57.00 CompleteIndia Fourth Power Transmission 604 1/76 6/83 150.00 149.87 CompleteIndia Singrauli Theroml Power (*) 685 3/77 12/83 150.00 150.00 CompleteIndia Korba Thermal Power (M) 793 4/78 3/85 200.00 194.83 CompleteIndia Ramaguudam Thermal Power (*) 874 1/79 12/86 200.00 200.00India Second Rural Electrification 911 5/79 3/84 175.00 171.75 CompleteIndia Second Sin8rauli Thermal Power (*) 1027 5/80 3/88 300.00 260.81India Farakka Thermal Power (*) 1053 6/80 3/87 225.00 208.58India Second Korba Thermal Power (C) 1172 7/81 12/89 395.09 250.37India Upper Indravati Eydro 1356 5/83 6/91 189.29 62.66India Indira Sarovar SFO10 5/84 6/92 122.00 4.20India Indira Sarovar 1613 5/85 6192 lS.05 -

Total 2,425.43(Total Credits for NTPC Projects) (1,475.00)

(C) NTPC Projects.

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Annex 3.1Page 1 of 2

INDIA

TALCHEn THERmAL POWER PROJECT

Project Description

1. The Talcher power project, located in Orissa close to the Tal-cher Coalfield, io one of a series of large coal-fired power stationsplanned by NTPC to feed into a 400 kV interconnected grid and supply bulkpower to the State Electricity Boards in the Eastern Region.

2. The power station at Talcher is conceived for an ultimatecspacity of 3,000 MW, in six units of 500 MW each. Under the project,the first stage with 2 x 500 MW units will be constructed. This stage isexpected to be commissioned in 1994.

3. The 500 MW steam turbines will be tandem compound operating onreheat and regenerative feed water, heating cycle and condensing type,with steam at 170 kg/cm2 and 537 degree C./reheat 537 degree C. Thegenerators will be water and hydrogen cooled, each rated 588 MVA. Thesteam generator will be "tower-type", controlled circulation, pulverizedcoal fired, balanced draft type using the direct firing system. Theboiler will have a continuous evaporation rating of 1,700 tons per hourswith superheater outlet pressure of 178 kg/cmz and temperature of 540degree C. The boilers will stand about 100 meters above foundations. Theflue gas traverse electrostatic precipitators having an efficiency greaterthen 99.5Z before dispersal in the atmosphere through a 275-m high chimneycommon for both boilers. Each generating unit will be connected to the400-kV transmission grid through three single-phase transformers with acombined rating of 600 MVA.

4. The salient features of the proposed first stage of the powerscheme are the following:

- Fuel. Raw coal from the Lingras Block of the Talcher Coalfield.Consumption of the 1,000 MS power station at 5,500 hrs ofoperation per year is about 4.5 million tons on the basis of aworst-coal calorific value of 2,800 kcal per kg. Blendingshould produce a design coal with 3,800 kc*l/kg, 121 moisture,0.7Z sulphur, and 381 ash. The steam generator will be designedto accmodate raw coal with calorific value as low as 2,800kcal/kg.

Annex 3.1Page 2 of 2

- Transport of Coal. Bj- a merry-go-round rail line about 30-kmlong equipped with bottom discharging wagons.

- Cooling System. The cooling water requirements of the powerstation will be met by a close-circuit cooling towers system.Make-up water to replace evaporation will come from the SamalBarrage pond about 3 km distant.

- Ash Disposal. At 5,500 hrs operation per year the 1,000 MWpower station will produce about 1.7 million tons of ash. Theash disposal area is available approximately 7 km from the powerstation site. Ash will be pumped as slurry through a pipeline.

5. The dedicated satellite-based data processing communication net-work that will connect NTPC's corporate office with its power stations isthe least-cost option to overcome the current telecommunication con-straint. The proposed communication network consists of six INSAT Type"B" satellite earth stations located at the project sites of Singrauli,Korba, Ramagundam, Farakka, Kahalgaon, and Talcher communicating on a starconfiguration with a central INSAT Type "A" Delhi Region Satellite BarthStation to be located at Muradnagar near Delhi. In addition, the com-munication network includes 2 longhaul terrestrial digital microwave radiorelay links to interconnect the Rihand and Vindhyachal STPPs to theSingrauli Earth Station and one double hop-link between the Delhi RegionEarth Station and NTPC's corporate office. The data processing network ofNTPC will consist of 6 main-frame computers to be installed at the NTPC'scorporate center, Singrauli, Ramagundam, Korba, Farakka and Talcher.Remote communication processors will be installed at NTPC's other powergenerating facilites to enable these power stations to use the dataprocessing resources available elewhere in the network.

6. The power from the power station will be evacuated through two400-kV, double circuit transmission lines:

- Talcher-Rengali - 40 km- Talcher-Rourkela - 190 km

In addition an independent 220-kV line will be built from Rengalito provide power for the start-up of the power station.

ANMU 3.2Page 1 of 4

INDIA

TALCHER THERMAL POWER PROJECT

Detailed Project Costs(in US$ thousand)

A. POWER STATION

Base Total ForeignPreliminary Works Costs Costs Component

Survey and Soil Investigations 769.2 828.0 -Land and Infrastructure 10,346.2 11,136.1 -Site Clearance & Levelling 14,730.8 15,855.5 3Permanent Siding; Roads 20t384.6 21,941.0 -

Subtotal 46,230.8 49,760.5 -

Civil Works

Foundations 6,730.8 9,520.5 -Structural Steel Works 24,500.0 32,599.5 10,902.1Main Plant Works 9t538.5 14,069.7 -Ash Handling Works 25,000.0 359336.2 -Chimney 7t692.3 11,142.5 -Coal Handling System 10,653.8 14,678.4 -Admin. and Services Buildings 5,230.8 7,402.4 -Fuel Oil Handling 692.3 1,051.8 -Cooling Water System- 19,192.3 27,704.2 -Water Treatment Works 4,730.8 7,002.7 -Township 21,038.5 30,773.3 -Temporary Constructions 10,038.5 14,960.9 -

Subtotal 145,038.5 206,242.2 10t902.1

Main Plant Equipomnt

Steam Generator and Auxiliary 219t961.5 287,524.9 132,023.3Power Cycle Piping 33,538.5 44,138.9 20,243.4Electrostatic Precipitators 28,884.6 37,768.3 19t976.9Turbine-Gen. and Auxiliary 109,769.2 144,151.9 66,131.9Equipment Cooling System 1,769.2 2,320.8 1t226.9

Subtotal 393t923.1 515t904.8 239t602.4

AMNNE 3.2Page 2 of 4

Base Total ForeignOther Mechanical Equipment Costs Costs opo"t

Control and Instrum. (incl. DAS) 18,307.7 24,353.0 12,842.6Auxiliary Pumps 1,423.1 1t832.9 790.2Water Treatment Plant 4t884.6 6,535.8 2t794.6Cooling Water Pumps andCooling Tower (Make-up System) 12t538.5 16*908.3 7,217.2

station Piping 6,153.8 8,113.9 3,480.3Workshop and Laboratory 1t384.6 1t777.7 766.9Hydro Generator Plant 1t500.0 1t931.9 833.0Fuel Oil System 1*346.2 1,801.8 770.4Hoisting Equipment 461.5 591.8 255.4Air Compressors 1t384.6 1t875.3 799.9A/C and Ventilation 2,423.1 3t281.8 1t399.8Fire Fighting Equipment 3,769.2 5,033.0 2*153.0Ash Handling System 13,115.4 17,559.0 7,506.8Diesel-Electric Set 769.2 968.7 419.7Tools and Plants 7,692.3 9,878.6 49260.2

Subtotal 77,153.8 102t443.4 46,289.9

Coal Handling and Transportation

Coal Handling 37,653.8 51t457.1 14,430.0Rail Tracks 10,115.4 13,519.7 3,813.8Wagons 4,346.2 6t026.8 1,684.2Locomotives 6t769.2 9,386.9 2*623.2Signalling 384.6 550.8 75.4Workshop and Lab 1,538.5 29203.0 301.6

