SHP Development in India – A roadmap

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The information presented on this presentation are provided by Strategic Consulting Group

for information purposes only. Efforts have been made to ensure accuracy of data.

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of this material should take their own professional advice before acting on this information.

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Small Hydro Power in India is classified as projects up to 25 MW capacity.

Small Hydro Power Projects can either be allotted by State Governments or acquired directly

form the Secondary Market/ Promoters.

Acquisition from State Governments Acquisition from Secondary Market

(Project License owners)

Method Of

Acquisition

• Direct allotment of self identified sites

• Bidding for advertised sites on the

basis of

• Free Power

• Tariff

• Net - Worth

• Upfront Premium

• Conduct due diligence on already

allotted projects

• Negotiate a premium (either cash or

equity stake) for the promoter

• Acquire license as per relevant Govt

regulations on transfer of shares

Time Frame Allotments currently closed in HP and

Uttarakhand. Allotment may be open in

NE states and Sikkim.

4 to 6 months

Cost of

Acquisition

Depends on geography and size of

project and type of bidding/allotment

prevalent

60 lacs/ MW to 100 Lacs/ MW based on

stage of license, viability of project etc.

Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

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Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

Project Development

Developing a Small Hydro Power Project, i.e. making it construction ready can be divided into

Four Phases:

Phase I : Clearances

• Obtaining the necessary clearances (NOCs) from various concerned Government

departments.

• Different states have a have different set of clearances to be obtained.

Phase II: Detailed Project Report (DPR) & Detailed Engineering Drawings

• A DPR has to be made to understand the true potential of the project and to get the Techno-

Economic Clearance for the project.

• The approved DPR is also used in raising the Project – Finance.

• The Detailed Engineering drawings are the set of drawings on the basis of which the Project

is constructed

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Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

Phase III: Power Purchase Agreement (PPA):

• A PPA can be signed with the project’s State SEB or a different state SEB (using open

access).

• The APPC route can also be explored

Phase IV: Project – Finance (Raising Debt):

For project finance & other structured financing options, State Co-operative banks, Public

Sector Banks, Private Sector banks, IREDA , DFIs etc. can be approached.

SCG is currently working on raising Debt finance for four projects in India, and eight Small

Hydro Power Projects in Kenya.

*Rate for Himachal Pradesh and Uttarakhand is for projects <=5 MW

All numbers are indicative and subject to change as per Govt policies

State

Base Price

(INR)

REC

(INR)

Total

(INR)

Tenor

(Years)

Himachal Pradesh* 2.95 - 2.95 40

Himachal Pradesh (APPC)* 2.20 1.50 3.70 5

Punjab 4.00 - 4.00 30

West Bengal 4.40 - 4.40 35

Uttrakhand* 3.76 - 3.76 35

Merchant Power (indicative) 3.75 1.50 5.25 10

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Different Stages in the Development of a Hydro Project Before Start of Construction

Allotment

Level I Clearances

Revenue

Gram Panchayat

Irrigation

Fisheries

PWD

Wildlife

Detailed Project

Report

Techno-

Economic

Clearance (TEC)

Level II Clearances

Land Acquisition

Detailed Engineering

Power Purchase

Agreement

Implementation

Agreement

Financial Closure

Forest

Pollution

Commence

Construction

Stage I : 9-12 months Stage II : 6-9 months Stage III : 6-9 months

Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

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Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

Development Work in the Acquired Projects

• Most of the greenfield projects acquired, either from the Government or from the Secondary

market have a major part (at times the entire) project development works pending.

• Pending development work may involve:

• Obtaining NoCs

• Preparing DPR (if required)

• Detailed Engineering, Design, Tendering etc.

• Forest NoC, Land purchase and lease, Pollution Control Board Certificate

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Construction of a Small Hydro Power project, depending upon the size varies from 18 months to 36

months.

Project CapacityConstruction Period

in Months

1 MW - 5 MW 18 - 24

5 MW - 15 MW 20 - 30

15MW - 25 MW 24 - 36

Major Activities During construction:

• Diversion Structure (6 – 8 months)

• Water conductor (12 – 18 months)

• Penstock (8 – 10 months)

• Power House (14 – 16 months)

• Switchyard & Transmission ( 6 – 9 months)

Construction period may vary because of the following factors

• Road access for project site locations

• Working season at site

• Geological surprises encountered during construction

• Size / Length of various appurtenant structures

• Construction methodology adopted

Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

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Post commissioning the Operation and Maintenance of a Hydro Power Project needs to be carried

out for a period of 35 – 40 years (i.e. the life of the project).

Around 1% - 2% of the project capital cost (depending on the project size can be attributed to

Operation and Maintenance activities.

