Information Memorandum_Suman Sarwari Project

8/8/2019 Information Memorandum_Suman Sarwari Project

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2.5 MW Suman Sarwari Project

Information Memorandum(July 2006)

Usaka Hydro Powers Pvt. LtdNew Delhi

Prepared by:

Hydro Design Management Company Pvt. Ltd.

G-52, Sector 6, Noida 201 301, NCR Delhi.

Ph: +91 120 2423930, Fax: +91 120 2423931

Email: [email protected]


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Contents1 INTRODUCTION...................................................................................................................................4

1.1 GENERAL............................................................................................................................................4 1.2 PROJECT BACKGROUND.....................................................................................................................4 1.3 REVISED CAPACITY TO 5 MW...........................................................................................................4

2 PROJECT DESCRIPTION ........................................................................................ ........................... 5

2.1 TECHNICAL DESCRIPTION ..................................................................................................................5 2.1.1 Location............................................................................................... ...................................... 52.1.2 Land and infra structure ............................................................................ ............................... 52.1.3 Outline of the Project ................................................................................. ............................... 52.1.4 Hydrology .............................................................................................. .................................... 72.1.5 Flood .............................................................................................. ........................................... 72.1.6 Sedimentation ...................................................................................... ...................................... 72.1.7 Geology ............................................................................................... ...................................... 82.1.8 Transmission line .............................................................................................. ........................ 8

2.2 ENVIRONMENTAL IMPACT .................................................................................................................8 2.3 ENERGY PRODUCTION PROFILE .........................................................................................................8 2.4 PROJECT BUDGET...............................................................................................................................9

2.5 COMPLETION SCHEDULE....................................................................................................................9 2.6 LICENSES AND PERMITS ....................................................................................................................9 2.6.1 Implementation Agreement (IA) ..................................................................................... ..........92.6.2 Techno Economic Clearance (TEC)......................................... ................................................ 92.6.3 Environment and Forest clearance .......................................................................................... 9

3 SPONSORS & THE COMPANY........................................................................................................10

3.1 PROJECT COMPANY .........................................................................................................................10 3.2 OWNERSHIP STRUCTURE .................................................................................................................10 3.3 THE SHAREHOLDER .........................................................................................................................10

3.3.1 Umesh Anand & Co. ............................................................................... ................................ 103.3.2 Sudhir Gupta. ........................................................................................ .................................. 103.3.3 Moring Advokat AS ...................................................................................... ...........................10

4 POWER MARKET...............................................................................................................................11

4.1 MARKET ...........................................................................................................................................11 4.2 CUSTOMERS .....................................................................................................................................11 4.3 POWER PURCHASE AGREEMENT (PPA)...........................................................................................11

5 PROJECT FINANCING & ECONOMICS....................................................................................... 11

5.1 FINANCING STRUCTURE AND PLAN .................................................................................................11 5.2 ASSUMPTIONS ..................................................................................................................................12 5.3 DISCOUNTED CASH FLOW/ RETURN................................................................................................12 5.4 TAX ..................................................................................................................................................12

6 DEVELOPMENT IMPACTS..............................................................................................................13

6.1 ENVIRONMENTEL AND SOCIAL IMPACTS .........................................................................................13

7 PROJECT RISKS .................................................................................................... .............................14

7.1 COMPLETION RISK ...........................................................................................................................14 7.1.1 Construction risk/Cost and time overruns..............................................................................147.1.2 Quality of works .................................................................................... .................................. 14

7.2 OPERATING RISK..............................................................................................................................14 7.2.1 Market Risk .............................................................................................................................147.2.2 Hydrological risk ....................................................................................................................147.2.3 Plant availabilty risk...............................................................................................................147.2.4 Commercial risks ....................................................................................................................14

8 STATUS OF PROJECT.......................................................................................................................15


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LOCATION MAP OF THE PROJECT.....................................................................................................17