Subtotal 60,807.7 83,144.3 22,928.2

ANNEX 3.2Page 3 of 4

Base Total ForeignElectrical Works Costs Costs Component

Power Transformer 12,192.3 15,380.7 12,126.4Bus Ducts 3,115.4 4,047.7 3,183.7H.T. Switchgear 3,038.5 3,947.7 3,105.1L.T. Switchgear 1,961.5 2,548.5 2,004.6D.C. Batteries 423.1 538.4 424.3'Control snd Relay Panels 538.5 715.1 561.6Power Cables 6,307.7 8,382.6 6,581.9Intercom 230.8 306.5 240.7Switchyard (incl. 220 kV) 16,615.4 21,601.3 16,992.5,Station Lighting 2,538.5 3,336.7 2,622.3

Subtotal 46,961.5 60,805.1 47,843.1

Consultancy 7,692.3 10,162.9 946.7Engineering and Administration 46,669.2 63,727.9 -

B. TRANSMISSION

Preliminary and Civil Works 761.5 899.2Line Materials 32,176.9 42,060.5 7,910.4Substations Equipment 10,223.1 12,683.4 10,681.3Engineering and Administration 3,453.8 4,873.8 -

Subtotal 46,615.4 60,516.9 18,591.7

AhdMX 3.2Page 4 of 4

Base Total ForeignC. SATELLITE COMMUNICATIONS Costs Costs Component

Infrastructure 18,476.9 20,462.4 -Satellite Earth Stations 12,261.5 13,968.2 11,104.1Microwave Radio Relay Link 2,200.0 2,506.2 2,249.9Works Assoc. with Talcher STPS 6,507.7 7,537.4 5,984.4Mainfame Computers 9,615.4 10,713.3 8,035.0Other Works and Software Pkg. 9t569.2 10,806.1 8,596.4Engineering & Administration 2,930.8 3,363.2 -

Total Satellite Comm. 61,561.5 69,356.8 35,969.7

TOTAL 932,653.8 1,222,064.9 423,073.7= = = _*u===s

Am 3.3Page 1 of 1

INDIA

TALCHBR THERMAL POWER PROJECT

Notes on Coal Linkage

1. The proposed power station has been linked to the Lingraj Blockof the Talcher Coalfield. This linkage has been confirmed by the SpecialStanding Linkage Committee on Power at a meeting held in New Delhi onJanuary 2, 1986.

Characteristics of the Talcher Coalfield

2. The Talcher Coalfield is located in the State of Orissa in theValley of the Brahamani River. It covers an rea of 1,800 sq kmes. Coalformation took place in the Carboniferous Period and the coal depositionis of drift origin, e.g., the carboniferous material was carried away fromits place of formation to the deposition area by water. An aggregatethickness of 177 meters of coal horizons has been identified at Talcher anestimated reserves are over 30,000 million tons. There are predominantly8 coal horizons in this coalfield. The coal seams are intercollated bycarbonaceous shale.

The Lingraj Block

3. The Lingraj Block is located in the south-eastern part of thecoalfield. So far 700 million tons of coal reserves have been proved andanother 300 million tons are in the indicated category. At present 12boreholes per sq km have been drilled and Coal India Ltd., is planning todrill 4 more boreholes per sq km to reach 16 boreholes per sq km. Thecoal deposits are at a very shallow depth; about 8 to 10 X of overburdennear outcrops. The overall overburden to coal stripping ratio is 0.8cubic meter per ton.

Coal Quality Parameters for Raw Coal

4. The following are the the coal quality parameters obtained fromanalysis of raw coal samples frca boreholes drilled at the Lingraj Block:

Design Coal Worst Coal Best Coal

Moisture 12X 17X 10SAsh 381 451 302Gross Calorific Value 3,800 kcal/kg 2,800 kcal/kg 4,500 kcal/kgVolatile Matter 251 211 271Sulphur 0.6 X 0.71 0.452

r R ¢ * * t P B S S X " !.a p Y 9 P X

IL

- - -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~asgNW

; e ~~~~~~~~~^i e ~~~~~~N" :e!,S, ~*a h9 r e e M ,M

Ahe mom1 ! - ! " t l:J

: 9 @1 e ~~~~~~-- ~~~' ~ff

S. me' t

Y>'t w--e~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(9

HIM

ANNEX 3.6Page 1 of 1

INDIA

TALCHER THERMAL POWER PROJECT

Estimated Scehedule of Disbursements(US$ Million)

IBRD Fiscal Year Percent Amountand Half Year Disbursed Disbursed Cumulative

FY88June 1988 2 7.5 7.5

FY89December 1988 2 7.5 15.0June 1989 8 15.0 30.0

FY90December 1989 13 18.0 48.0June 1990 19 23.0 71.0

FY91December 1990 27 30.0 101.0June 1991 36 34.0 135.0

FY92December 1991 46 37.0 172.0June 1992 56 38.0 210.0

FY93December 1992 65 33.0 243.0June 1993 74 34.0 277.0

FY94December 1993 81 26.0 303.0June 1994 87 23.0 326.0

FY95December 1994 92 19.0 345.0June 1995 96 15.0 360.0

FY96December 1995 99 11.0 371.0June 1996 100 4.0 375.0

ANNEX 4.01

INDIA

NATIONAL THERMAL POWER CORPORATION

TALCHER THERMAL POWER PROJECT

Chapter IV Annexes

Table of Contents

Title Annex No.

NTPC's Financial Performance Indicators 4.02NTPC's Consolidated Income Statement 4.03NTPC's Balance Sheets 4.04NTPC's Statement of Sources and Application of Funds 4.05NTPC's Financing Plan 4.06NTPC's Projected Regional Tariffs versus

Long-Run Marginal Costs (LRMC) 4.07NTPC's Rate of Return on Net Revalued Assets 4.08NTPC's Investment Program 4.09Assumptions for NTPC Financial Projections 4.10

INDIA

NATIONAL THIRL POUU COIPORAUI LXPIIUD

TALNU THERMAL POWR P UoJEC

VIRNACIAL PEUOIKANC INDICATS

COVUICo FISCAL YUUS FY1983 Ti,uow TY1996

ACTUAL ACTUAL ACTUAL ACTUAL ----------------- OEcED ----------------------FISPA YEAR ENI MAC 315t 193 1 19M 1996 17 19 19 1 1991 1M 19 19 19 199

RATE OF RETURI- HISTMRICAL W51 OF NEI ASTS 6.61 11.32 12.5t 17.21 14.91 II.1 I1.U 13.0t 15.4t 16.72 1t.62 7.n 7 I.11 16.n

-ON REVALUED COST IF ET ASSETS 4.41 *.4t 10.11 13.4t 11.21 7.51 7.11 L87 9.6 10.22 10.51 10.22 9.4 9.21

OPERATIB RATIO (OFM.EXPS. AS 2 OF hER. REV.) b4.11 51.n 57 54.02 55.21 35.22 49.42 46.5t 45.1l 4L. 45.U 45.3 45. 45.61

OPETINS IICONE AS 2 OF EMl £INE S RENE 35.92 4.32 41.32 46.02 44.82 44.82 50.41 53.52 54.9n 54.52 54.42 54.7 54.2 54.42

NET EA£IJ116S AS I OF ORTIB SLS REVN 13.82 32.11 26.32 35.02 27.3t 25.52 27.52 29.91 32.86 33.21 32.62 32.32 33.51 33.42

2 CSH ENTION CONTRIBUITION TO INVESTIENT 5.0 3.02 11.n 1o.n 1.9n 7.92 14.92 28.52 43.02 49.32 1.62 49.U 6.2l 13.62

OEBT SERVICE COVERA 2.9 3.5 3.5 5.0 3.2 2.8 2.6 2.7 2.9 2.9 2.6 2.4 2.5 2.4

RATIO OF DEBT TD BT PLUS EQUITy 21/79 2U174 32168 3416 37/63 41159 41/59 44/56 44/56 41159 41/59 40/60 42156 42/58

CURT RATIO 0.5 0.8 1.0 1.2 0.6 0.? 1.5 2.0 2.5 2.0 1.9 1.B 3.2 b.9

QUICK RATIO 0.4 0.6 0.9 1.0 0.4 0.6 1.0 1.5 1.9 1.5 1.4 1.4 2.7 6.3

ACCAUNTS RECEIVA8LE- ER OF MNTHSSALES 7.9 7.2 £.9 5.2 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