Typical features in operation of a Small Hydro Power Project:

• 6 to 10 persons required in total to man the plant in different shifts.

• Of which 4 – 6 trained / skilled staff (engineers/diploma holders)

• 2 – 6 unskilled staff required.

Maintenance of Small Hydro Power

Projects

Scheduled Preventive

maintenance

Transmission Line

maintenance Break Downs Capital Maintenance

Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

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Once a portfolio of operational Small Hydro Power projects is created, various exit routes can be

sought; e.g.

• Sale to another developer or aggregator (at current market rates, commissioned hydro power

projects command ~30% premium over completion cost)

• Listing on an Indian Bourse

• Listing on a foreign Bourse (e.g. AIM – London)

• Sale to funds looking for long term revenue generating assets (e.g. Pension funds)

Project Acquisition Project

Development

Project

Construction

Operation &

Maintenance Exit

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Risk Assessment and Mitigation Measures

in Small Hydro Power Projects

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Hydrology Risk

Power offtake risk

• Hydrology Risk

can be defined

as the risk of

lack of water

Geology Risks & Surprises

Cost overruns due to delay in construction

Definition:

The risk of not enough water!

This could be due to

• incorrect project sizing

• Drop in Precipitation

Results in:

• Lowering of Plant Load

Factor

• Reduces Project returns

Mitigation:

Indirect Method:

Conduct proper hydrological

studies and tests such as

• Correlation analysis

• Hydrology analysis using

Software Direct Method:

Construct gauge station at weir site and measure

discharge over the development & Construction

Period

Definition:

Risk of power not being able to evacuate

power in spite of plant being available for

generation.

Caused by · Grid failure · Lack of demand

· Breakdown in Transmission lines Mitigation:

Definition:

Encountering unforeseen and unexpected geological

strata during construction.

Mitigation:

Definition:

Increase in Capital cost of project due to

increase in planned construction period…

Caused by · Geological Surprise

· Promoter Equity shortfall Mitigation:

Results in:

• Increase in foundation works

• Increase in Project

Construction period

• Increase in Project Cost

Detailed Geological

investigation during detailed

Engineering stage cover the

following appurtenant

structures:

· Diversion Weir · Water Conductor · Forebay

· Penstock Alignment · Power House · Tailrace

Channel

Results in:

• Reduces Project

returns

• Increases Payback

period

• Introduction of Take –or-

Pay clause in the PPA.

• Preventative maintenance of

transmission Lines and towers

• PPA with bankable buyers only e.g. State

SEBs , corporates with a constant power

demand and a sound balance sheet such and

ITC, Linde, Airliquide, etc.

Results in:

• Increase in project

construction time

• Increases IDC

• Detailed project planning

• Detailed Project investigations

• Tying up of equity & Debt funds prior to

construction

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Project Timelines

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Development Timelines for a typical 5-15 MW Small Hydro Power Project

Months 1 2 3 4 5 6 7 8 9 10 11 12 13

Allotment

Clearance Revenue Department

Set I Gram Panchayat

Irrigation

Fisheries

Public Works Department

Wild-life

Detailed Project Report

Techno Economic Clearance

Clearance Forest Department

Set II Pollution Department

Land Acquisition

Interconnection Studies

Detailed Engineering

Preparing Tender Specs. &

Tendering

Implementation Agreement

Power Purchase Agreement

Project Finance

Financial Closure

Commence construction

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Construction Timelines for a typical 5-15 MW Small Hydro Power Project

FIRST YEAR

(Development Works) SECOND YEAR THIRD YEAR

Activities 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Pre - 1 Surveys, Hydrology Data, Geological Data, Misc.

Construction 2 Firm up Designs i/c Model Studies

Activities 3 Pre-const. Activities & Mobilization

4 Intake Excavation

5 Intake concreting

6 Power channel Excavation & Concreting

7 De-silting chamber Excavation & Concreting

Civil 8 Tunnel Excavation & Concreting

Works 9 Forebay

10 Penstock Excavation

11 Procurement, Fabrication, Transportation of penstock

12 Power House Excavation

13 Power House concreting

14 Tail Race Channel Excavation & Concreting

Electro 15 Proc., & supply of Hydro Gen. Unit

Mechanical 16 Erection of Hydro Gen. Unit

Works 17 Erection of transmission system

18 Switchyard

19 Testing & Commissioning of Unit

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Contact Persons

Nikhil Jaipurkar, +91 980 550 4545

Nav Bhardwaj, +91 93 1800 8424

Office

Strategic Consulting Group,

D 449, Ground floor, Sector 4, Phase II,

New Shimla, Near DAV School,

Shimla 171 009 HP India

Ph/Fax: +91 177 267 2945

Website: www.scg-india.com

Email: info@scg-india.com

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