Extended Annual Review Report

Project Number: 39916 Loan Number: 7242-LN2249 October 2013

Loan NTPC Limited NTPC Capacity Expansion Financing Facility (India) In accordance with ADB’s public communication policy (PCP, 2011), this extended annual review report excludes information referred to in paragraph 67 of the PCP.

CURRENCY EQUIVALENTS

Currency unit – Indian rupee/s (Re/Rs) At Appraisal At Project Completion 24 January 2006 1 April 2013 Re1.00 – $0.023 Re1.00 – $0.018 $1.00 – Rs44.18 $1.00 – Rs54.49

ABBREVIATIONS

ADB – Asian Development Bank CFS – complementary financing scheme CIL – Coal India Limited COD – commercial operations date CSR – corporate social responsibility MGR – merry-go-round NTPC – NTPC Limited (formerly National Thermal Power

Corporation Limited) PAP – project affected person PLF – plant load factor R&R – resettlement and rehabilitation SOE – state-owned enterprise STPP – super thermal power plant TPP – thermal power plant XARR – extended annual review report

WEIGHTS AND MEASURES

GWh – gigawatt-hour ha – hectare km – kilometer MW – megawatt

NOTES

(i) The fiscal year of the Government of India ends on 31 March. The fiscal year of NTPC Limited ends on 31 March.

(ii) In this report, “$” refers to US dollars.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Vice-President

L. Venkatachalam, Private Sector and Cofinancing Operations

Director General T. Freeland, Private Sector Operations Department (PSOD)

Director M. Barrow, Infrastructure Finance Division 1, PSOD

Team leader S. Kondo, Investment Specialist, PSOD

Team members B. Q. Cafirma, Senior Operations Assistant, PSOD J. Gomez, Safeguards Officer (Environment), PSOD M. Manabat, Senior Investment Officer, PSOD J. Munsayac, Safeguards Specialist, PSOD M. Principe, Senior Social Development Officer (Safeguards), PSOD

CONTENTS

Page BASIC DATA MAPS EXECUTIVE SUMMARY i

I. THE PROJECT 1

A. Project Background 1 B. Key Project Features 1 C. Progress Highlights 3

II. EVALUATION 4

A. Project Rationale and Objectives 4 B. Development Impact 4 C. ADB Investment Profitability 7 D. ADB Work Quality 7 E. ADB's Additionality 7 F. Overall Evaluation 7

III. LESSONS 8

APPENDIXES 1. Basic Data: Investment Summary 10 2. Private Sector Development Indicators and Ratings: Infrastructure 11 3. Social Impact 14 4. Environmental Impact 18

BASIC DATA

NTPC Capacity Expansion Financing Facility (Loan No. 2249 – India)

Key Dates Expected Actual

Concept clearance approval July 2005 7 July 2005 Board approval January 2006 27 July 2006 Loan agreement September 2006 21 September 2006 Loan effectiveness September 2006 21 September 2006 First disbursement October 2006 25 October 2006 Final Disbursement March 2008 28 March 2008 Commercial operations date: Sipat STPP stage I (3 x 660 MW): Unit 1 April 2008 1 October 2011 Unit 2 February 2009 25 May 2012 Unit 3 December 2009 1 August 2012 Sipat STPP stage II (2 x 500 MW): Unit 4 June 2007 30 June 2008 Unit 5 December 2007 1 January 2009 Kahalgaon TPP stage II (phase 1: 2 x 500 MW and phase 2: 1 x 500 MW) Unit 5 November 2006 1 August 2008 Unit 6 May 2007 30 December 2008 Unit 7 March 2007 20 March 2010 MW = megawatt, STPP = super thermal power plant, TPP = thermal power plant.

Project Administration and Monitoring No. of Missions No. of Person-Days Due diligence 2 6

Project administration 3 10

Extended annual review mission) 1 30

BITKULIRESERVEFOREST BURKHAN

RESERVEFOREST

Has

deo

Rig

ht B

ank

Can

al

Water Intake Pipe

Has

deo

Riv

er

Khurang R

iver

Khu

Khu

rang

rang

Rig

ht B

ank

Can

al

Left

Ban

kC

anal

Arpa River

Khurang Reservoir

Reservoir

Sipat

Beltara

Ramang

Gataura

Balauda

SIPAT PROJECT

Ash Dyke

Dipika AreaCoal Mines

Coal Loading Point

Silli

Pali

Katchora

Korba

to Janjgir

to R

aipu

r

to Mungels

to Katni

to Howrah

MGR Track

Darri HasdeoDam

Water Pump Station

Project Area

Reserve Forest Area

State Capital

City/Town

Other Town/Village

National Road

Provincial Road

Road

Railway

Canal

River

MGR = merry-go-round

Source: NTPC Ltd. (A Government of India Enterprise)

INDIA

NTPC CAPACITY EXPANSION FINANCING FACILITYSIPAT SUPER THERMAL POWER PLANT -

(as completed)VICINITY MAP

N

13

-03

96

a H

R

Map

1

This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

Gan

ga R

iver

Gerua R

.

Water Intake Pipe

Belbadda

KAHALGAON

MatiaRAJMAHALCOALFIELD

Loading Point

Merry-G

o-R

ound R

ailw

ay

THERMALPOWERPLANT

ASH DYKE

to Sahibganj

to Bhagalpur

Telaundha

Silhan

Khajuria

Arar

Nayanagar

Narayanpur

Bikampur

Dhanora

Amarpur

Salendara

Salempur

Sadanandpurbalsa

Banaspati

Bholsar

Water PumpingStation

Rasulpur

Rampur

Ratanpur

Madarganj

Lalapur

Banshipur

Bhagalpur

Kushapur

Rampur

Akbarpur

Lagma

Project Area

Ash Dyke

State Capital

City'Town

Village

National Road

Road

Railway

River

State Boundary

Boundaries are not necessarily authoritative.

Source: NTPC Ltd. (A Government of India Enterprise)

INDIA

NTPCCAPACITY EXPANSIONFINANCING FACILITYKAHALGAON THERMAL

POWER PLANT - VICINITY MAP(as completed)

N

13-0396b HR

Map 2

This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

EXECUTIVE SUMMARY

In July 2006, the Board of Directors of the Asian Development Bank (ADB) approved a corporate loan of $300 million to NTPC Limited (NTPC), comprising a $75 million facility A from ADB’s ordinary capital resources and a $225 million facility B—through the complementary financing scheme (CFS)—from 32 international commercial banks, to partially finance the construction of two coal-fired power plants: (i) Sipat super thermal power plant (Sipat STPP), stages I and II, in the state of Chhattisgarh with a total installed capacity of 2,980 megawatts (MW), and (ii) Kahalgaon thermal power plant (Kahalgaon TPP), stage II, in the state of Bihar with a total installed capacity of 1,500 MW. This was ADB’s first loan to a state-owned enterprise without sovereign guarantee under ADB’s Innovation and Efficiency Initiative.