AVERA TARRIFFS AS A 2 Of LK1 0.02 O.O0 91.02 89.42 102.42 105.22 103.2 1o0.9 99.82 11.4 100.71 101.12 1OI.52 101.6t

I INCREASE IN TARIFFS - 11.7 7.52 2.n 29.52 1.Ot .6t S.62 7.n 7.8 5.32 6.42 6. 6.32

1 INCREASE 1I POUR 6ENEATION - 24.0 116.72 53.32 -1.-0 29.12 66.31 42.2 26.S 17.n 11.41 7.U 10.41 11.11

2 ICREA IN OPERATIN6 SALES REVEE - 318.U2 137.9t 57.32 23.42 44.12 80.22 52.02 35.8% 26.92 17. 14.62 17.62 16.22

2 INCRSE It ORTIN EXPENSES - 237.92 170.32 44.n 26.22 44.02 61.91 42.42 31.92 27.9 17.2 13.91 18.1 1.41

2 INCRE IN OPERATI INCOE - 462.52 103.3 75.3 20.21 44.3 102.n 61. 39.12 26.12 169 15.22 17.2t 19.02

I INCRA IN NET EINNS - 876.12 9.92 109.12 -3.n 34.n 4.42 65.2 48.52 20.52 15 15.42 t9.92 18.22

2 INCREASE IN AS SENERA1ON CNRIWI.TO IWEST. - -73.02 454.02 41.22 145.72 -37.02 80.5 89.52 4R.12 43.02 3.1 11.92 13.n 10.42

2 INCRA IN DCT SERVICE - 240.0% 122.62 15.92 102.32 65.62 113.n 56.32 .92 25.42 30.42 2 01 16.22 20.32

2 ICREASE IN CMITK EXPENITIRE - - 40.22 55.12 t20.22 -5.02 -3.31 -I,7 -2.02 24.tt 3.42 16.32 -3.62 -22.t2

I INRSE IN 6ROSS FIXE!D ASSF!S IN OPERATION - 202.92 45.32 20.12 60.52 96.92 102.12 19.02 21.91 15.42 11.712 19.9 24.7 'b.92

2 INCREASE IN UR-IN-PRO?ESS 7.92 42.t 65.72 75.72 1, 4t -31.12 28.1 6.82 24.82 25.22 OX2 -11.8 -15.42

tI INCREASE 1 AVERAE NET FIXED ASSETS-HISTOPICAL EosT - 232. St 82.7? 27.92 39.72 83.32 102.2S 44.62 17.92 16.22 11., 14.12 21.72 i9.02

1 INCREASE IN AVERABE NEl 'I-10 ,SETS-REAVED COST - 160.2 8. 9 33.72 39.62 85.12 105.1t 50.12 24.9? 21.62 14.71 16. 7 23.5? 22.32

MATIONAL. THEtNAL MMW COOSFOATIOU LINITEID

TALCUES THAIR"" POWER PROJEaCT

CONSMLIDATE1D INCOME STATMUIEI

COVERING OPERATIONS FYI983 THROUGUH FY1996

(RUPES NfILLIOW)

ACTUM. ACTUAL KMUA ACTUM. ---------- ----- -- JEC TEU- --- ---------- ----- - -- --------------- - --- TOTALFI611 TAR E1101156 INM 315T 1163 3164 115 3996 115 39 1199 MO9 1191 192 199 119 319 396 319-9

MDE SEIERAIIR 1,309 4,267 9,248 14,174 14,031 18,128 30,136 43,065 54,4811 64,141 71,43 76,0 60 4,7 14,302 190,274LESS,AVIIUIIAR CUS1RIPTS 75 432 932 1,335 1,403 1,725 2,413 3,353 3,913 4,653 5,207 5,562 6042 6,607 43,463

TOAL FME SAUE I1Uh) 1,034 3,53 9,316 12,339 12,625 36,3M 27,725 31,W0 50,66 59,451 66,231 73,335 75,537 97,69 556,13---- - ------ - - tnnooft" -* wuftttt a.int*a. 5a.00, **anna. ftfa...t a.na Satn. tnt,.t =.*.s*. a

NUI SIEPL TARIFF WAMUE FEN MM) 32.30 36.09 39.75 39.62 53.36 56.9 60.53 63.5 63.46 73.6 77.72 82.72 6W."99 13.

OFPA96IN US. REVERE 334 3,398 3,326 5,233 6,460 9,313 36,774 25,495 34,638 43,212 53,475 38,92 61,369 91,193 406,619

FUEL: UUIiE~~~~~~ ~~SPSIN 141 365 707 31I 44 lo1102 3767 2 376 3,356 4131 5445 5I'9 6623 7,333 43,517NESTRSRE 0 3 29 33 13 33 12 :42 :91 29 2:990 3:361 3:371 3194 4:983 25:796

MUTES lESION ~ ~~0 32 229 653 574 635 at5 31 1,5 3,757 2,129 2,290 2,415 2,92 3,402 11,097EASTES RS 0 0 0 0 243 439 476 512 M3 1,616 2,651 3,495 4,32 5,346 19,72

TOAL FUE[L 14 0 ,252 1,952 2,054 2,746 4,236 6,094 5,541 11,316 33,53 15,279 37,760 20,96 106,306

00131131 a NAUsT9CE USESlsioN 66 337I 2 2 225 112 305 b45 996 12 1,079 1,35 1,334 1,3 ,0 0,064PESTERS0 KlESoN 27 129 139 9 279 52 731 750 M5 75014 W0 ,6 ,4 ,9

SITSsiUN 0 2 67 32 336 336 237 330 331 393 301 547 M5 71 4,236EASIm ReSiU 0 0 0 0 t1o 33 to4 HIS to6 75 3,02 1,1 1,320 3,2 4,94

TOAL M.N..& 301. 6 34 416 49 106 i3,93 1,92 2,533 2,963 3,333 3,92 4,537 ,63 29,269

SEFREC1ATIINh RT~~~IE a ESIoN 2 42 307 325 153 359 34 156 ,27 ,441 3,66 3760 2,044 2,31 12,5WNESTU lESIO 0 I3 90 309 130 333 420 Il91 1,33112 1,1391 1,139 31,139 1,4112 2,04 9,fis

NOUE RSN 0 32 63 307 M6 393 I19 367 496 620 639 619 909 3,27 5,65EAT N O936 0 0 0 0 345 217 M5 21 2o 716 t1,32 1,10 I,54 2,124 6,155

TOAL U IAEIATIU -- 2 67 246 344 W0 69 1,374 2,472 2,99 3,916 4,550 5,332 6,24 7,537 36,417

TOTAL. KEIBTIE PIRTIU E1E 213 736 3,925 2,73 3,159 4,356 7,203 10,463 34,072 I3,31 23,419 24,356 2B9,22 34.33 37202

00151111 1 US3UTEMU 3 3 13 13 3I0 290 32 434 473 546 63B 7Y6 921 90 5,400DEPRECIATION 0 2 l6 33 211 45 75 941 1,0`7 1 ,2m 1,419 1,613 I,93 2,135 11,693

MOAL IRAINISSIP O019A16 E115151 29 46 409 795 3,115 I,355 3,30 3,77 2,65 2,394 2,7M 3,035 17,293

TOAL 101*11 E1016( 214 723 3,954 2,826 3,568 5,39 6,316 13,643 135,622 39,17 23,476 26,730 31,55 37,373 189,313

0013116 W CUEFOREi 191115) -- 20 675 3,37 2,405 2,192 4,372 6,45 13,652 35,996 23,153 2719 32,262 37,63=2 44,622 211,386

LmiShTIRES 0 Lowl 454 45 73 1,432 2,361 3,934 5,65 7,6 9,9 11,06 32,3 34,37 16,942 20,460 107,419KMILE INTERES CWITAL3UED 369 236 266 HZ2 1,043 2',042 1,556 1,64 1,93 3,629 3,33 1,476 2,343 3,264 20,344

ET 131OM5 ClIME TO 3WMIRIOU 65 221 492 570 ,J25 1,794 3,63 6,017 7,656 9,390 33,221 12,6196 14,601 37,196 57,075

OVU E M ITENOF 9----------- -- -- - #------0----- ------- 0 9

ET EIWNS 46 441 3On 1,630 3,762 2,373 4,633 7,635 33,340 14,573 16,77! 39,364 23,231 27,426 332,27tan.... ,na.taa nat.... ants.9 tta..a X~.9 =**as".. *seas" nat... ma... ant... ammasat tatata *at.."