ENERGY PRODUCTION PROFILE 75% DEPENDABLE YEAR 1985............................................. 20


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1 INTRODUCTION

1.1 General

The role of small hydro potential in the context of overall power shortage in the

country is significant. Further from the viewpoint of developing rural economy,

its role is very important. Their small gestation period, low investment

requirement, absence of major socio-economic issues are attractive features.Besides these being located in close proximity of rural areas particularly in hills,

development of such schemes will lead to small scale agro-based

industrialization, chances for the growth of the Tourism facilities like trail etc and

avoid transmission and distribution losses associated with carrying power from

distant sources. Small hydro-power (SHP), is therefore not only investment

friendly, but also can promote rural development in the most economically viable

way. Considerable enthusiasm has been created by these inherent features of SHP

in Government of India and Himachal Pradesh Government.

1.2 Project Background

Suman Sarwari mini Hydropower Project has been contemplated as Run-of River scheme on Sarwari khad in Kullu district of Himachal Pradesh.

Himurja is the nodal agency for development of small hydro power projects in

the state of Himachal Pradesh. Usaka Hydro Power Private Limited (UHP)

received the award of work for preparation of a DPR for Suman Sarvari Project

vide letter dated 4th May 2001 from Himurja for an estimated capacity of about 3

MW. Accordingly UHP signed an MOU dated 28th

May 2001 for preparation of a

detailed project report for Suman Sarvari Project. Company has submitted Rs. 6

lacs as security in favour of Himurja. The project upto 5 MW capacity are

exempted from the levy of 10% free power for first 15 years from the date of

commissioning of the project. As per MOU HP state electricity board has the first

option to purchase the electricity generated from the project @ Rs. 2.50 per Kwh.

UHP in accordance with the above MOU carried out a detailed investigation on

the project and submitted a DPR to the government of Himachal Pradesh for

Suman Sarvari project with a capacity of 2.5 MW. The DPR has been prepared

by Sai Engineering Foundation, Shimla. A techno economic clearance of the

project has also been accorded by HPSEB. The implementation agreemenet has

been signed on 28th

August 2002. The company has since been able to achieve

various clearances that are required for implementation of a hydro power project.

1.3 Revised Capacity to 5 MW

UHP has signed a shareholders agreement on 20.3.2006 with M/s MoringAdvokat AS, Norway and Sudhir Gupta to include as new investors into the

project. The new investors had carried out a detailed due diligence on the

technical and financial feasibility of the above project. The technical feasibility of

the project has been reviewed by Hydro Design Management Company Private

Limited (HDM) in September 2005. As per the hydrological assessment of the

project, it is assessed that there is an economic power potential of 5MW in the

Sarwari river as against the proposed capacity of 2.5 MW in the DPR. However,


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it is agreed to study the actual water flow over the weir site and then decide to

increase the capacity as an extension of the approved project of 2.5 MW.

2 PROJECT DESCRIPTION

2.1 Technical Description2.1.1 Location

Suman Sarwari mini Hydel Power Project is accessed through Shimla-Kullu road.

Project site is located at distance of 197 km from state capital Shimla. The nearest

airport is located at Bhuntar and the project is about 15 kms from this airport.

Mettalled road 4 km from Kullu diverts towards Dhalli Ghat. The project site is

en-rout on this road. The nearest railway station having meter gauge line can be

accessed at Joginder Nagar through road distance of 91 km from Project site.

Road map of the site is attached as Annexure 1 herewith to come across the

exact location of the project.

2.1.2 Land and infra structure

UHP has acquired the project land as per the following details:

Government land 1.335 Ha

Private land 0.8 Ha

With the acquisition of the above land most of the project land related works

have been completed.

The alignment along the water conductor has been done and first trace cut with

blasting wherever necessary has been carried out. Advance action on preparing

the short tunnel works is under planning stage.

All the land required for the project has been acquired and the alignment of the

water conductor system has been completed. The first trace cut on this alignment

has been carried out.

2.1.3 Outline of the Project

The Suman-Sarwari Mini Hydel Power Project is a run of the river scheme for

power generation of 2.5 MW on Sarwari Nallah. Sarwari nallah is a tributary of

river Beas. The project area lies between latitude 31o-53-30 to 32

o-7-30 North

and longitude 770-50 to 77

o-4 East.