As the largest power generator in India, NTPC’s operations and expansion plans are

critical to reducing power deficits in India. NTPC is a financially sound entity with a strong balance sheet, an effective governance structure, and experienced management, and operated on an independent commercial basis.

Evaluation of the project is based on four main criteria: (i) development impact, (ii) profitability of ADB’s investment, (iii) quality of ADB’s work, and (iv) ADB’s additionality. The results of this analysis were aggregated to derive an overall rating for the project.

The development impact of the project is rated satisfactory. It was evaluated in four categories: (i) private sector development; (ii) business success; (iii) contribution to economic development (economic sustainability); and (iv) environmental, social, health, and safety performance. The contribution to private sector development is rated satisfactory. The business success of the project is rated satisfactory. NTPC is the largest power generator in India with 41,184 MW of installed capacity (18.44% of total installed capacity in the country) and, through this corporate financing, was the first utility in India to introduce supercritical boiler technology, which utilizes higher temperatures to convert fuel resources to steam and therefore is a more efficient thermal technology. NTPC is the leader in India’s power sector development in terms of power plant operational performance and, as such, is the benchmark against which private sector power producers are compared. NTPC’s wide range of social undertakings has had a high developmental impact in the many states where NTPC has built its generation assets.

NTPC’s environmental, social, health, and safety performance is rated satisfactory. The

subprojects have satisfactorily met national and ADB requirements on environmental safeguards and sufficiently implemented health and safety programs. NTPC has adequately mitigated the potential environmental impacts in accordance with its corporate environmental and social management system. There were no direct and negative social impacts, as none of the subproject facilities was established on tribal lands and land acquisition for both sites was completed before ADB’s involvement. NTPC has continued resettlement and rehabilitation assistance to the project-affected persons, and it undertook extensive corporate social responsibility activities, including provision of medical services, education, and installation or rehabilitation of rural electricity distribution systems.

The investment outcome of NTPC is rated satisfactory with timely principal and interest

payments. ADB’s work quality and additionality are both rated satisfactory. NTPC was the first utility to introduce supercritical boiler technology for power generation in India. Furthermore, ADB’s participation catalyzed cofinancing of $225 million from 32 international commercial lenders under the CFS (the largest syndication yet undertaken under the CFS or B-loan program, oversubscribed by 300%) and provided comfort to other lenders in respect of project viability, transparency, and corporate governance practices of a state-owned entity.

Overall, the project is rated successful.

I. THE PROJECT

A. Project Background

1. In July 2006, the Board of Directors of the Asian Development Bank (ADB) approved a corporate loan of $300 million to NTPC Limited (NTPC) for two power generation capacity expansion subprojects. The loan was provided in two tranches: (i) facility A, a direct loan of up to $75 million sourced from ADB’s ordinary capital resources, and (ii) facility B, a B-loan of up to $225 million, loaned by ADB as a lender of record under the complementary financing scheme (CFS). 2. The loan proceeds partially financed the construction of two coal-fired power plants in different states in India: (i) Sipat super thermal power plant (Sipat STPP), stages I and II, in the state of Chhattisgarh, and (ii) Kahalgaon thermal power plant (Kahalgaon TPP), stage II, in the state of Bihar. Sipat STPP stage I has three supercritical units with 660 megawatts (MW) of capacity each, and stage II has two subcritical units of 500 MW capacity each, supplying electricity to the western region of India. Kahalgaon TPP stage II has three subcritical units of 500 MW capacity each, and supplies electricity to the northern, eastern, western, and north-eastern regions of the country.1 3. NTPC, being the largest power generator in India with 41,184 MW of installed capacity (18.44% of total installed capacity in India), is responsible for the development, construction, and operation of its power generation projects. NTPC was originally incorporated in November 1975 under the Companies Act as a private limited company 2 and remained a 100% Government of India-owned entity until its initial public offering in October 2004. In November 2004, following the initial public offering, the company listed its shares on national stock exchanges, which improved its financial transparency. NTPC supplies power to the unbundled distribution entities, the state electricity boards (SEBs) across India, based on long-term power purchase agreements. 4. The project was undertaken during the pilot phase of the Innovation and Efficiency Initiative,3 to introduce new financial instruments and modalities to ADB’s existing financial instruments, including lending to creditworthy state-owned enterprises (SOEs) without sovereign guarantee. The loan was the first financing of an SOE pursuant to this initiative. B. Key Project Features

5. The Sipat STPP stage I units represented the first use in India of supercritical boiler technology.4 The units of Sipat STPP stage II and all the units of Kahalgaon TPP stage II are based on traditional, subcritical technology.

1 ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the NTPC Capacity Expansion Financing Facility. Manila.

2 National Thermal Power Corporation Limited changed its name to NTPC Limited in 2005, in line with diversification in business operations beyond thermal power generation.

3 ADB. 2005. Innovation and Efficiency Initiative: Pilot Financing Instruments and Modalities. Manila.

4 Due to higher thermal efficiency, supercritical plants have lower heat rates, lower specific fuel consumption, and reduced emissions. Further, supercritical units have other efficiency advantages such as faster startup times, load changes, and higher adaptability for sliding pressure operations and fuel quality variation. (According to the report and recommendation of the President cited in footnote 1.)

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6. Sipat STPP consists of stage I with a total generating capacity of 1,980 MW (three units of 660 MW) and stage II with 1,000 MW (two units of 500 MW). The Sipat STPP site is located near Sipat village, Bilaspur district, in the state of Chhattisgarh. The site covers 1,753 hectares (ha) and consists of the main plant and switchyard, ash dikes, reservoir, township, and a merry-go-round (MGR) coal transport system.5 For the Sipat STPP stage I units (supercritical), the steam generator package was supplied by Doosan Heavy Industries of the Republic of Korea, whereas the turbine generator package was provided by Power Machines of the Russian Federation.6 For Sipat STPP stage II, Bharat Heavy Electricals Limited (BHEL), a major heavy industry manufacturer in India, was the supplier of both the steam generator package and the turbine generator package. 7. In fiscal year (FY) 2012, total annual electricity generation of Sipat STPP (stages I and II) was 18,490 gigawatt-hours (GWh). All electricity generated by Sipat STPP supplies the western region of India. Coal is mined at the Dipika (extension) mine block of Korba coalfield in Chhattisgarh state and transported through the MGR system and railway wagons to the power station. 8. Sipat STPP stage I utilizes supercritical boiler technology, which improves thermal efficiency and reduces greenhouse gas emissions, unlike subcritical configurations commonly found in India. The supercritical boilers convert fuel into steam at much higher temperatures and thus achieve higher thermal efficiency (40%–42%) than traditional, subcritical boilers (35%–37%). A 1% increase in efficiency can reduce emissions of carbon dioxide, nitrogen oxides, sulphur oxides, and suspended particulates by about 2%–2.5%. Sipat STPP stage I units have achieved a plant efficiency improvement of around 2%–2.5% over the latest subcritical units, implying a close to 4%–6% reduction in greenhouse gases. 9. Kahalgaon TPP (stage II) has an overall generating capacity of 1,500 MW, consisting of phase I of 1,000 MW (two units of 500 MW) and phase II of 500 MW (one unit). All the units at Kahalgaon TPP employ subcritical technology. The plant site is about 3 kilometres (km) south of Kahalgaon township and 4 km west of the Ganges River in Bhagalpur district, in the state of Bihar. The Kahalgaon TPP site covers an area of 1,359 ha and includes the main plant and switchyard, ash dikes, township extension, and an MGR system. BHEL supplied both the steam and turbine generator packages of the Kahalgaon TPP stage II units (subcritical). 10. Total annual electricity generation from the Kahalgaon TPP was 14,707 GWh in FY2012. The generated electricity supplies the northern, western, eastern, and northeastern regions of India. Coal is mined at the Rajmahal Expansion coalfields and transported through an MGR system and railway wagons to the power station. 11. Both the Sipat and Kahalgaon generation stations have 25-year power purchase agreements with multiple SEBs. 12. NTPC has concluded 20-year fuel supply agreements with subsidiaries of Coal India Limited (CIL) for the Sipat STPP stage II and Kahalgaon stage II (phase 1) units. NTPC has mitigated the shortfall through imports, e-auctions, and bilateral arrangements. For the units commissioned after 31 March 2009, including those at Sipat STPP stage I (the supercritical