EiNE El FItS AssETS IN U91-NIST6RCAL CUT 1,665 5,991 30,157 34,036 19,593 35,902 72,5960 304,945 323,612 143,731 151,533 31,1.96 221,539 264,604PATIS O OWINSFEROWACE-KULIES COST 2,723 7,064 13,096 17,132 24,206 44,524 90,736 335,035 366,534 202,570 235,387 279,340 350,136 433,90

008113 RATIO 013.115IP. AS lI PEOM. REV.) 64.3 51.n2 37 5 4.0?c o 55.21 55.2 41.63 46.5? 45.12 45.52 C.6" 45.32 45.5 45.62 46.32MUT OF RETIIAN U NISTUICAL COS W NET ASSES 6.62 13.32 12.52 37.22 J4.82 33.42 33.61 33.02 35.4 I6.7 17.6 17.72 37.1? 16.9? -

AN AEWKUBE COST OF NEI ASSET 4.42 9.42 10.32 33.52 33.42 7.72 7.u 9.32t 10.22 30.92 10.12 10.4? 9.42 9.02 -

0019133 INCh AS I PF PRTIU SALE REVE 35.92 45.32 41.31 46.02 44.8 44.62. 50.4? 53.5? 54.91 54.52 54.42 54.2 1A.5M 54.4t 53.71NET 191335 S as IF oI'r ATI SUES REVEIl 133.6132.31t 26.32 35.0? 27. 3? 25.32 27.52 29.9? '2.62 '7 32.62 32.92 .'i.52 33.42 32.42

INDIA

NATIONAL THEM" POWE OhPtORATON LIMITED

TALCU E TIIeUAL Pawn PROJECT

BAAN1 S SB

COVEin FISCAL vuas FYirn nTOO= FTI

F1S.I EVWIEES WMI 315T 13 1m IM Im Im 190 19, it" 1929t 93 I IN 3"S 1994

gm FlI AmES to S117 3,0 9,197 13,363 1,0417 25,7 50,706 t62,461 120,94 147,440 170,211 19,14 227,93 24,133 332,10twtUCT A 310 476 903 1,731 2,924 5,001 3,412,34 17,479 23,60 30,43B 36,557 48, 29

KET FiE AMT 13 OPTIN 2,6 N9,V 12,9 15,144 24,02 47M2 97,413 112,477 134,9 15,532 1,494 197,11 245,7 253,4312~~~ - -,111-111-1IUSE I2,79 13,747 19,15 132,54 57,213 " 446 04,497 57,243 41,149 74,3112 95,544 103,314 93,142 77,130

TOT FRIED MT 15,724 22,74 32,543 47,13 1,233 112,4n 142,110 149,720 19,01 228,534 212,03 300,3 334,718 30,711

NW-, 90 21 6 446 75 3t 170 231 316 404 480 541 642 751SEEJVUWl 216 642 1,42 2,2 1,07 1, 2,79 4,249 5,7 7,320 6,59 9,332 11,562 13,6411UEIS 115 424 704 40 517 am" 13,91 1,718 2,247 2,63 3,09 3,575 4,315 4,5

LOUS& SILU 266 223 324 472 3 114 191 280 313 4ll 5s4 42 729 857gmT-WM101J13151113115) 0 0 39 637 (0) 0) 0) (0) (0) (0) (0) (0) 12,34 37.721gm O $t M I 8 14 13 10 I1 10 10 10 10 10 10 10 10

T li AMT lET 7 S9 1,73 3,1I5 4,74 1,713 2,4 4,55 ,48 6,71 10,937 12,473 4, 9,594 5,9"9MEIN EIM IIIEB 24 21 19 19 14 9 5 5 5 5 5 5 I 5

MIOL. AS 14,49 24,539 35,713 52,524 83,010 115,329 144,60 174,213 2M,737 239,72 274,734 315,456 344,317'418,M

ESITY S LI* ZL1T1ES

gmn CiltI. low 1131,35 15,"6 20,432 24,65 45,441 59,414 77 73,n 4 31,331 ,4 %5,1" 1,724 03,724 103,t24

At*i= 1*35 44 49 3,370 3,231 4,93 7,36 11,9" 19,414 36,954 45,S5 62,303 31,"47 14,6 132,30"1013 lTES SIJISTS 31

TOTAL fUll? 11, 1,5 22,2t 20, , 6,762 5,1531 t7,1 t12,6 13, 157,452 13,391 26,02 3

LlSIUITJESa33iI LIIIJS3,14 5,947 10,344 17,729 29,353 45,51 3,424 75,43 09,443 45,394 130,633 121,942 146,484 174,265SI"ILE LlSttitlE1,41 142 3,01 3,691 3,023 3,032 3,104 3,165 3,491 5,401 6,451 t,25 9,229 0,464

IOTAL .LIILIIIES 4,63 6,06 13,445 21,620 32,374 0,547 41,530 78,545 91,952 10,79 117,264 130,047 157,715 3N^,749

TOT EL0111 I LI*SILIIES 1b,4l 24,593 35,713 52,526 03,010 315,329 1(4,60 176,213 204,7 239,726 274,736 315,458 364,317 418,M IFIUIIIIL ITION RA oTIOS

93110IF 0Elt TO SEIT PLUS EMl?tY 21179 26/74 32166 34/44 37/63 4119 41/ "A5 4415 41/59 41/59 010 4215 42/5CORmuT RATIO 0.5 0.3 1.0 1.2 0.4 0.9 .3. 2.0 2.5 2.0 1.9 1.8 3.2 4.9wuI 3TS*1 0.4 0.4 0.9 8 .0 0.4 0.6 1.0 1.5 .9 1.5 1.4 1.4 2.7 6.3

3M91 KECEIII-11E_1 OF NIITNSALES 7.8 7.2 5.9 5.2 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

INDIA

NATIONAL THERMAL POWER CORPORATIOtN LIMITED

TALCHEM THERIAL POWER PROJECT

STATEN= OF $OUCE AND APPLICATION OF FDS

CWVRtIUG OP!RATtIOS FY1983 THROUC PY1996

(RUPES WtLUON)

mamagmama~~~~~ILKMa

FX""X~ ~~~SWtt SW -t t% 1w -1 -1l 1-WIm "

W IIII AM IE 13111 219,36 in 675 1,372 2,*5 2,2 4,1m 8,456 A,2 16,9"9 23,951 27,99 32,262 37,612 44,422-93136 WIWUJUJIIINI ~~31 0 $1

1*4,529 66 1_2 306 427 3 1,193 2,12t 3,413 4,070 5,145 5,9 ,OM 9,119 9,9mmin. 13 3 m m I1W 27,6 t 2 3,72 5,35 I, 1, 23,06 M, 33,6 39,052 45,31 54,59

LU 19,4 3,19 2,75 4,417 7,365 11,65 16,M 13,152 17,363 13,463 7,m 17,237 14,412 30,3 3,97133111 um CWItiL 10,724 11,010 4,204 1,3 6,0 17,96 13,776 13,7A 4,3 3,7 II,522 1,7 6,576 0 0

161AL OF IF 562, 1 51 5912 7,3 1H,9M 17,4 33,3 35,416 37,4" 39,261 40,406 ,313 52,99 62,00 76,474 6,50

MLIWItU F FM

Tlcapir EITIKWIE 511 iD lle) 40,310 15,74 7,170 14,6 15,57 34,346 32,63 31,56 31,3 30,41 37,913 39,193 4,59 43,9 34,03

4lIlt W IF,ISE 67,075 65 221 492 S70 1,125 1,794 3,6 6,017 7,656 9,360 11,221 12,6 14,01 17,1%1336 anIIRtiZMIt 16,213 0 0 0 0 26 IS 241 35 42 759 1,99 3,103 4,0 5,17WIt E. 31139CE 103,23 65 22 492 570 1,53 1,90 4,060 *,376 ,06 10,139 13,220 16,"1 19,601 22,373

FELIIWUII FEB I ff 43 a 0 3 5 0 0 0 0 0 0 0 0 0 0nt-lEV W TIUU) 37,7ll 0 0 3 2MA 637) O 0 0 0 0 0 0 12,3 25,36

.ISEMAIM ) 11,05 1702 343 34 591 1,526) 67 1,6 1,062 1,92 261 53 439 1,56 3,"t

MAtLT JLICrION 1 FM 562,16 15,192 7,34 10,9 17,005 33,336 35,416 37,490 39,261 ",406 4,313 52,94 62,00 76.474 95,5S0inauauiongmSnSaia n. aaam aaaa aaamaaia am **gam ma ussaa sasasgam gagxagaz MM*==a oa===17 3191CE CiME 2.6 2.9 3.5 3.5 5.0 3.2 2.8 2.6 2.7 2.9 2.9 2.6 2.4 2.5 2.4