The alignment of the project is proposed on the left bank of nallah. Alignmentpasses through a very hard and steep rock. Desilting tank is proposed on

abandoned slate query on rocky strata. The strata near Power House is hard &

rocky.

The project envisages utilization of a gross head of 91 m between the nallah take

off point out and proposed power house. Main features of the Project are as

below:-


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* A Diversion Cum -Trench weir of 48.47 m length is proposed to divert

3.6 Cumecs the design discharge 50% for deslting at an elevation of

2256.0 m.

* A R.C.C. Intake Tank of size 2.8 m x 2.8 m x 3.65 m is proposed on left

side of the nallah with Complete flushing arrangements. Provision for

protection works due to steep hill slopes is kept in the cost estimate.

* A R.C.C. Desilting Tank of overall size 53.00 m x 6.5 m x 3.5 m is

proposed at a distance of 475.00 m to extract the silt particles of size

0.15mm and above. Desilting Tank is proposed with complete flushing

arrangement consisting scour pipes and sluice valves. Due to massive

steep slope cuttings, protection/rock bolting works are proposed for

Desilting Tank. The desilting technology developed by Norwegian

company (GTO Sediments AS) will be used in the system.

Water conductor system comprises of following components:-

i) Power duct from Weir to Intake Tank* Power duct from weir to Intake tank is proposed to carry the design

discharge + 50% extra to flush the silt particle in the intake tank.

Horseshoe type power duct of length 25m in R.C.C. of size 1.65m X

1.65m is proposed to carry the design discharge plus 50% extra up to

Intake tank

ii) Power duct from Intake to Desilting Tank

* Power duct from intake to desilting tank is proposed to carry the design

discharge + 25% extra to flush the silt particle in the desilting tank. MS

pipe embeded in rock face after cutting is proposed in between takeoff

point to intake tank. Horseshoe type power duct in R.C.C. of size 1.5m X

1.5m is proposed to carry the design discharge plus 25% extra up to

desilting tank.

iii) Power channel from Desilting Tank to Forebay

* RCC channel of effective size 1.4m x 1.4 m is proposed in between

Desilting Tank and Forebay (length 2159.00 m). This alignment passes

from hard rock having steep slopes. Alignment intersects vertical cliffs.

Hill slope is proposed to be stabilized with rock bolting at many portions

to protect the channel from damages. Channel passes through the

agriculture land. Aqueduct is required to be constructed over the monsoon

drain in this stretch of channel.

* Forebay of 41 m X 5 m X 4.5 m effective size is proposed to store 3

minutes design discharge plus Live storage equal to design discharge. A

chamber of size 3 m X 3 m X 4.9 m is also proposed to house the

penstock assembly. Storage capacity of the forebay is sufficient to meet

with the instantaneous water requirement at the time of start of plant.

* M.S. Pipe spillway of 900 mm dia is proposed to spill out the full design

discharge as and when it is rejected by the Power plant.


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* An underground penstock of 1000mm dia & thickness 8mm of 124m

length is proposed. Anchor/ Thrust blocks and saddle have been provided

wherever required. Protection works and rock bolting is also proposed

along the alignment of the penstock as the bedding plane of strata is

favourable and hill slope is quite steep. A Sluice Valve of 1000 mm dia is

proposed just below the forebay to close the penstock at the time ofurgency.

* A Surface power house of an overall size of 28.8 m X 14.4 m in framed

structure is proposed to house one unit of 2.5 MW Electro Mechanical

equipments. R.C.C. channel is proposed as a tail race.

* One set of electro mechanical equipment for the generation of 2.5 MW

power with sub station and transmission system complete is proposed.

However, the capacity of the power house shall be increased to 5MW by

installing an additional unit of 2.5 MW in the second stage.

The scheme will generate 18.95 MU unit of electrical energy at 75%dependable year. The total cost of project is estimated Rs. 19.11 crores.

