CERC (Terms and Conditions of Tariff) Regulation 2009

Impact Analysis for Coal Fired Power Plants

Annual Fixed Cost

Sl NoComponent1Return on Equity -Post TaxRaised from14 to 15.5/16%2Interest on Loan CapitalNormative loan repayment equal to depreciation for the year3DepreciationRates increased for first 12 years. But AAD abolished4Interest on Working Capital5O&M Expenses6Cost of Secondary FuelNorms tightened. No special provision for stabilization period. Saving to be shared in the ratio of 1:17Allowance in lieu of R&MCapitalization or special allowance8Capital additionNo capital addition. Special allowance after 10 years of commercial operation

Return on EquityFor tariff calculation, cap of 30% on equity component of capital cost. Excess equity treated as normative loan (No Change)ROE enhancedThe prescribed ROE to be grossed up to determine pre-tax ROENormative schedule w.r.t investment approval200-330 MWGreen Field: 33M + 4M +Extension: 31M + 4M +500-600 MWGreen Field: 44M + 6M +Extension: 42M + 6M +660-800 MWGreen Field: 52M + 6M +Extension: 50M + 6M +

Interest on Loan

Loan repayment shall be deemed to be equal to depreciation for that year, starting from first year after CODInterest on loan shall be calculated on the normative average loan of the year at the weighted average interestIf there is no actual loan for a particular year, the last available weighted average rate of interest shall be consideredIf there is no actual loan, then the weighted average rate of interest of the generating company as a whole shall be considered.Refinancing of loan is encouraged for net savings on interestRe-financing cost shall be borne by the beneficiariesNet savings shall be shared between the beneficiaries and the generating company in the ratio of 2:1

DepreciationNormative Life: 25 yearsDepreciable value : 90% of capital costAdvance against depreciation (AAD) abolishedFirst 12 years after COD: Accelerated depreciation. For most items,5.28%Remaining normative life of plant: at a uniform rate. For most items, 2.05% Existing regulation provided uniform depreciation at 3.6%(most items) with provision for AAD to facilitate loan repayment

Interest on Working CapitalCoal cost (Price & GCV of preceding 3months) Pit head: 1.5MNon pit head: 2MSecondary Fuel Oil Cost2MMinimum spares @ 20% of O&M expensesReceivables: 2MO&M expenses: 1MAll expenses to be calculated based on normative plant availabilityRate of interest: Short term PLR of SBI as on 01.04.2009 or 1st April of year of COD, whichever is later)

O&M Expenses (Rs lacs/MW)Escalation @5.72% after 2009-10Separate provision for TTPS, BTPS, Tanda.

Capital Cost

Expenditure on projectExpenditure incurred or to be incurredInterest during construction (IDC)Financing chargesGain/Loss due to foreign exchange rate variation (FERV)Capitalized initial sparesCeiling of 2.5% of project cost Additional CapitalizationCapital expenditure incurred or projected to be incurred after COD and up to the cut off date subject to prudence check by CERC.After cut off date, only that owing to change of law, arbitration or ash utilization.

Operating NormsNormative plant availability factor: 85% (TTPS & BTPS 82%)Gross station heat rate (kCal/kWhr)Existing Station500MW: 2425 (Existing norm 2450)200/210/250 MW: 2500 (No change)BTPS& Tanda: 2825TTPs: 2950New StationOperating margin of 6.5% over design station heat rateCeiling on design TG heat rate and boiler efficiency

Heat Rate CeilingsHeat Rate ceilings will be further reduced by 40 Kcal for units with MDBFP

Normative heat rates (Old v/s New)

Steam Parameter150/535/ 535170/537/537170/537/565247/537/565247/565/593

New Normative cap on stn HR24502443242423802317Existing Normative Stn HR 25002443NANANANTPC StnBongaigaonFarakka -IIIDadri-IISipat-IBarh-IIBoiler Eff0.8472(=0.85)0.8339(=0.85)0.85340.86270.837(=0.85)TG HR19431944.41935.9(=1935)1904(=1900)1838New Nornative HR2434.462436.212414.782345.542302.9Effective Operating Margin6.1%4.48%6.45%6.27%4.8%

Auxiliary Power Consumption200 MW Series8.5% ( No change)500 MW Series and aboveSteam driven BFP6.0% (old 7%)Electrically Driven8.5% (No change)For units with IDCT provision of additional 0.5% (earlier 0.5% for NDCT also)Provision of additional Aux Power of 0.6% during stabilization period withdrawnSpecial provision for some of the old stationsBadarpur : 9.5%Tanda: 12%Talchar: 10.5%No special provision for stations with FGD

Secondary Fuel OilReduced to 1.0 ml/kWh from earlier value of 2.0 ml /kWhProvision of additional SFC of 2.5 ml/kWh during stabilization withdrawnSaving in SFC to be shared in the ratio of 1:1Impact on revenue ~ 1.26%

Capacity Charge & IncentiveNormative Annual Availability Factor increased from 80% to 85%Existing Norm For scheduled generation beyond normative 80% PLF, @ Rs.0.25 per unit additional generationNew NormIncentive is based on availability instead of PLF.In case of fuel shortage, LDC will specify schedule to optimally utilize the MW and energy capability during peak and off-peak hours. DC will be equal to the maximum peak-hour ex-plant MW schedule.Capacity Charge =AFC x (0.5 + 0.5x(Actual Av/Normative Av))For first 10 years of commercial operation =AFC x (Actual Av/Normative Av)After 10 years of commercial operation

Issues and ImpactsHeat RateOperating margins of plant with poor design TG heat rate or boiler efficiency is reducedFor 25 kCal/kWhr reduction in HR, typical pit head station would lose 0.41% in generation revenueAvailability & IncentiveTypical change due to change in normative availability and incentive normPlant operating at 75% Availability : (+) 0.36% of FCPlant operating at 80% Availability : (-) 2.94% of FCPlant operating at 85% Availability : (-) 1.78% of FCPlant operating at 90% Availability : (-)0.62% of FC

Issues and ImpactsAuxiliary PowerNegative Impact on 500 MW plants with TDBFP (reduction of 1%)Aprox. reduction in revenue ~ 0.64%500 MW plants with MDBFP and 200 MW plants not affected (8.5%)Provision for MDBFP in supercritical2.5% against expected increase of ~4%No special provision during stabilizationReturn on EquityPositive impact on revenue ~2.08%

Impact on Top Line and Bottom Line Assumptions:Unit size=500MW (Less than 10 years old)Availability=PLF=85% Pit Head Station

New NormOld Norm% Impact on RevenuePercentage of ProfitROE15.5014.002.0810.45SFC1.002.00-1.26-6.33AP6.507.50-0.64-3.20HR2425.002450.00-0.41-2.05Av & Incentive(Plant Av = 85%)85.0080.00-1.04-5.23COG1.26% LessBase-6.35