ATIUtOAL TUSL MM U)SlamAI LUNITI

TALCUES TElllAL POWl FUOJC

COVD9 C FPICAL 113 FY197? T_NICl F1196

(1U33 NILLIOS)

VW MM3MISR 31T "U ML W9ll. C l l 1 t 11 19 1 19" 19 5993 199" 19"5 199_

mN fi w &!!rN 20,09 2I 7,, i3 m 1,'3 2,3 S $,Yd 13,93 17,615 231,61 9, 33,913 X,65 4,rJl 5,54

M s W11i- n*l5m_i1 ) 9w1 uI,IW X2 a3 all a") 1, mu (1,3) 11,112) (1,2 (SI) (Ml la"1) 14 1,36 63,1urn 33393E (7,945)os m-31 on3)#21 (492) U57) 1,13 II,""9 (4,630 1.71 (3,) 60133 113,19) (13,220) (11,65) 113,31)1 ln,3731353331 as gill 13)t 13 a 0) i3n to) t) (3 ) ) to) 10 o ) 1 t0) o0)e1UiS n ,n7sm 51,1 13,1 I 253 5,1, 1, 4,93 2,20 4,13 3,32 13,767 53,6% 20,212 22,U12 257U- 21640

urn T± ,9 319 13g19 ,I 43 , I 13, tm 4m II,1 43 3,1 1112 1,145 3, 0

LuUm-tU M i 62, ,1%) 3 0 9 t5) 221 3 6 3 3 0 3 0 (52,331) 125,31)

lO Nl £ F 31,40 4,310 15,1 1,13 10,61 15,5 24,341 32,63 31,56 31,0 39,411 37,913 39,193 45,59 43,970 30,41

nTM 1eis i Ina

lincl.iotuost d'&q Cu1tntiCAD 31,43 469,310 15,14 ,1 15,6015 15,5 34,34 32,b1 31,565 31,OQ 3,411 3,913 39,1 4t,59 43,970 34,035

I CIIIIIIItI To1331E(giuribotius to igmitut - tow Xof awsa 3 i capital psrl, 31.31 5.O L3A 51.n .7 1. 7. 14.3 3 4. 49.3 5.1. n . s5. 331

UaI2L 1_ -l t,lllUMuIU

204111 iaLsm MM u mx

aiOJcTIUD 33wUAoL Th3111 VW=l WM-1W NAICKAL COSTS (L312c)

CWING nIAL *1 P11967 MOM=5 Y19n

(PAISU P cb)

FICUL V11 195 l 1 1S LU? 193 lw 99 19 19 I 19 19 25 294

a ints _ a

3 OSL i1u 4&4. U4." 9 2.30 65.30 10.50 78.0 32.10 7.20 92.30 97.10WEi-CaUTI PFM PIM3 52.2 5.70 41.52 44.75 72.42 76.77 31.30 04.26 91.40 9.9371t1f AS I E L0.21 100.41 201.11 '".31 97.31 101.4 100.91 191.1t 100.91 109.61

UK WILV TW1P 440 5241 17.10 41.80 66.30 71.00 75.00 79-.0 3450 39.40

UltSMlBU Fll 1195 4415 5.07 54.33 3.95 43.% 4741 11.38 74.10 0.75 35..0TlP1 ts I WE 191C4 10.91 20.11 104.81 103.71 104..? 104.42 104.21 104.4 104.42

ox WLY TOM1 W023 41.37 64.54 47.03 69.17 70.41 73.10 79.30 04.10 93.90Lgt-13CAUT M PU M 11931.1 54.4 5D.U 64. 69.49 73.64 70.0 62.7 An.n 92.91311 60 OFWL 120.11 112.11 109.31 104.7 9"9. "95.t 4".I %99."2 101.01

UI U 4L TW1F 57.54 45 59.42 59.91 44.74 71." 7.30 01.40 37.0 92.0UK-MECUTED FM 15m 40.44 5L34 .20 43.15 0.52 72.63 l." 31.61 0.51 1J.7TUIIP AS I OP WE 114.42 10.01 02.12 9.01 97.41 99.01 99.12 99.71 100.43 191.9?

TOTAL 3m1

mu 11. 13m 1 32.30 34.0 33.7 39.32 51.14 579 0.51 3.9 6..44 ?303 77.72 3L22 3." 93.10lUE-11CaL11 FMK 1113 42.2 44.07 49.94 5.9 1.39 63.30 60.1 72.70 11.20 31.35 04.71 91.00rMIFFAS A OF U1 "L. 04.42 1o2.42 105.2n 1o03.6 l109.9 ot 93 0. 100.72 11.ol2 11.it5 1i9.

1DWEC11 TlIMI PS t RhN NEw lNW tEfhK

Ca_l NESIONS m1194-9 L.41

3M 111 N1193941 L.51

INDIA

NATIONAL THERMAL POWER CORPOATION LItMTED

TALCIItn TIERIAL POWHR PItJECT

lTE Of RETURN ON UT EALUED ASST

WVERIIC OMATIONS FY113 TEOUCt F111996

(UPEES KILLION)

fil3. VW 7m 197 19 2m I9 1932 1912 I93 293l 1m 1996 197 19 23 199" 1I9 9I92 993 1294 1999 96

9 1 ;11 3 1111 3 11 PR19 7RV) 1.52 2.5 0.02 14.12 0.n 0.7n 4.n - 4.9 7.N 4.12 6.01 6.02 4.02 b.02 i.02 6.02 4.02 6.0 6.02 4.02

5IfF1*11115

nITS. feIt VEW 7 213 631 1JOB 213" 3,944 5,61t 62O 6,433 21,36 23,nt 22,65 24,36 2s,7st 24,543 30,619 29,997 35,7t4 35,44 26,160sONLITM 7 220 at 27 4,1 0,499 t4,113 20,39 23,9 4 0,195 63,93t 96, 1 120,3 136,771 i24,314 191,9 22l2S,0 257673 23, 319,3221331*2. ENMUWTEEaCATIW-E4M=E 7 22 657 2,477 5,222 9,63 26,405 23,592 33,63 47,624 74,959 102,332 234,030 1686,97 204,09 2471301 293,652 346,09I 445,252 46,301

1-11-9UISIM801.412 7 220 m1 37 41 6N4 1156U 122396 1t79 292 45327 4101 41263 5196 4910 6221 ts437 SU30 922 5U62I USL.CAP.Eo . 2oo0.0 I6o.02 2.0 le.0s l2.0 St.22 3a. 6o.n 61.32 72.2 70.92 16.o2 37.22 PI 01 31.02 32.42 34.02 31.n 23.N 17.n

SThTIUr _-IW TIE9e0 0 0 0 0 0 1,14 2,69 9,m 13,034 12.954 212,13 45,246 4,22 104,m 140,523 147,56 193,610 239,47 39,921 s75,"7

W131U

1a3 L 1 r2vEm $ 12 6 1s 334 4B7 625 392 1,622 4,231 20,612 9,93B 7,217 5,225 5,673 7,2" 9,26 9,35 6,46 I,675SiUlETIWE e 12 ee 230 14 1,at1 1,476 2,16l 4,190 ,421 19,033 23,3 97 3,2 41,413 47,236 54,130 43,6 73,627 32.13 6S9.9659 1 1 ts CWTnIVE-IEWeLK 0 22 f 242 Ut 1,201 2,947 2,950 4,79 9,480 20,997 32,462 41,964 9,76 16,793 49,933 93,495 93,6t51 113.311 t2,221

- SS:lU."mm°Imu 0 12 3 230 64 993 12192 131 7 97 33 09 It 1ON1 6 339 3434 52 It 20 1 422 2 07 202 23006 21 915 20521IL UUU.C3.f299. 130.02 200.0 200.02 130.02 94.5 f.ti r3.6 a 7.2 9.22.42F Ea .Ira '9.52 12.02 En.7 h.n 3i.i 1.2 h6.7 r2.92

NUSIU-lUS-WTUlEVIED 0 0 0 0 0 66 563 1,363 2,523 1,754 7,391 14,097 3,087 43,369 44,65t 51,,06 57,111 67,672 3,057 90,997

5151235 3.52 0 0 0 0 0 65 3 72 275 314 763 1,164 2,947 3,66t 4,929 1,365 6,t73 0S3S2 10,U4 I3,2561WiUUlilil 2.62 0 0 0 0 0 2 0 9 0 114 205 367 6 i,n20 2,164 1,349 1,433 1,765 2,159 2,5)413761 0 0 0 0 0 67 3 O3 * 15 471 960 1,951 3,932 4,79 4,095 7,214 9,266 10,247 13,003 15.732