The Power generated will be supplied to the 33KV H.P.S.E.B. Power

grid.

2.1.4 Hydrology

The discharge of the nallah mainly consists of rain flow, base flow and ground

water flow, snow melt and some contribution of subsoil water in Summer. The

minimum discharge occurs during the months of December to January. During

summer almost in the month of April after melting of snow the water reduces to

minimum and increases in July due to rains.

Gauging of stream Sarwari has been done by HPSEB since 1968. The catchment

area up to the G&D site near village Barka maintained by HPSEB measures

166.75 sq.km. The discharge data from 1968 to 1992 has been made available

with some missing records in between. The Sai Engineering foundation has

measured the flow from January 2000 to May 2003. Velocity is measured with

the help of current meter.

2.1.5 Flood

Based on the analysis and the type of structure i.e trench weir, in which head up

of water is not involved, the Design Flood is recommended as 550 cumec.

2.1.6 Sedimentation

This stream carries significant sediment load in summer and monsoon. In the

winter water is quite clear and free from all kind of impurities. The Stream bed is

characterized by accumulation of boulders of different sizes along the course of

the stream. The size of such boulder varies from small pebbles to big boulder.


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2.1.7 Geology

In the Sarwari small Hydro project grey micaceous quartzite, phyllitic quartzite

phyllitic quartzite with grey mica schist of Jutogh Group are widely exposed.

Grey, medium grained, often slightly fractured micaceaous sericitic quartzite is

the major rock type in the area with minor bands of phyllites and mica schists.

Besides the above mentioned, light grey schistose quartzite with thinly foliatedschist also occur.

The foliation dips of the micaceous quartzite, phyllitic quartzite are low to

moderate and generally in northeasterly and northwesterly directions. The rocks

are folded and faulted. Due to folding and faulting, particularly close to big nalas

rock has become moderately weathered and thinly foliated and thus weaken along

nala.

Overburden covers small portion of the project area, particularly middle of water

conductor system. The proposed layout is mostly on rocky slopes with minor

overburden generally the overburden is slopewash material and river terrace

deposit that consists of slates.

2.1.8 Transmission line

The power generated shall be connected to H.P.S.E.B. power grid. 33 KV grid is

available at a distance of 4 km from the power house site. 11KV, H.P.S.E.B.

transmission and distribution lines are available at project site. The construction

power will be available from the existing grid.

2.2 Environmental Impact

This Power Project if constructed to exploit hydro-electric energy to meet the basic

needs of the people of this remote locality, it will not only improve the economiccondition of the inhabitants of the valley but will also maintain the ecological

balance and prevent the environmental degradation as well. The hydro electricity

will give the requisite impetus to achieve the following objectives to improve the

living conditions of the rural population residing in this area :

This project will also reduce the migration of population from these remote

localities to urban areas by providing the chances of self employment & other job

facilities.

To impart social justice to the residents of rural area it is essential to provide the

basic infrastructure like roads, water supply and hydro electricity so that their living

standard is improved. An essential ingredient in all these developmental

programmes and activities is the regular supply of electric energy.

2.3 Energy Production Profile

On the basis of hydrological studies the annual energy generation with a 95%

machine availability would be 18.95 MU in the 75% dependable year by

installing one machine of 2.5 MW.


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Energy Production profile is attached as Annexure 2.

2.4 Project Budget

The detailed project report for 2.5 MW capacity has been approved by HPSEB.

The total project cost is estimated as Rs. 19.13 crores. However, the additionalcost for second stage capacity addition of 2.5 MW is estimated at Rs. 8 crores.

Thus the final cost of the project after total completion shall be Rs.27.13 crores

for 5 MW.

2.5 Completion Schedule

The project is scheduled for completion within 24 months from the date of

financial close.

2.6 Licenses And Permits

2.6.1 Implementation Agreement (IA)

The implementation agreement has been signed on 28th

August 2002 for

establishing 2.5 MW Suman Sarwari Project. The IA is valid for a period of 40

years from the date of commercial operation of the project. There is a provision

of an extension of 20 years on mutually agreeable terms. The government of

Himachal Pradesh has agreed to facilitate all the required permits and clearances

for the project. There is a provision for 10% free power to the state government

after 15 years of commercial operation. For first 15 years there is no requirement

from free power.