5 A merry-go-round system is a closed-circuit dedicated rail transport system between the linked coal mine and power plant.

6 As the Russian Federation is not a member country of ADB, none of the loan proceeds was used to finance this equipment.

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units) and Kahalgaon TPP stage II (phase II unit), the fuel supply agreement with subsidiaries of CIL has been signed in August 2013. 13. NTPC was responsible for oversight, schedule management, on-site coordination with suppliers, system integration, and commissioning and completion of the generation units under both subprojects. NTPC conducted international competitive tendering for all major equipment at both Sipat STPP and Kahalgaon TPP. 14. NTPC uses an advanced web-based milestone monitoring system, a project review and internal monitoring system, and an enterprise-wide issues-tracking system for both construction management and power plant operations, which it developed in-house. These systems allowed NTPC to minimize interface risks and costs during project construction and increase the efficiency of daily operations, thus collectively contributing to a lower power cost for the end consumer. 15. Prior to ADB’s Innovation and Efficiency Initiative, 7 all ADB financing to local governments and SOEs required a sovereign guarantee. Under the initiative, ADB is able to finance creditworthy SOEs which, as a result of government decentralization, are sufficiently autonomous to borrow in their own right. NTPC can borrow up to $750 million per annum in foreign currency without the Reserve Bank of India’s approval. The $225 million facility B was syndicated to 32 international banks. C. Progress Highlights

16. All the units of Sipat STPP and Kahalgaon TPP have been commissioned and are fully operational. The commercial operations date (COD) for each unit is shown in Table 1.

Table 1: Commercial Operations Dates of ADB-Funded Projects

Power Station Stage Unit (Capacity) COD

Sipat STPP I #1 (660 MW) 1 October 2011 #2 (660 MW) 25 May 2012 #3 (660 MW) 1 August 2012

II #4 (500 MW) 30 June 2008 #5 (500 MW) 1 January 2009

Kahalgaon TPP II #1 (500 MW) 1 August 2008 #2 (500 MW) 30 December 2008 #3 (500 MW) 20 March 2010

ADB = Asian Development Bank, COD = commercial operations date, MW = megawatt, STPP = super thermal power plant, TPP = thermal power plant. Source: NTPC Limited.

17. Plant performance of all the units since their CODs has been satisfactory. The average plant load factor (PLF) of Sipat STPP was 75.29% in FY2012, generating 18,490 GWh. The average PLF of Kahalgaon TPP was 71.75% in FY2012, generating 14,707 GWh. During FY2009–FY2011, Kahalgaon TPP had relatively low availability and PLF due to the delay in the

7 The initiative (footnote 3) listed numerous creditworthy SOEs that had long-term financial viability to borrow without government guarantees. They constituted the “third generation” of potential borrowers for ADB (sovereign states being the first generation and private sector companies the second generation) and became increasingly important since they operated rather independently from the sovereign. These SOEs played a vital role in creating employment and providing infrastructure and basic public services. Giving them access to affordable long-term credit was critical to promoting economic growth.

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development of the coal mines linked to the plant, especially the expansion of the Rajmahal mine from an annual capacity of 10.5 million tons to 17.0 million tons. The shortage of coal has been temporarily mitigated by importing coal. However, the PLFs of both Sipat and Kahalgaon in FY2012 were above the national average of 69.95%.

II. EVALUATION

A. Project Rationale and Objectives

18. The project’s objectives as set out in the report and recommendation of the President (footnote 1) were to (i) reduce current peak demand and energy deficits to sustain economic growth; (ii) introduce supercritical steam technology to power generation plants in India to improve thermal efficiency and reduce air emissions, thus improving the country’s environmental standards; (iii) catalyze commercial cofinancing through the use of the CFS program; (iv) help NTPC more closely match its liabilities to the cost recovery formula dictated by the tariff order of the Central Electricity Regulatory Commission (CERC); and (v) support NTPC’s strengthening of governance programs and international best practices. These objectives were relevant and were achieved by the project. B. Development Impact

1. Private Sector Development 19. India is in chronic need of additional power generation capacity; after topping 11% in 2011, power shortages during peak hours have remained at 8%–10% during 2012 and were about 7% in April 2013. In response, the government has set an aggressive target of 88,537 MW of capacity addition during the Twelfth Five Year Plan, 2012–2017, of which NTPC is expected to contribute 14,058 MW, or 15.88%. 20. NTPC is India’s largest power generator with installed capacity of 41,184 MW, accounting for 18.44% of the country’s total installed capacity. Contributing 27.51% of the country’s total power generation,8 NTPC is the linchpin of the Indian power sector and has been critical to its growth, both directly and indirectly by seeding key people and ideas into the private power sector. NTPC also provides an extensive range of training programs and conferences in the areas of management; power station operation and maintenance; project construction, erection, and commissioning; and information technology, thereby further contributing to the development of the Indian power sector. 21. The supercritical technology introduced in Sipat STPP marked a technological milestone that fostered competition among generators—they have since installed more than 13,000 MW of supercritical generating capacity. Sipat STPP was followed by the Mundra Ultra Mega Power Project, which has added 4,000 MW (five units of 800 MW) in the state of Gujarat. The project was partially financed by ADB, and was the first example of ultra-supercritical boiler technology installed by a private entity in India. NTPC intends to apply the lessons and experience gained from Sipat STPP to install supercritical technology in the majority of its new coal-fired projects to improve energy efficiency and reduce both coal consumption and greenhouse gas emissions.