MIESh KYE96E'ED IUETS-N-09TU 0 0 0 0 0 957 2,M 7,66 23,0 17,132 24,206 4,524 90,76 135,035 166,064 202,570 235,137 279,140 310,119 433,906

M13 Yl E 1963 1964 2935 9 1967 21 196 199 29I91 1992 I293 199 I29 19

_I lo EtO1 l IET3-uI- IlU0 2,723 7,06 13,04 17,132 24,266 44,524 90,724 135,035 166,634 2,570 235,1t7 279,140 310,226 4906ir U. 61T9 220 4 2,37 2,45 2,692 4,272 6,456 13,652 26,996 23,952 27,999 32,26 37,622 04,6222 _9 264 37" 3 2,193 2,127 3,413 4,070 5,141 5,99 6,79 l3,2 9,972432 131 WS25 (4712 (966 (1,951) 13,9322 1,739 (6,095 17,2142 13,266 410,1472 21'3,003) (15,732)

AIWUSiU 11 -l!EA 15 229 663 1,321 2,311 2,752 3.414 4,651 12,2t6 16,971 21,662 25,700 23,95 32,923 X3,962

fait11 t f a 96 3 a 3 4.42 9.42 10.2 123.12 11.42 7.7 7.32 9.2 20.22 10.6 2o.9 20 9-4 9.02

26Alt 9 1 NMOIUIC I1 6.62 t2.32 12.5t 17.22 14.62 11.6 2.62 1t3.0t 5.42 1.7 17.2 27.7 t 2nI _ s . a . . . ,a

| _ - ________ ~~~~~~~~~~~~…-- --- _- _--- -- - --- -- - -- -- - --- -- - -- _- - -- _ S

INDIA

NATIONAL TlRIALL POMB COSSA1TIOU LIUNITED

TALCUER THEUAL POWER PRWECT

TTAL COhPORATION

Iuv6sTm usoO8m

cov INC OPERTIONS PIM11 3 T13U03 P1199

Cauosu WILLIM)

_ tni WllilL EWEInM U 197-% 17 97m n 197 9 16 1 lo2 19I3 1 9 895 16111 197 1SI 939 99 1991 8992 1993 194 1995 196

iis.inilin lEl lbst3u 10-210 7,302 7 197 2% 746 34 75 521 511 3 332 2,10 3,947 5,597 5,I"5 4,445 75S 0 0 0 0- 51111 5W 67,9 o 0 0 0 0 0 44 13,101 1'05m 2,375 5,487 4,327 ,125 2,747 859 22,93 7034 ,42 210, 167 7,TRIISSIUN 29,915 0 12 is I15 137 42 234 5 562 1,422 ,93 4,416 2,941 1,824 3,594 1,627 2,G22 ,3 2,830 2,38JIC 8,167 0 0 0 0 21 50 33 to 55 306 7868,67 75 59 78 501 280 31D28,228 311111T871. 133,852 ? 29 3s4 911 992 1,341 1,89" 2,139 ,339 7,547 31,122 12,'55 12,043 9,137 1,661 9,m21 9,059 14,301 15,00 1,914

MA.W BI USIUlSIliUS 180-210 I4, 0 16 201 303 635 ,114 I,8 646 1,09 1,444 2,5 l,9"1 ,9 1,U7 S 0 0 0 0 0SutAmI 500 63 0 0 0 0 0 0 334 717 1,218 3,603 3,036 190 1,63 2,22 3,697 7,806 10,761 13,2 30,130 7,e83SotAiI RN8,70 0 0 0 0 0 0 0 0 0 23 77 '173 I,21 656 219 0 0 0 0 0r_h#1I1S1 24,9 0 0 0 32 I57 177 12 70 331 1,239 2,224 1,624 1,6I2 1,135 1,674 2,84 3,336 3,401 2,13 2,04246 365 0 0 0 0 0 34 U 41 0 1 216 661 SW 199 0 0 0 145 72 101,02TiL 81, 29 0 I 2t 3 7 1,32 8,5 1,41 29 *,290 9,0 s ,956 7,025 5,64 ,326 10,690 14,097 17,172 13,5 10,

ITO.101 FMUB bas6ttl 200 ,360 0 0 50 363 345 1,06 I',7 49 274 2 0 0 0 0 0 0 0 0 065011O35 50 29,173 0 0 0 0 0 0 0 737 75 121 3,013 2,631 2,543 8,8311 2,404 5,107 3,123 3,1113 1,95 75IuIIJ 13,09 0 0 0 3 39 2 55 i? 2,11 151 3 3 1,261 1,245 ,50 83 75 I246 2,719 0 0 0 0 0 0 23 6! 33 M 24 23 41 3 69 35 379 742 397 0t TIl 50,35) 0 0 °0 366 364 1,263 1,919 e,015 1,63 2,92 5,473 4,424 4,656 2,929 3,754 1,2 7 5,518 4,746 2,526 75

MAXEIM IUTOTUII 200121 20,410 0 0 4 9 3 4SU bit 021 1,444 1,5M2 2,08 3,195 2,914 2, 2,326 8,561 0 0 0 06501115 ~ ~~~53 5,9 0 0 0 0 0 0 a 2 36 426 2,126 2,692 4,8 667 6,42 7,1 a6 6,95 9,5 6,22113 113 O8 10,131 0 0 0 0 1 es 3 96 53 2,231 7 1,m9 3 1,324 ,7 1, ,'727 2,439 2,23 2,776toe 4,365 0 0 0 0 0 0 0 0 4 41 17 32 14 17 , 1,9 739 210 0 374MA1 106,316 0 0 4 364 502 70 936 1,562 2,212 1,412 7,66 6, 1,511 10,3o 11,215 10,732 960 12,210 38,M

WIL NM CINIIUstoSTTE 880-210 2,309 7 213 3 1,501 2,87 3,433 3,6n 2,020 3,372 3,6 7,292 1o,915 11,70 30,5 7,521 2,320 0 0 0 091185 500 230,932 0 0 0 0 0 454 8,490 251 4,369 0m 8,62 10,346 It41 13,6 1531 27,014 29,077 34,503 33,71 23,642TJIISSIU 31,~~639 0 12 a ISO 334 480 607 I7 160 4,18 1052 952 6,79 58 5 536 7I0 6,999' 9,4 7,911 7,8291-6 19,3 0 0 0 0 28 t 4 1 2 9 35413 9 1,3 204 25 14 1 1313 1,47 2,341 3,264ONSTE2ITo ID 77-116 to39 () 0 9 22 29 It 3 26 79 9 (3,34 2,4 1200) 1202001 120) 1203 120 79 0 (03VIM TOll. ~409,380 7 234 721 1,85 2,543 4,463 6,341 7,870 10,0 1559 34 32,63 38,56 38,023 30,416 37;,913 39,893 45,59 43,970 34,03C.AIIE MAL1 1 31 409,310 7 241 962 2,647 5,890 9,653 1,79 22,6 33,089 48,68 32,9 SA 1551347,111 173,104 286,600 24,513 235741 331,305 37,275 409,310

IIC

AMNX8 4.10P F 1of l

INDIA

NATIONAL THERMAL POWU CORPORATION

TALCEER THERMAL POWER PROJECT

Assumptions for NTPC Financial Projections

1. The financial statements in this report reflect NTPC's financialposition and operations for the period PY77 through FY96, and consist of:

(a) income statement (Annex 4.3) with supporting statementsand schedules of tariffs compared to Long-Run MarginalCosts (Annex 4.7), rates of return on net revalued assets,(Annex 4.6), and scheduled commissioning of power plants(Annex 2.2);

(b) statement of source and application of funds (Annex 4.5) withsupporting financing plan (Annex 4.2), and investment program(Annex 4.1); and

(c) summarised balance sheets as at March 31st of each year(Annex 4.4).