2.6.2 Techno Economic Clearance (TEC)

The techno economic clearance for 2.5 MW capacity at a total cost of Rs. 19.13

crores has been received from HPSEB vide its letter dated 22nd June 2004 as per

the following table:

1. Civil Works 1299.67

2. Electrical & Mechanical works 367.36

3. Transmission works 34.05

4. Cost without IDC & FC 1701.08

5. Escalation 55.56

6. Interest during construction 134.58

7. Financial charges 22.00

Total 1913.22

2.6.3 Environment and Forest clearance

Environment and forest clearance has been received vide letter dated 7th

April

2004 from Divisional Forest Officer. The costs related to diversion of forest land


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and cost of trees etc has already been deposited. All related clearances have been

applied for and the following approvals are expected shortly:

IPH

Fisheries

Pollution control board (Will be granted after IPH and Fisheries clearance

are obtained)

3 SPONSORS & THE COMPANY

3.1 Project Company

Usaka Hydro Powers Private Limited (UHP) holds all the permits and clearances

in its name. The project company has been incorporated on 2001. The registered

office of the company is located in Delhi.

3.2 Ownership Structure

Currently, the company is owned by 5 Shareholders holding 100% equity in the

company. As per the above shareholders agreement, the share holding of these 5shareholders will be diluted to 40% and the remaining 60% shall be subscribed

jointly by Moring Advokat AS, Norway and Sudhir Gupta.

3.3 The Shareholder

The 40% share holding is held by 3 individuals namely Mr. Umesh Anand, Mr.

Manjit Singh, Mr. H K Bindal.

The remaining 60% is held by Mr. Morten Ringvold and Mr. Sudhir Gupta. The

combined estimated net worth of all the 5 share holders is about 8-10 crores.

3.3.1 Umesh Anand & Co.

Mr. Umesh Anand is an industrialist and running multiple factories

manufacturing variety of electric fans. Cooler kits, exhaust fans etc. under the

brand name of Usaka fans.

3.3.2 Sudhir Gupta.

Mr. Sudhir Gupta has more than 22 years 8 years with NTPC and 4 years with

Powergrid. 2 years each with JK Corp, Kvaerner Energy, Norway. For last 6 years

he has been a retainer consultant to Statkraft SF and its subsidiary company SN

Power Invest AS, Norway.

Experienced in the field of Power Generation, Transmission and Distribution

projects dealing primarily in preparation of feasibility reports, Financial analysis,Risk assessment, tariff schedules, Power Purchase Agreements (PPA), project

marketing, preparation of bids for power projects (Technical & Financial

Proposals), Contract Conditions, Techno-Commercial negotiations, Contract

Agreements, post contract management, arbitration etc.

3.3.3 Moring Advokat AS

Mr. Morten Ringvold is a senior legal advisor to Statkraft Norfund Power Invest

As who is also the proprietor of Moring Advokat AS which is a company formed


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in Norway. Mr. Morten Ringvold has more than 25 years of industrial experience

in various projects for last 4-5 years has been involved in advising hydro power

companies.

4 POWER MARKET

4.1 Market

The private sector continues to grow, and the demand for electricity is

maintaining its annual growth of 10-12%. The annual GDP growth was 6.4% in

2003, and the current expectation is above 8% for 2004. Stocks traded in the

energy sector have increased substantially over the last 12 months, following the

enactment of the new Indian Electricity Act last May. Tata Power stocks have

increased by 200 % over the last 12 months, while the Reliance Energy stocks

have soared 234 % in the same period. The power sector in general, and

hydropower development in particular, has received more attention than ever by

governments and private developers in the last quarter.

In the Northern Grid where this projects is located, the demand/supply gap isestimated to 2200 MW at present, increasing to about 9900 MW in 2011-12.