8 Capacity is the maximum electric output a generator can produce under prescribed conditions, while generation is the amount of electricity a generator produces over a specific period of time. A generation share that is higher than the capacity share means that either there are other plants that are not fully operational, or the efficiency of the other plants is lower than that of NTPC’s.

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22. 75% of the loan amount was financed through the CFS. It was ADB’s first CFS facility in India and catalyzed $225 million of commercial cofinancing, which helped strengthen NTPC’s relationship with international commercial banks to meet its foreign currency needs. By broadening its exposure to the international commercial banks, NTPC became more familiar with market benchmarks for commercial financing in terms of tenor, interest rates, and other term sheet provisions. 23. Despite majority ownership by the Government of India, NTPC operates like a private sector entity with sound corporate governance practices. As a Maharatna company, a status granted in May 2010, NTPC’s board of directors is empowered to take all financial decisions independently apart from those related to merger and acquisition activities in India and overseas.9 NTPC was cited as a model for SOE reform when the loan was processed, and the company believes in sustainable corporate growth, managing potential conflict of interests by putting in place a system of checks and balances between various stakeholders. Continuous improvements in corporate governance—including appointment of nine independent directors to the 18-member board, establishment of 13 board committees, and a code of conduct for directors and senior management personnel—have led to stronger relationships between NTPC and investors, and improved access to capital markets. 24. NTPC is committed to utilizing by-products from power generation in construction programs and for other productive uses near its plants, thereby reducing the size of its ash ponds and any negative impacts on the environment. NTPC uses ash for construction activities such as road-laying, embankment building, as landfill to reclaim low-lying areas, and as backfill for abandoned mines or pitheads. It also provides the pond ash to manufacturers of ash-based products such as cement, concrete blocks, bricks, and panels in the vicinity of the subproject sites. 25. The impact of private sector development is rated satisfactory. The private sector development indicators and ratings are in Appendix 2.

2. Business Success

26. The project is rated satisfactory for business success.

3. Economic Sustainability 27. The project is rated excellent for economic sustainability.

4. Environmental, Social, Health, and Safety Performance 28. ADB’s loan to NTPC was classified as equivalent to environment category FI under ADB’s Environment Policy (2002). It required NTPC to adopt an environmental management system comprising policy, procedures, and capacity to comply in its operations with the government's environmental laws and regulations and ADB’s policy requirements. Since both

9 In 2009, the government established the Maharatna status, which raises a company's ceiling for investment in joint ventures and subsidiaries from Rs10 billion to Rs50 billion. The Maharatna firms can now decide on investments of up to 15% of their net worth in a project. Currently, there are seven companies in India (NTPC along with Coal India Limited and Indian Oil Corporation was the first to be given this status) granted with the Maharatna status. Three of the major factors and criteria for awarding Maharatna status include (i) 3 years with an annual net profit of over Rs25 billion, (ii) net worth of Rs10 billion, and (iii) turnover of Rs50 billion.

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subprojects were classified as environment category A under ADB’s Environment Policy (2002), an environmental impact assessment was prepared for each and reviewed, plant visits were conducted, and summaries were posted on ADB’s website in accordance with disclosure requirements during project processing. NTPC’s 1995 environment policy and environment management system is constantly updated to reflect its evolving operations.

29. The plants’ main environmental impacts include the decline in air quality, and coal ash and effluent generation. These are mitigated by the use of coal with a low sulfur content of around 0.36% (for Sipat STPP) and 0.40% (for Kahalgaon TPP), a two-stage combustion process that reduces the formation of nitrogen oxides in the furnace, and use of highly efficient (99.9%) electrostatic precipitators that meet particulate emission limits. The plants have also 275-meter-high stacks to ensure better air dispersion. The ash produced is used for brick manufacturing and is being promoted for wider application. The plants implement near-zero effluent discharge and the ash slurry is being deposited in ash ponds. Both plants have an integrated management system that covers quality, environmental, and occupational health and safety management systems, and have also acquired certifications for ISO 9001, ISO 14001, and OSHAS 18001.

30. The plants’ operations and compliance with permitted parameters are periodically monitored by the NTPC Corporate Environmental Management Group and by relevant national and local authorities. Environmental monitoring reports are also regularly submitted to ADB. 31. None of the subproject facilities was established on tribal lands, and land acquisition for both the Sipat STPP and Kahalgaon TPP sites had been completed before ADB’s involvement in the project, therefore both subprojects were categorized as C for involuntary resettlement and C for indigenous peoples. Following payment of compensation, resettlement and rehabilitation (R&R) assistance was extended to project-affected persons (PAPs). R&R assistance in Sipat comprised a combination of land-for-land, skills enhancement, and employment of PAPs either through contractors or directly by NTPC. Following completion of R&R activities at both sites, assistance to PAPs (and other villagers in villages affected by land acquisition for the plant, township, and coal transport system) continued under NTPC’s corporate social responsibility (CSR) activities. As a company policy, NTPC allocates 1% of its previous year profit after tax to CSR and sustainability activities. Sipat and Kahalgaon have used these resources extensively to improve village infrastructure such as roads, community halls, water supply systems, and schools. 32. NTPC has excellent human resources policies and procedures, and has a dynamic relationship with various trade unions and executive associations both at the central office and at the Sipat and Kahalgaon plant sites. It has an effective system to monitor compliance with national labor laws, particularly payment by contractors of minimum wages, retirement plan contributions, and employee insurance. While there were reported issues with payment of minimum wages in the early stages of the project, these were resolved through online banking payments and effective and diligent monitoring by NTPC’s industrial relations cell at the plant site. 33. On gender and development, NTPC awards small community contracts (e.g., maintenance of its expansive plant and township facilities) to local village societies consisting mostly of women. On both sites, NTPC also provides nonformal education and livelihood development programs to local women.

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34. The rating for environmental, social, health, and safety performance of the project is satisfactory. Details of social and environmental impact assessments are in Appendixes 3 and 4, respectively. C. ADB Investment Profitability

35. ADB’s investment profitability is rated satisfactory. D. ADB Work Quality

36. ADB’s effectiveness in the area of screening, appraisal, and structuring is rated satisfactory. The project is in line with ADB’s country, energy sector, private sector development, and environmental protection strategies. It was processed within a short period, which demonstrates ADB’s responsiveness to a client’s needs without compromising good practice standards. 37. Monitoring and supervision quality is rated satisfactory. ADB’s role and contribution to the project is rated satisfactory. The role of ADB was in line with ADB operating strategies, policies, and standards. The project supported the country partnership strategy for India10 in the areas of energy sector, private sector development, and environmental protection strategies. NTPC was ADB’s first financing of an SOE pursuant to the Innovation and Efficiency Initiative. Also, Sipat STPP stage I was the first implementation of supercritical technology in India, demonstrating how thermal projects can convert energy resources into electricity more efficiently while reducing emissions. 38. Overall ADB work quality is rated satisfactory. E. ADB's Additionality