2. FY83 through FY86 data reflect actual operating results, while thefinancial projections for FY87 through FY96 are based on the followingassumptions:

ANN8X 4.10Page 2 of 7

(a) Stabilization of Power Generation:

Operating GWhu/HW GWhs/UnitHours/year per year per year

200 MW UNITS: - First 6 months : 2500 2.5 500- Next 6 months : 4000 4.0 800- Second year : 5500 5.5 1100

210 MW Units: - First 6 months : 2500 2.5 525- Next 6 months : 4000 4.0 840- Second Year s 5500 5.5 1155

500 MW Units: - First unit commissioned at each station

- First year : 2500 2.5 1250- Second year : 4000 4.0 2000- Third year : 5000 5.0 2500- Fourth year : 5500 5.5 2750

500 MW Units: - Subsequent units of each station

- First year : 2500 2.5 1250- Second year : 4000 4.0 2000- Third year : 5500 5.5 2750

CTG 100 NW - From commissioning 5500 5.5 550

Combined Cycle(CTG + STG) - First Year s 4000 4.0 400300 KW - Second Year s 5500 5.5 550

ANNEX 4.10Page 3 of 7

(b) Fuel Costs:

Northern RegionSingrauli Rihand Muradnagar

Coal: 200 & 210 MW Units- Calorific Value (Kcal/Kg) 4900 N/A 3200- Heat Rate (Kcal/KWh) 2131 N/A 2043- Boiler Efficiency Z 87.491 N/A 87.52%- Kgs per KWh 0.4971 N/A 0.7295- Price per ton-Rs 231.40 N/A 312.15- Cost per GWh: Base Cost 1985 0.1150 N/A 0.2277

Coal: 500 M4 Units- Calorific Value (Kcal/Kg) 4900 4000 N/A- Heat Rate (Kcal/KWh) 2016 2027 N/A- Boiler Efficiency Z 86.63X 87.00% N/A

- Kgs per KWh 0.4749 0.5825 N/A

- Price per ton-Rs 231.40 147.78 N/A

- Cost per GWh: Base Cost 1984 0.1099 0.086' N/A

Fuel Cost Factor to include Oil 120.01 120.'3J 130.0%

SouthernWestern Region Region

Korba Vindhyach Ramagundam

Coal: 200 & 210 MW Units- Calorific Value (Kcal/Kg) 3200 4350 4500

- Heat Rate (Kcal/KWh) 2043 2150 2014

- Boiler Efficiency 1 87.52Z 86.491 88.60%

- Kgs per KWh 0.7295 0.5715 0.S051

- Price per ton-Rs 112.84 147.78 258.07- Cost per GWh: Base Cost 1985 0.0823 0.0844 0.1304

Coal: 500 MW Units- CaloriEfic Value (Kcal/Kg) 3200 N/A 4500- Heat Rate (Kcal/KWh) 2016 N/A 2033

- Boiler Efficiency 1 86.69S N/A 87.28%- Kgs per KWh 0.7267 N/A 0.5176

- Price per ton-Rs 112.84 N/A 258.07- Cost per GWhs Base Cost 1984 0.0820 N/A 0.1336

Fuel Cost Factor to include Oil 130.01 120.0% 120.01

ANNEX 4.10Page 4 of 7

Eastern RegionFarakka Kahalgaon Talcher

Coal: 200 & 210 MW Units- Calorific Value (Kcal/Kg) 3200 3200 N/A- Heat Rate (Kcal/KWh) 2020 2150 N/A- Boiler Efficiency g 87.16% 86.49% N/A- Kgs per KWh 0.7242 0.7768 N/A- Price per ton-Rs 120.05 120.50 N/A- Cost per CWh: Base Cost 1984 0.0869 0.0933 N/A

CoaL: 500 MW Units- Calorific Value (Kcal/Kg) 3200 N/A 2800- Heat Rate (Kcal/KWh) 2027 N/A 2060- Boiler Efficiency Z 86.69% N/A 87.00X- Kgs per KWh 0.7307 N/A 0.8456- Price per ton-Rs 120.05 N/A 78.00- Cost per GWh Base Cost 1984 0.0877 N/A 0.0660

Fuel Cost Factor to include Oil 130.01 130.0% 130.0%

Northern & Western RegionsGas Based Stations All RegionsCombined Cycle Coal-FiredCTCG (TG + STC) New Projects

Coal: 200 & 210 MW UnitsCombined Cycle Units

- Calorific Value (kcal/kg & - - 3800.kcallNm) 8800 8800 -

- Heat Rate (Kcal/KWh) 920 920 2043- Boiler Efficiency % 33.40% 46.53% 86.69%- Kg8 per KWh 0.3130 0.2247 0.6202- Price per ton-Rs &

1000 Nm-Re 1800.00 1800.00 201.86- Cost per GWh: Base Cost 1985 0.5634 0.4044 0.1252

Coal: 500 NW Units- Calorific Value (Kcal/Kg) - - 4520- Heat Rate (Kcal/KWh) - - 2027- Boiler Efficiency I - - 87.00%- Kgs per KWh - - 0.5155- Price per ton-Rs - - 201.86- Cost per CWh2 Base Cost 1985 - - 0.1041

Fuel Cost Factor to include Oil - - 130.0%

ANNEX 4.10Page 5 of 7

The escalation rates applied to the above base 1985 fuel costs forcalculating cost increases and tariff fuel surcharges were are set out in(c) below.

(c) Escalation Factors

The financial projections and project costs are based on 1986 pricesescalated at the Bank's price escallation factors for the foreign and loalcomponents. The turbo-generators and boilers are, however, subject to thefollowing maximum price escalation from the date of order:

Singrauli 200 MW units - 25%Korba, Ramagundam, Farakka, and other 200/210 MW units - 20%(In the case of Vindhyachal (210 MW units) fixed-price contractsapply)500 MW units for all projects - 15% Turbo-generators

- 20% Steam-generators

Physical contingencies

Civil works - 10% of construction costsEquipment - 5% of equipment costs

(d) Operations & Maintenance Expenses

Power stations - 2.5% on original cost of 200 MW plant- 2.0% on original cost of 500 1W plant

Transmission & satellitecommunication network - 1.0% on original cost

(e) Depreciation

Power stations - 3.5% on original cost of plantTransmission & satellite

communication network - 2.6% on original cost

(f) Auxilliary Consumption

Auxilliary power consumption for station use has been assumed at 10%for 200/210 MW units and combined cycle gas/steam units 2.51, and 8% for500 MW units.

(g) Tariffs

Tariffs have been determined from the formulae of the Regional bulksupply contracts which provide for:

ANNEX 4.10Page 6 of 7

(i) fuel costs with an automatic fuel price adjustment clause;

(ii) depreciation applied to capital costs escalated to currentcosts;

(iii) operations and maintenance costs based on capital costs forpower plants and transmission facilities, escalated to currentcosts;

(iv) loan interest at the prevailing GOI interest rate (currently14%) on estimated balance of loan principal outstanding;and

(v) return on equity at 10%.

(h) Capital Requirements

(i) Other capital requirements would met by NTPC's internal cashgeneration combined with GOI advances in the form of equity andshare capital subject to the condition that unpaid loans, atthe end of each year, does not exceed share capital andretained earnings. Equity capital advances would precede GOIloan funding, except for Bank Loans 2555-IN and 2674-IN, andthe Bank loan for the proposed Project.

(ii) GOI loans (including the onlending of the proposed Bank loanand previously approved credits and loans) are assumed tofinance projects included in NTPC's investment program.Interest on loans up to the date of commissioning of each unitwould be capitalized, while subsequent interest would becharged to Revenue. Repayment of principal is assumed in 30semi-annual installments commencing on the first anniversaryfollowing the end of the five-year grace period. The totalloan drawdown for each year, and for each project, is assumedas a separate GO loan for purposes of loan repayments.

(i) Balance Sheet

(i) Cash is assumed at 10 days operating expenses less depreciation.

(ii) Accounts receivable are assumed at a level of equivalent totwo months total operating revenue for FY87 and for each yearthereafter.

ANNX 4410Page 7 of7

(iii) Inventories are assumed at a level equivalent to 15 days coalcosts (including fuel surcharge), 60 days oil costs, 1.5 yearscosts of spares requirements, and 6 months costs of chemicalsand lubricants.

(iv) Loans and advances are assumed at 1% of annual revenue,Rs 15 million, an added Rs 2 million per year to provide forloans to officers.

(v) Other current assets are assumed to be a constant figure of 4million each year.

(vi) Current liabilities are assumed at 1X of annual fuel costs,15 days of salaries, 2% of annual operations and maintenancecosts, loan principal repayments projected for the subsequentsubsequent year, and one month's average yearly capitalexpenditure.