Clearly, there is a market for power in the Northern Grid.

4.2 Customers

This project has a power purchase agreement with HPSEB. All the electricity

produced from this project shall be sold to HPSEB under a PPA where Power

will be sold at a unit price of Rs. 2.50 per Kwh. IN case of default of HPSEB

UHP shall be free to sell this electricity directly to the customers. It should be

possible to achieve a tariff of more than Rs. 2.50 from other customers than

HPSEB. For e.g. Power Trading Corporation. Currently Malana power company

is selling electricity to Haryana at a tariff of Rs. 2.80 per Kwh under a short term

contract.

4.3 Power Purchase Agreement (PPA)

The Power Purchase Agreement has been signed with HPSEB on December 23rd,

2005 at a tariff of Rs. 2.50 per kwh. The payment of electricity tariff will be at

the interconnection point at 33 KV level. The term of PPA is for 30 years.

5 PROJECT FINANCING & ECONOMICS

5.1 Financing Structure and Plan

The project cost of Rs.19.13 crores is proposed to be financed with a debt equity

ratio of 70:30. Based on this, the debt component works out to Rs. 13.4 crores

and equity component of 5.73 crores.


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The existing promoters shall contribute 40% of the proposed equity amounting to

Rs. 2.3 crores and the new promoters (Moring Advokat AS and Sudhir Gupta)

will bring Rs. 3.44 crores.

5.2 Assumptions

The project assumes 75% dependable year water flow in the river for the

purposes of generation calculations. The flow measurements have been carried

out by HPSEB for 28 years and the data can be treated as reliable. It has been

observed that the flows as measured during 2001-03 have been much smaller

when compared with the data provided by HPSEB. It can be explained due to

very low hydrology in the area and most of hydro plants have been generating

below their design enrgy in these years. However, the flow measurements during

this year have been normal and corresponds to the observed data of HPSEB.

The 75% dependable generation has been calculated at 18.95 MUs and energy

available for sale after deducting 0.5% of trans foundation losses and 0.5% ofauxiliary consumption works out to 18.76 MUs for first 15 years of operation.

For the remaining 15 years the energy available for sale is 16.88 MUs. The tariff

as per PPA is Rs. 2.50 per unit.

O&M costs are assumed as 2.5% of the capital cost as against the GOI guidelines

of 1.5%. The escalation in O&M is assumed as 6%. The rate of interest on debt

component is assumed at 10% with 6 monthly 24 installments. Interest of

working capital is assumed to be 12%. The corporate tax rate of 35% has been

used in the calculations. The project assumes 10 year tax holiday granted to the

power projects during which Minimum Alternate Tax (MAT) of 7.84% has been

assumed.

The following upsides has not been included in the financial calculations.

1. Revenue generation from sale of carbon credits

2. Capital and interest subsidiae available from MNES

3. Possible escalation in electricity tariff

5.3 Discounted Cash Flow/ Return

The present value of the cash flows for equity investment of Rs. 5.74 crores has

been worked out at Rs. 14.39 crores with the discount rate of 12%. The net IRR

to the investors on profit after tax is calculated at 30%. Project appears to havestrong cash flows and high profits.

5.4 Tax

The GOI guidelines allowed 10 year tax holiday within a block period of 15

years. Due to differential rat of depreciation for income tax and the normal book

depreciation it is possible to improve the above IRR by synchronizing the tax

holiday period commencing from the date when book profits starts appearing.


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This situation has a positive effect on the returns to the share holders. GOI

guidelines also allow advance to be taken against book depreciation of 3.4% in

order to make principle repayments. The project calculation has been done to

synchronize the depreciation with the principle repayment.

The details are provided in the attached financial model.