39. ADB’s additionality is rated satisfactory. The corporate loan facility helped NTPC partially finance a project that introduced supercritical boiler technology to power generation plants in India. As has been discussed earlier in the report, supercritical technology achieves higher energy efficiency, consumes less coal, and emits less greenhouse gas than traditional, subcritical technology, and ADB brought value by helping improve India’s environmental standards by supporting NTPC in upgrading and improving its own environmental standards. 40. Through the use of its CFS facility, ADB’s loan has catalyzed $225 million of commercial cofinancing, which helped NTPC strengthen its relationship with international commercial banks. A 3-to-1 leveraging of ADB funds reduced ADB’s overall exposure in the transaction while helping NTPC effectively raise funds from the international banking market. The facility also helped NTPC more closely match its liabilities to the cost-recovery formula dictated by CERC. F. Overall Evaluation

41. The project’s overall rating is successful, with development outcome and ADB’s additionality rated satisfactory.

10 The country partnership strategy, 2009–2012 emphasizes infrastructure development (e.g., transport, energy, urban, agriculture, and water resources management) with a focus on the poorer states. It will help catalyze investment and spur the private sector’s participation in infrastructure development, including through public–private partnerships.

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Table 2: Evaluation of the NTPC Capacity Expansion Financing Facility

Item Excellent Satisfactory Partly

Satisfactory Unsatisfactory

Development Outcome X

Private sector development X

Business success X

Economic sustainability X

Social and environmental impacts X

ADB Investment Profitability X

ADB Work Quality X

Screening, appraisal, and structuring X

Monitoring and supervision X

Role and contribution X

ADB’s Additionality X

Highly Successful

Successful Partly Successful

Unsuccessful

Overall Rating X

ADB = Asian Development Bank, NTPC = NTPC Limited. Source: Asian Development Bank.

III. LESSONS

42. The project demonstrated the following factors that could be replicated in designing new projects: 43. Advancing power generation technology. ADB’s loan financed the introduction of energy-efficient supercritical boiler technology to power generation in India, which set a technological benchmark that has since been followed by private sector players. Knowledge-sharing opportunities provided by NTPC through extensive training and education programs also raised the general technical level of the power sector of India, particularly in relation to newer technologies such as supercritical boilers. This demonstrates that helping a leading industry player with abundant experience to introduce an advanced technology can establish a benchmark and motivate other sector players to use this technology. 44. Financially supporting state-owned enterprises. The loan was the first to an SOE without a sovereign guarantee under ADB’s Innovation and Efficiency Initiative. Successful execution of the loan is attributable to the borrower’s strong balance sheet and cash flow, dominant position in the power sector in India, favorable business environment with backup from the sovereign, and also NTPC’s strong commitment to maintaining robust corporate governance. As the unbundling, corporatization, and professionalization of government entities is a trend that is expected to spread in India and other developing member countries, ADB can add value in future transactions to SOEs with similar attributes. 45. Social and corporate undertakings. NTPC’s initiative to adopt its own corporate policies on both R&R and CSR allowed it to provide entitlements and resettlement assistance beyond what is required under the 1894 Land Acquisition Act. The CSR program is not only a benefit-sharing mechanism but also a means to continue support to PAPs and affected villages, allowing them to build their capacity for sustained improvements in their living standards. These good practices are recommended to be replicated in future projects. They illustrate how extensive undertakings in R&R and CSR contribute to inclusive development of the community.

9

46. Labor and social protection. NTPC has human resource policies and procedures that aim to meet the needs and concerns of its staff and of people working on its behalf. NTPC’s system to monitor compliance with national labor laws was effective in resolving issues related to the payment by contractors of minimum wages, retirement plan contributions, and employee insurance. NTPC has a dynamic relationship with various trade unions and executive associations both at its central office and at the Sipat and Kahalgaon plant sites. NTPC’s internal mechanism to promote and monitor compliance with labor laws can be used as a model for other projects.

10 Appendix 1

BASIC DATA Investment Summary

1. Country India

2. Investment Number/Loan Number

7242/LN2249

3. Type of Business

Conventional energy generation

4. Project Title

NTPC Capacity Expansion Financing Facility

5. Investee Company/Borrower NTPC Limited

6. Participating Agent Bank of America, N.A. Hong Kong

7. Amount of Approved ADB Assistance - Facility A (direct loan) - Facility B (CFS)

$75 million $225 million

8. Environment Category Corporate loan: FI Sipat and Kahalgaon subprojects: A

Appendix 2

11

PRIVATE SECTOR DEVELOPMENT INDICATORS AND RATINGS: INFRASTRUCTURE

Impact of the Project

Rating: Impact to Date

a

Potential Impact (Sustainability) and Risk

to its Realization Impact

a Risk

b

Combined Rating

c Justification / Annotations

1. Beyond Intermediary and Investee Company Impacts

1.1 Private Sector Expansion. Contribution by a pioneering or high-profile project that facilitates or paves the way for more private participation in the sector and economy

Excellent Satisfactory Low Excellent NTPC is India’s largest power generator with installed capacity of 41,184 MW and contributes 18.44% of the country’s generation. Sipat STPP stage I units use the first supercritical technology introduced to India, setting a benchmark of higher energy efficiency at lower fuel cost. NTPC has engaged with private sector players to form joint ventures in the fields of generation, services, manufacturing, coal acquisition, and power trading.

1.2. Competition. Contribution of new competition pressure on public and/or other sector players to raise efficiency and improve access and service levels in the industry

Satisfactory Satisfactory Low Satisfactory NTPC’s introduction of supercritical technology to India marked a milestone of technological advance in India’s power sector, and contributed to the accumulation of competitive and efficient power plants in the country. After Sipat STPP stage I, more than 13,000 MW capacity has been commissioned using supercritical technology, including Mundra with five 800 MW ultra-supercritical units, partially financed by ADB.

1.3. Innovation

Demonstration of efficient new products and services, including in areas such as marketing, distribution, tariffs, production, and technology, and in ways to cover or contain costs and manage demand

Excellent Satisfactory Low Excellent Sipat STPP stage I was the first implementation of supercritical technology in India, demonstrating how thermal projects can convert energy resources into electricity more efficiently and more cleanly, while using less coal for a baseload power plant. This was ADB’s first loan to a state-owned enterprise without sovereign guarantee under its Innovation and Efficiency Initiative. Also, the first loan through CFS in India benefited the borrower by blending the ADB facility and that provided by commercial lenders, which better aligned the aggregated terms of the loan with the liability profile of NTPC.