IDI

TALCRER TMIVIAL POME P_R-OJCT

!lactricitv Demand and &pplY - Eastern Refion

85/86 86/87 87/88 88/89 89/90 9 l0/91 91/92 92/93 93/94 94195

1. Installed Capacity as on31.3.85 is 6495 MV le -

2. Capacity additions from .sanctionedloagoingschemes: 1060 844 543 147 577 700 735 890 1130 420

3. Capacity additions duringthe year from new schemes:

Nydro (MV) 68 4 - -Thermal (MV) - - - - - _ 500 420 500 630Total: _ _ _ _ - 568 420 504 630

4. Overall Installed Capacityat the end of year:

Hydro (NV) 1080 1204 1327 1474 1631 1911 2294 2478 2478 2478Thermal (MV) 6475 7195 7615 7615 8035 8455 9375 10585 12135 13185Total: 7555 8399 8942 9089 9666 10366 11669 13063 14613 15663

Peak Demand (NV) 461 5134 5640 6196 6757 7442 8202 9043 9974 11006

Peaking 8hortage (NW) (1439) (825) {645) (779) (1181) (1422) (1731) (1769) (1799) (2027)

Energy Requirement (Olb) 26684 29525 3244 35650 38889 42831 47194 52021 57366 63287Energy Availability (Gwh) 20518 25354 31639 36396 39529 42025 42754 48168 57394 65397Energy Surplus(Deficit) (Owh) (6166) (4171) (801) 746 640 (806) (4440) (3853) 28 2110

/a - Rydro: 980 MV; Thermal: 5515 M

I-a

ANNEX 5.2Page I of 4

INDIA

TALCHER THERMAL POWER PROJECT

Internal Economic Rate of Return

As described in Chapter 5, the proposed Project forms an integralpart of the expansion program for the Eastern Region and, therefore,cost-benefit analysis needs to be carried out on the program as a wholerather than on the Project in isolation. A time-slice of the EasternRegion's investment program has, therefore, been analyzed. Capital cost,incremental operation and maintsnance, incremental fuel cost and benefitstreams for the Eastern Region are shown in Table 1. Assumptions underlyingthese figures are detailed below.

Capital Costs

b Anticipated capita' expenditure on generation at financial prices hasbeen converted to economic prices by (i) expressing the imported content atcif prices; (ii) valuing unskilled local labor at 0.75 of the market wagerate; and (iii) applying the estimated standard conversion factor, 0.8, tolocal costs. Transmission and distribution capital expenditures have beenestimated at 50% of generation expenditure.

Operation and Maintenance Costs

Incremental annual operating and maintenance costs have beenestimated as the following percentages of capital value: thermal generatingplant 2.5%, hydroelectric 1.13%, and transmission and distribution 1.0%.

Fuel Costs

Average fuel consumption of new coal-fired plant has been estimatedat 0.645 kg/kWh. The economic cost of coal at the pit head has beenestimated at Rs 164/ton. The economic cost of delivering cqal to load centerstations has been estimated at Rs 0.54/ton mile.

Case 1. Benefits

Case 1. benefits are based solely on incremental revenue at existingtariff levels. These allow for system losses which are assumed to remainconstant at 21% of net generation in the Eastern Region. The average finan-cial tariff in FY'85 was Rs 0.56/kWh. After allowing for (a) general infla-tion of approximately 7% per year from FY'85 to date; and (b) a standard

ANNEX 5.2Page 2 of 4

conversion factor of 0.8, the corresponding average economic tariff at cur-rent prices is Rs 0.50/kWh.

Case 2. Benefits

In Case 2, the benefits of incremental consumption include elementsof consumers' surplus for both industrial and agricultural consumers.Surplus has been imputed at half of the difference between the average tarifffor each category and the alternative costs of autogeneration for industrialconsumers and diesel pumping for agricultural.

The cost of industrial autogeneration, at mid-FY'85 prices, has beenestimated as follows:

Purchase price (incl. installation) Rs 4,300/kWLife of cet 15 yearsAverage utilization 30%Discount rate 12%Operation and maintenance cost Rs 215/kW per annumFuel and lubticant Rs 0.80/kWhAverage cost Rs 1.12/kWh

The cost of electricity which would equate the cost of electricalpumping with that of diesel is calculated at mid-FY'85 prices as follows:

ANNEX 5.2Page 3 of 4

Electric Diesel

Motor/engine size 5.0 HP 7.0 HPLife Years 15.0 10.0Investment Cost Rs. 4000 Rs. 10250Cost of diesel/hr - Rs. 4.82

Annual Costs

Annual Charges Rs. 526 Rs. 1668O&M Rs. 890 Rs. 2500Electricity/diesel(800 hrs/year)Electricity costingX /kWh Rs. 2984 X Rs. 3853

Total annual cost Rs. 1416 + Rs. 80212984 X

Marginal cost of electricity X = (8021-1416)/2984at which diesel and electricity 3 Rs. 2.21/kWhare equivalent

Average industrial and agricultural financial tariffs during FY'85in the Eastern Region are estimated at Rs. 0.64/kWh and Rs. 0.20/kWh respec-tively. After allowing for inflation between mid-PY'85 and end FY'86, theaverage estimated willingness to pay, converted into economic terms at astandard conversion factor of 0.8, is Rs 0.78/kWh for industrial andRs 1.02/kWh for agricultural. Combining these with revenue estimates of thebenefits to other consumers gives an average benefit of Rs 0.70/kWh ineconomic terms.

ANNEX 5.2Page 4 of 4

Eastern Region Investment Program

Economic Rate of'Retuirn(Rs Million)

Fin. Capital O&M Fuel Total .Incr. Not NetYear Exp. Cost Cost Sales Benefitl Benefitg

1987 584 564 -584 -564.1988 1117 1117 -1117 -11171989 18650 1650 -1650 -1850l1990 3089 3089 -30898 30U91991 4405 4405 -44057 -44051992 5259 161 5420 156 -8342 -53111993 5604 318 188 6108 1387 -5415 -513?1994 3566 453 511 4530 3221 -2920 -22751995 1488 654 894 3036 .5288 -892 8681996 407 663 1245 2315 7111 1241 26381997 663 1394 2057 7875 1881 3481998 863 1444 2107 8129 1958 35831999 663 1444 2107 8129 1958 358352000 683 1444 2107 8129 1958 35832001 663 1444 2107 8129 1958 35832002 663 1444 2107 8129 1958 35832003 863 1444 2107 8129 1958 35832004 663 1444 2107 8129 1958 35832005 663 1444 2107 8129 1958 35832006 663 1444 2107 8129 1956 35832007 663 1444 2107 8129 1958 35832008 663 1444 2107 8129 1958 35832009 663 1444 2107 8129 1958 35832010 663 1444 2107 8129 1958 35832011 663 1444 2107 8129 1958 35832012 663 1444 2107 8129 1958 3583'2013 663 1444 2107 8129 1958 35832014 663 1444 2107 8129 1958' 35632015 663 1444 2107 8129 1958 35832016 663 1444 2107 8129 1958 35832017 663 1444 2107 8129 1958 35832018 663 1444 2107 8129 1958 35832019 683 1444 2107 8129 1958 35832020 663 1444 2107 8129 1958 35832021 663 1444 2107 8129 1958 3583

4% 10%-

ANNEX 6.1Page i of 1

INDIA

TALCHER THERMAL POWER PROJECT

Related Documents in the Project File

1. Feasibility Report for the Talcher Super Thermal Power Project, NationalThermal Power Corporation Ltd., New Delhi, June 1984.

2. Report on the Satellite Communication Network System, National ThermalPower Corporaton Ltd., New Delhi, March 1986.

3. Techno-Economic Justification Studies for the Talcher Super ThermalPower Station, Central Electricity Authority, New Delhi, February 1986.

4. Sector Data for World Bank Appraisal of the Talcher Super Thermal PowerStation, Central Electricity Authority, New Delhi, January 1986.

5. Project Detailed Cost Estimate - COMPASS, May 19, 1987.

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INDIATALCHER. THERMAL POWER PROJECT

Proposed Project Features:

f :I lProject Areosn> . ' ' ' ~~~~~~~~~~~~~~~~~~~M.G. R.

-- - - Approach Road (Diversion)SCttlflukO ------- '-- ++ Siding

Bridges-:-. .. Transmission Corridor

Existing Features:

7\\ Coal Area and Bock BoundariesRoadsRailroads

0 VillagesRiversSubmergence by Samal BarrageCanal

21e05 =__ Bridges

nKILOMETERS

!aka

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KILOMETER

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rO Gd f .7,0M 987MAY 1987