6 DEVELOPMENT IMPACTS

6.1 Environmentel and Social Impacts

i. Regular power supply will reduce the use of petroleum products and fuel wood

resulting in reduction in the process of deforestation. Hydro-electricity is a

cleaner form of energy thereby it will reduce the emission of green house gases.

ii. The power generated from local small/mini/micro hydel power projects can also

be used for irrigation and other necessities of the area. Consequently the concept

of cash crops cultivation can be popularized for the economic uplift of the people.

iii. This valley is very fertile and suitable for the cultivation of cut-flowers. Flori-

culture is an effective tool for the economic uplift of the people of this area.Poly green houses will have to maintain a temperature condition necessary for the

survival of cut flowers and hydro electricity will prove very useful in doing so.

iv. To preserve the perishable items like fruits, vegetables, flowers and seeds, it is

required to keep these items in cold stores. In case of flowers like tulips, the

flower bulbs are given different temperature treatment before sowing them in the

fields. If we have small/micro hydel power units network spread over the entire

area, this problem can be solved by the construction of small cold stores and

hydro-electricity can be used to energize these cold stores.

v. Some villages are located in district Kullu at far flung locations where there is no

road and the possibility of being connected by road is also remote in the near

future due to high cost of construction. This makes the production of cash crop in

this area uneconomical, as transportation is a major hindrance. To solve this

problem it is proposed to popularise the rope-way concept which is least

disturbing to the local ecology and environment as no hill slope cutting is

involved and chances of massive land slide, desilting and erosion are negligible

as compared to roads. Rope-way neither lead to deforestation nor they are too

costly. Their maintenance cost is low whereas in case of roads, removal of land

slides, checking of soil erosion and restoration due to snow damages consumes

considerable amount of funds and also results in disruption of traffic causing loss

to the local people. Moreover, distance and time required for transportation will

also be reduced considerably. And as these remote villages are generally

surrounded by dense forests, therefore, construction of road will also result in

felling of thousands of trees. Therefore, power available from the local hydelunits can be utilised for operating these ropeways and this scheme can also be

helpful in promoting tourism as an alternative.

vi. Power generated from this hydel power project can be used for setting up small

scale industries, thus self employment opportunities can be generated to raise the

living standard of the people of the area.

This project will also reduce the migration of population from these remote

localities to urban areas by providing the chances of self employment & other job

facilities.


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7 PROJECT RISKS

7.1 Completion Risk

The project has two small tunnels of 300 and 400 meters length each. All other

works are surface works and have very little underground geological risksinvolved. The civil works are simple in nature and there are very limited risks for

timely completion from technical perspective.

7.1.1 Construction risk/Cost and time overruns

The project will be constructed with an experienced turnkey civil contractor for

the complete civil works being carried out by one contracting company. Electro

Mechanical works and balance of plant works will be sourced from

internationally renowned suppliers of equipment in order to maintain cost and

time deliveries.

7.1.2 Quality of works

The project will be managed by very experienced civil engineering and electrical

engineering experts. The quality of the contractors will be monitored by an

independent quality engineers hired by the project company in order to reduce the

quality related risks during construction.

7.2 Operating Risk

7.2.1 Market Risk

The project will sell its entire energy to HPSEB under a long term PPA at a fixed

price. The project is not assuming any market related risks like volume or price

risks.

7.2.2 Hydrological risk

Hydrology risks can be covered through an insurance cover. However, it is not

proposed to cover this at this stage.

7.2.3 Plant availability risk

The project will have one unit of 2.5 MW in the first stage. Since the project will

have new unit, the availability of 95% considered in hydrology calculations is

considered to be very safe. However, an extension will be definitely brought in

immediately after confirming the generation and the size of the second unit fixed.

At that stage the plant availability risk will be reduced substantially.

7.2.4 Commercial risks

HPSEB has so far not reported any default on its payment obligations to its

existing private developers. Further, PPA conditions stipulate the sale to third

party in the event of failure of this obligation of HPSEB. This is easily achieved

due to the fact that market prices of electricity are higher than Rs.2.50 per kwh

even today.


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8 STATUS OF PROJECT

The company has already finished certain critical and important activities with

regards to the progress on the construction work of the project. They have been

explained as below.

i) Issue of E&M Tender to Various Bidders- Global Tender notice for E&M

works of 2.5 Suman Sarwari Hydro Power Project (P) Ltd was issued in 4

leading news papers on 2nd May 06 (Photo Copy of text of notice ) is

attached for your ready reference please.

ii) Based on our notice we had received very positive response from reputed

Bidders both from India & abroad. On their request we have issued our

Electro and Mechanical Tenders to following Companies /Bidders.