1.4. Links Relative to investments, contribution of the project of notable upstream or downstream links to business clients, consumers, suppliers, key industries, etc. in support of growth

Satisfactory Satisfactory Low Satisfactory NTPC has been holding training programs and conferences in the areas of management; power station operation and maintenance; project construction, erection, and commissioning; and information technology, thereby contributing to the development of the Indian power sector. NTPC provides the pond ash to manufacturers of ash-based products such as cement, concrete blocks, bricks, and panels. Ash is also used in the laying of roads, construction of embankments, or as landfill to reclaim low-lying areas, including backfilling abandoned mines or pitheads. NTPC allocates 1% of its previous year profit after tax to CSR and

12

Appendix 2

sustainability activities, including those at Sipat and Kahalgaon, and has engaged in improvement of village infrastructure such as roads, schools, community halls, and water supply systems. In Kahalgaon, NTPC is financing the installation or rehabilitation of the rural electricity distribution system in villages surrounding the plant.

1.5. Catalytic Element

Contribution by pioneering and/or catalytic financing, mobilizing, or inducing more local or foreign market financing and/or foreign direct investment in the sector

Excellent Satisfactory Low Excellent 75% of the loan amount was financed through the CFS. It was the first CFS facility in India. Through its use, ADB’s loan has catalyzed $225 million of cofinancing from 32 commercial banks, which helped strengthen NTPC’s relationship with the international banking market to meet its foreign currency financial needs.

1.6. Affected Laws, Frameworks, Regulation

Contribution to (i) better laws and sector regulation for PPPs, concessions, joint ventures, and BOT and BOOT projects; and (ii) liberalization of markets as applicable for better sector efficiency

Satisfactory Satisfactory Medium Satisfactory Kahalgaon TPP’s production of a lot of ash led to a local government regulation that, within the parameter of 100 kilometer from the site, ash brick from the power plants has to be used for all the foundations of national highways, which saves the use of conventional cement and brick.

2. Company Impact With Wider Potential

2.1. Skills Contribution

Contribution to new strategic, managerial, and operational skills with actual or potential wider replication in the sector and industry

Excellent Satisfactory Low Excellent As of fiscal year 2013, NTPC had about 24,000 employees. Its executives were primarily inducted as trainees and trained for 1 year, which involved exposure to state-of-the-art training and hands-on experience. Recruitment of non-executive employees included local populations and affected persons. Recruitment at Sipat and Kahalgaon plants was undertaken according to staffing needs in the non-executive category. Each year, employees were provided with 7 days of training through in-house or external programs.

2.2 Demonstration of New Standards

As seen in new ways to operate the business and compete, and in investee performance against relevant best industry benchmarks and standards

Excellent Satisfactory Low Excellent In discharging its social responsibility as a part of its corporate governance philosophy, NTPC followed the global practice of dealing with CSR issues in an integrated, multi-stakeholder approach covering the environmental and social aspects. NTPC has embarked on various CSR activities in line with Global Compact principles, a voluntary initiative of the United Nations for CSR.

2.3 Improved Governance

As evident in standards set in corporate governance; stakeholder relations; environmental, social, health, and safety fields; and/or in good energy conservation standards, etc.

Excellent Excellent Low Excellent NTPC has won many awards and accolades for excellence in financial reporting and corporate governance. The corporate governance philosophy of NTPC is based on conscience, openness, fairness, professionalism, and accountability and is ingrained in its value system and reflected in its policies, procedures, and systems. NTPC has embedded the code of corporate conduct in each of its systems for environmental, economic, and social sustainability. Besides adhering to provisions of the Listing Agreement, NTPC also

Appendix 2

13

ADB = Asian Development Bank; BOOT = build, own, operate, and transfer; BOT = build, operate, and transfer; CFS = complementary financing scheme; CSR = corporate social responsibility; MW = megawatt; NTPC = NTPC Limited; PPP = public–private partnership; STPP = super thermal power plant; TPP = thermal power plant. a Excellent (4), satisfactory (3), party unsatisfactory (2), unsatisfactory (1).

b Risk: low (4), modest (3), medium (2), high (1).

c The combined rating should weigh impacts and risk to its sustainable realization. Source: Asian Development Bank.

followed the Guidelines on Corporate Governance issued by the Department of Public Enterprises of the Government of India.

3. Overall Private Sector Development Rating The rating (excellent, satisfactory, partly satisfactory, or unsatisfactory) is not an arithmetic mean of the individual indicator ratings, and does not have fixed weights. Actual impact (positive or negative), potential future impact, and the risk to its realization need to be considered.

Excellent Satisfactory Low Excellent Overall, the impact of the project on private sector development is considered excellent. ADB’s loan to NTPC has helped build up generating capacity urgently needed to meet India’s growing demand, and also to increase energy efficiency by introducing state-of-the-art technology.

14 Appendix 3

SOCIAL IMPACT

A. Project Overview

1. The corporate loan to NTPC Limited (NTPC) partially financed the construction of the Sipat super thermal power plant (stages I and II) in Bilaspur, Chhattisgarh State, and the expansion of Kahalgaon thermal power plant (stage II) in Bhagalpur, Bihar State. 2. Land acquisition for both power plants was completed at the time of project processing and no specific impacts on scheduled tribes were identified; hence, the project was classified C under the Asian Development Bank (ADB) policies for involuntary resettlement (1995) and indigenous peoples (1998). An extended annual review mission was fielded to determine the social impacts of the project. B. Review Findings

3. Social safeguards. Acquisition of 1,764.26 hectares (ha) of land for the Sipat plant, township, coal transport system, and other support facilities did not entail any physical displacement.1 The compensation payments to project affected persons (PAPs) have been deposited in an escrow account. Following payment of compensation, resettlement and rehabilitation (R&R) assistance was extended to PAPs. R&R assistance in Sipat comprised a combination of land-for-land, skills enhancement, and employment of PAPs either through contractors or directly by NTPC. A social impact evaluation report conducted by an independent institute in 2008 states that affected people are satisfied with the compensation received, that the rehabilitation grant has helped them, and that assurance of employment from NTPC and its contractors boosted their confidence in the project. Affected persons interviewed by ADB's extended annual review mission confirmed that PAPs have used the compensation and rehabilitation grant to invest in a business and/or purchase either the same size of land in the same village or district, or a larger parcel of land 10–20 kilometers (km) away from the plant site. Some PAPs have invested a portion of their compensation and grant payments into building or improving their houses. Residents of affected villages also benefited from the community infrastructure provided by the project—e.g., village roads, drinking water supply, school buildings, primary health-care centers, village ponds, solar street lights, community halls. 4. Kahalgaon stage II was constructed on land acquired between 1983 and 1987 through various notifications under the Land Acquisition Act. The Kahalgaon plant, coal transport system, and support facilities required 1,359.74 ha of land. During construction, NTPC required its contractors for both Sipat and Kahalgaon to prioritize local people and PAPs for project-related jobs. During operation, small work contracts for vehicle rental or maintenance of facility and township grounds were awarded to societies formed by PAPs or by villagers. The opportunity for permanent employment was also given to qualified PAPs or their family members, subject to the plants’ labor requirements. Job vacancies will continue to be filled on a competitive basis and PAPs will be prioritized for training to enhance their chances of employment either at the Sipat and Kahalgaon plants or at other companies in the district. 5. Following completion of R&R activities at the Sipat and Kahalgaon sites, assistance to affected persons (and other people in villages affected by land acquisition for the plant,

1 An additional 28.32 ha of land identified for acquisition in Gatora village was not acquired and the Chhattisgarh state government has yet to determine suitable vacant and uncultivatable government land. Said land will be used for establishing an ash-based industry (e.g., ash brick manufacturing) and not for ash disposal or ash dikes.

Appendix 3 15

township, and coal transport system) continued under NTPC’s corporate social responsibility (CSR) policy. NTPC allocates 1% of its previous year profit after tax to CSR and sustainability activities. Staff from its human resources department are assigned to implement CSR activities. At the Sipat and Kahalgaon sites, these funds have been used extensively to improve village infrastructure such as roads, community halls, water supply systems, and schools. In Kahalgaon, in particular, NTPC is financing the installation or rehabilitation of the rural electricity distribution system in all villages within 5 km of the power plant. The NTPC Kahalgaon Jivan Jyoti Hospital also provides quality service to the population within 25 km of the plant site. NTPC-supported schools cater annually to about 4,400 students, of whom only 700–800 are from families of employees, and the students often win academic competitions and rewards. 6. NTPC’s CSR program is geared toward local and sustainable livelihood and community development activities that aim to improve the welfare and living conditions of its neighboring communities. NTPC Kahalgaon works with Concerted and Harmonious Endeavour Towards Noble Aim (CHETNA), a nongovernment organization set up by NTPC Kahalgaon employees, in implementing development programs for underprivileged and project-affected persons in Bhagalpur and Godda districts. It provides environmental awareness and agriculture development programs, health and sanitation programs, educational and livelihood assistance, among others. Implementation of the CSR program has been recently subjected to external evaluation by an independent institute, but a final social impact assessment report of the CSR program was yet to be issued at the time of the extended annual review mission. 7. Other social dimensions. At each plant, NTPC has an industrial relations cell tasked to monitor contractors’ performance and compliance with national labor laws. The Assistant Labor Commission also conducts regular visits and spot checks at the plants to check on workers’ labor conditions. To monitor labor conditions and compliance with core labor standards at the plant sites, an engineer-in-charge is assigned to supervise the contractors and their workers. To ensure that contractors do not employ child or forced labor, NTPC requires contractors to submit a list of workers along with their photo, birth date, name of parents, and ID cards before issuing a company ID. To promote nondiscrimination, NTPC’s recruitment is open to competition for all qualified applicants, including women, and employment tests are carried out through external agents. During the early stages of the Sipat and Kahalgaon plant construction, NTPC's industrial relations cells effectively managed several labor-related issues. 2 The company also put in place various measures: (i) all contractors are required to pay wages, and provident fund3 (equivalent to a retirement plan fund) contributions and employee insurance contributions through banks and submit printed statements countersigned by the bank and validated by NTPC's engineer-in-charge; (ii) NTPC's Human Resource Department retains 10% of the contractors’ claims as security deposit, which NTPC uses to directly pay any discrepancies in the workers’ salaries and benefits; (iii) NTPC has a bulletin board in all the plants’ entry points showing the current minimum wage for various types of workers; (iv) NTPC also directed all contractors whose contract cost estimates are based on past minimum wage rates to update those cost estimates and submit revised ones; and (v) the retrenched workers in Sipat have been paid their final settlement and the issue has been closed by the Assistant Labor Commission.

2 These involved (i) various contractors who were not paying the minimum wage; (ii) contractors who were not depositing the pension fund and/or employee insurance contributions; (iii) contractors who had difficulties paying the minimum wage because their contract cost estimates did not factor in the expected increases in the minimum wage; and (iv) a case of a foreign subcontractor who did not give the final settlement to retrenched workers.

3 The Indian provident fund system requires both employers and employees to contribute 12% of "covered salary" up to a limit of INR6,500 per month. On leaving employment the account balance plus accrued interest is paid to the employee as a lump sum.

16 Appendix 3

8. NTPC also has a dynamic relationship with various trade unions 4 and executive associations both at the central office and at the Sipat and Kahalgaon plant sites. The last memorandum of understanding between the NTPC management and the labor union representative was signed in 2007 and amended in 2010 to incorporate enhancements in benefits, including salary increases adjusting for inflation. Labor union representatives from Sipat and Kahalgaon conduct regular meetings with the plant management to convey any staff concerns such as quality of education, transportation, and township improvements. They have also said that while contract workers are not union members, they have covered and discussed their issues on safety and wages as well. Most of these concerns have been rectified by the Sipat and Kahalgaon management, and the labor unions expressed their appreciation for the open communication channels they have with the management. 9. According to nearby villages, the Sipat and Kahalgaon plants opened new employment opportunities, either regular jobs or contractual work, that helped reduce labor force migration. Of the 1,145 regular employees in Sipat, 324 are from project-affected families in the surrounding communities. During the peak construction period, 7,000–8,000 workers were employed, a majority of which (unskilled) were from the local communities. In Kahalgaon, there are more than 1,000 regular employees, of which about 300 were recruited from among the PAPs for stage I, and an additional 86 for stage II. Jobs through other contracting agencies were also provided to more than 1,500 PAPs. 10. Moreover, NTPC also supports its staff by providing training for them and their family members. NTPC headquarters has a memorandum of understanding with the plant sites to conduct two environmental training sessions every year. Training for staff is designed by the Training Management Institute and each plant site has a learning center for specific staff training. In Kahalgaon, NTPC has established the Employees Development Center, which conducts pre-employment and skills upgrade training for NTPC employees and their families. The center also conducts training for external stakeholders such as the state electricity board and state administrative officers, and apprenticeship training for unemployed youths, and it collaborates with CHETNA in conducting computer training for underprivileged people of nearby villages. Some 280 training sessions are carried out by the center each year. 11. On gender and development, NTPC awards small community contracts, (e.g. for maintenance of its expansive plant and township facilities) to local village societies comprised mostly of women. At both plant sites, NTPC also provides nonformal education and livelihood development programs to local women. Due to the nature of its business, fewer women wish to be assigned to power plants in distant locations. C. Conclusions and Recommendations 12. Land acquisition and R&R have been implemented in accordance with national laws and NTPC’s corporate R&R policy, which are progressive and in line with ADB’s Involuntary Resettlement Policy (1995). However, improvement of the socioeconomic status and livelihood of some PAPs remains a challenge at the Sipat plant. The Sipat management is committed to further assisting PAPs as part of NTPC’s CSR program. Such assistance may include livelihood training support, support to self-help groups, scholarships and technical training to improve

4 NTPC workers are members of one of five labor unions present at the plant—Indian National Trade Union Congress (INTUC), All India Trade Union Congress (AITUC), Centre of Indian Trade Unions (CITU), Bhartiya Mazdoor Sangh, and Independent Union.