Voith Siemens hydro Private Limited New Delhi.

VA Tech Escher Wyss Flovel Ltd Faridabad. Gugler Hydro Energy Austria.

Kirloskar Brothers Limited Pune.

HPP Energy (INDIA) Pvt.Ltd. New Delhi (Indo-French joint venture)

P&R Engg Services Chandigarh India.

Teerupati corporation korba for M/s Zhuzhou Electric Locomotive

Research Institute China.

Company is expecting a healthy competition from the above mentioned bidders for

our E&M Tender.

iii. For Carrying out the Civil Works of the Project Global Tender notice for issue

of tenders of construction of Tunnels segment of the project was advertised in the

news papers on 29th May 06 .

iv. Following contractors/ Firms of Civil works have been asked to furnish their

quotation for completing the total Tunnel works required in our project based on

the conditions mentioned in Tenders for the Tunnel works.

GRT construction Pvt. Ltd of Mandi (HP)

Dawa Lama Govt. Contractor Class A of Rampur Shimla.

Sh. Kalzeng Sherpa of Distt Kullu.

P&R Engg. Services of Chandigarh.

SAI Engineering Foundation of Shimla.

Shri Rajesh Rao of Dist. Kullu (HP)

Shri Rajeev Gupta of Dist. Kullu (HP)

For Construction of Civil works (Tunnels), company has finalized the tunnel

contractor M/s Sai Engineering Foundation at a total price of Rs.2.21 crores and

accordingly a work order dated 17th

July has been issued along with advance

payment of Rs.15 lacs to the contractor towards mobilization.


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v. Tender for Balance of the works of the project e.g. Construction of Penstock,

Construction of conductors system including the desilting &Forebay Tanks and

Power house building with Tail race would be issued shortly.

vi. A site office at Kullu has been established for the purpose of carrying out

preparatory works w e f 1st May 06.

CLEAN DEVELOPMENT MECHANISM (CDM)

Company has been successful in engaging one of the most reputed companies by

name of Perspective GmbH from Hamburg Germany for providing their services

for development of Gold Standard Project document and in turn getting our project

registered through Clean Development Mechanism (CDM).

Once the project is registered on basis of GS PDD, company would be able to

acquire CERs from CDM for approximately 11,000 Tons of carbon di-oxide saved.

For each ton of carbon saved 20 is earned which works out to be 2,20,000 i.e. Rs.

1.2 Crore approximately each year. This profit would accrue to the project besides

normal operating profits. Also to mention that the above additional cash generation isbased in a very conservative figures i.e. when carbon saved is taken only @ 625 gms

per kwh whereas our project can easily be approved for 900 gms / kwh. In that case

profit would be even higher.


17/18

Location map of the project


18/18

Annexure 2

Energy Production Profile 75% dependable year 1985

S. NO. MONTH PERIOD

Energy

Generation2.5 MW

1 Jan I 0.293

2 II 0.266

3 III 0.349

4 Feb I 0.345

5 II 0.368

6 III 0.375

7 Mar I 0.600

8 II 0.600

9 III 0.66010 Apr I 0.600

11 II 0.600

12 III 0.600

13 May I 0.600

14 II 0.600

15 III 0.660

16 June I 0.600

17 II 0.600

18 III 0.600

19 Jul I 0.536

20 II 0.600

21 III 0.66022 Aug I 0.600

23 II 0.600

24 III 0.660

25 Sep I 0.600

26 II 0.600

27 III 0.600

28 Oct I 0.600

29 II 0.600

30 III 0.660

31 Nov I 0.600

32 II 0.396

33 III 0.34334 Dec I 0.303

35 II 0.271

36 III 0.401

Total 18.946

Documents

Information Memorandum_Suman Sarwari Project