Appendix 3 17

employability of PAPs, and other community development programs. Sipat was also requested to monitor the incomes and livelihoods of a sample of PAPs in the next social impact evaluation survey, to increase the frequency of its interaction with the affected villages, and to enhance the dissemination of information on available resources (e.g., township hospital services) to PAPs and other villagers. Construction and operation of both plants did not trigger ADB’s ADB’s Policy on Indigenous Peoples (1998). 13. The new Sipat plant and the expansion of the Kahalgaon plant both had positive social development impacts. Both provided employment opportunities to the local community during construction and operation, and catalyzed development in local communities by improving local infrastructure and implementing social programs that benefit the wider community. 14. At the Kahalgaon plant, the work of CHETNA, the Jivan Jyoti Hospital, and Vidya Bhawan, managed by the Kahalgaon Plant Ladies Club, is positively changing the lives of underprivileged children and women in the affected communities. It is recommended that NTPC Kahalgaon assist women trained under the nonformal education program in establishing self-help groups and links to the market. Overall, NTPC is requested to not only report its completed community programs but also to monitor and track the actual development impact of their interventions on the people and communities that they are assisting. 15. As for labor and social protection, NTPC’s human resource policies and procedures continue to evolve to meet the needs and alleviate the concerns of its staff and other people working on its behalf. Its internal mechanism to monitor compliance with labor laws and internationally recognized core labor standards can be used as a model for other projects. 16. NTPC’s overall social performance at the Sipat and Kahalgaon plants is considered satisfactory.

18 Appendix 4

ENVIRONMENTAL IMPACT

A. Overview

1. The project involved a corporate loan to NTPC Limited (NTPC) and is classified as equivalent to environment category FI under the Environment Policy (2002) of the Asian Development Bank (ADB). It required NTPC to adopt an environmental management system comprising policy, procedures, and capacity to comply with national environmental laws and regulations. Since both subprojects were classified as environment category A, an environmental impact assessment was prepared for each and reviewed, plant visits were conducted, and summaries were posted on ADB’s website. B. Review Findings 2. Environmental management and monitoring. The plants’ main potential environmental impacts include the potential decline in air quality, and coal ash and effluent generation. These are mitigated by the use of coal with a low sulfur content of around 0.36% (for Sipat) and 0.40% (for Kahalgaon), a two-stage combustion process that reduces the formation of nitrogen oxides in the furnace, and use of highly efficient (>99.9%) electrostatic precipitators that meet particulate emission limits. The plants have also 275-meter-high stacks to ensure better air dispersion. The ash produced is used for brick manufacturing and is being promoted for wider application. A coal dust extraction and suppression system mitigates dust emissions in the coal-handling areas and a well-established greenbelt program minimizes fugitive emissions along roads at the plants, townships, and surrounding areas. The plants implement near-zero effluent discharge operation and the ash slurry is being deposited in ash ponds. 3. Short- and long-term plans for ash utilization include applications in ash dike raising, road and canal embankments, low-lying area development, building construction, and use by ready-mix concrete plants, brick kiln industries, clay-ash brick industries, as well as other purposes, such as for insulation and thermal resistance applications. Both plants promote ash utilization by conducting workshops for officials of the national highway and railway authorities, brick kiln owners, and ash brick manufacturers; using a demonstration project on clay-ash brick manufacturing to raise confidence among brick manufacturers; and attending various fora to promote ash utilization. 4. Hazardous wastes such as waste oil and old batteries are stored in closed containers and sold to recyclers approved by the Pollution Control Board (PCB). Biomedical wastes are treated using autoclaves and/or disposed of in burial pits. In Sipat, a biomethanation plant is being planned to be put up in 2014 to process biodegradable waste of the plant’s canteen and township. Compensatory plantation and afforestation are also being done at the plant sites, along roadsides and canal embankments, as well as in nearby villages and at educational institutions. 5. NTPC has established a comprehensive environmental monitoring system in its power plants. The plants implement online stack emission monitoring for sulphur dioxide, nitrogen oxides and particulates, and implement online as well as manual monitoring for ambient air quality parameters (particulate matter with 2.5 micrometers or less in diameter (PM2.5) and particulate matter with 10 micrometers or less in diameter (PM10)

1, sulphur dioxide, nitrogen

1 To comply with the 2009 Indian Revised National Ambient Air Quality Standards, PM2.5 and PM10 are currently

Appendix 4 19

oxides, and carbon monoxide) at PCB-approved locations. Effluents from all the treatment plants are being monitored daily, while groundwater quality is being monitored monthly.

6. NTPC’s 1995 environment policy and environmental management system is under revision to incorporate features that cover its current operations. Environment-related policies, procedures, and documents are available on the company’s intranet. NTPC has further installed the Paryavaran Monitoring System to provide rapid and accurate flow of information on environmental performance of its power plants. 7. Both plants are certified for ISO 9001, ISO 14001 and OSHAS 18001, which comprise the integrated management system. At the corporate level, NTPC has consolidated its environment, ash management, and safety group. At the plant level, aside from creating specific sections tasked with ash management and electrostatic precipitator maintenance, each plant has an ash dike management committee and an electrostatic precipitator committee composed of representatives from various operational departments that meet regularly. 8. Health and safety performance. NTPC has a safety group (together with the environment and ash management group) at the corporate and at the plant level. All employees undergo internal and external training in various topics (including occupational health and safety) at its Employee Development Center. To date, no emergency situations have been reported and no adverse issues have been raised as regards health and safety. The Kahalgaon plant has received the “Swarn Shakti Award” for safety. The occupational health and safety plan as well as the disaster management plan are part of the integrated management system. NTPC has also developed and conducted environmental, health, and safety training both for high-level management and operations personnel. Plant environmental personnel also organize environmental, health, and safety awareness campaigns for plant employees and people from nearby communities. 9. Compliance with national and ADB requirements. The plants’ operations and compliance with permitting conditions are periodically monitored by the corporate Environmental Management Group and by relevant national and local authorities. Environmental monitoring reports are also regularly submitted, including to ADB. An environmental monitoring committee composed of representatives from NTPC, academe, industry, nongovernment organizations, and the government has also been constituted to review the plants’ compliance with various safeguard measures at Kahalgaon. C. Conclusions and Recommendation 10. The review and evaluation of safeguard documents coupled with observations and interviews with corporate and plant personnel revealed that the project has satisfactorily met national and ADB requirements on environmental safeguards. NTPC has established and is in the process of updating its corporate environmental and social management system and has adequately mitigated the potential environmental impacts of its power plant operations. It has also sufficiently implemented health and safety programs. The company has regularly submitted environmental monitoring reports to national regulatory agencies and to ADB. For its long-term ash management, it is recommended that NTPC further explore and widen the potential for ash utilization.

being monitored instead of respirable particulate matter and suspended particulate matter.