09 November 2006

UNFCCC Secretariat Martin-Luther-King-Strasse 8 D-53153 Bonn Germany Kind Attention : CDM Executive Board Re : Response to request for review "12MW Captive Power Project based on Waste Heat Recovery of Industrial Waste Gases", project # 0556 Dear Members of the CDM Executive Board, We enclose the initial response to requests for review on the above project. As requested, we provide below the answers to your comments. The DOE have turned in their replies separately. We appreciate your questions and have done our best to provide you with answers that have been substantiated by third party sources wherever required. Should you need to contact us for any clarification, please do not hesitate to call us. Comment #1 : The additionality arguments as presented by the project participants have not been checked against any third-party source, nor is any of the evidence available in the validation report, PDD, or even referenced in the validation report. This applies to the following important arguments: technological barriers; common practice; and impact of CDM registration. Response : In regard to technological barriers : The technology of our project, waste heat recovery from non-recovery coke oven, is a nascent technology in India. A number of recovery type coke ovens are present in large integrated steel plants, whereas few non-recovery type ovens operate on stand alone basis and all of them were without heat recovery during the time of conceptualizing our project. At the time of conceiving

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our project, there was not only no know-how in India but also we were faced with severe barriers in the nature of risk of thermodynamic shocks from the operation of boilers coupled with non-recovery type coke ovens. The following evidence was provided to the DOE that document these technology barriers.

Annexure 1 : Letter dated 25.5.04 from M/s Techno Electric and Engineering Company Ltd –EPC contractor to ECL for the project (EPC- Engineering, Procurement & Construction).

Annexure 2 : Letter dated 30.3.06 from M/s Techno Electric and Engineering

Company Ltd –EPC contractor to ECL for the project. This has been further substantiated by our boiler supplier, M/S Thermax who are a pioneer in India in the field of designing and manufacturing medium size boilers. They have documented the uniqueness of our project in terms of engineering and design challenges faced by them in the following letter:

Annexure 3 : Letter dated 6th November 2006 from M/S Thermax limited We contacted another reputed boiler supplier for their opinion on our project which they have documented based on their experience in India as follows :

Annexure 4 : Letter dated 7th November 2006 from M/S Thermal Systems (Hyderabad) Pvt. Ltd.

As is evident from these references, the risks posed by this technology were surmounted through detailed design and engineering that required unique engineering and process industry skills. As project proponent, we were inhibited by these concerns to proceed with the project unless the benefits of CDM revenues were available to tide over the pessimistic perception of failure scenarios. It was indeed a bold decision by us, who have a pioneering business in DI pipes in India, to risk capital and reputation for the cause of mitigating climate change. Our initiatives were lauded by experts and stakeholders and we are happy that our project provided the impetus for this technology in India through the alleviation of fears on technology barriers. In regard to common practice : We request UNFCCC to take note that one of the registered projects (ref # - Project 0351; Title - Power generation from waste heat of non-recovery type coke ovens at JSPL, Raigadh, Chattrisgarh State, India) has mentioned in the PDD that there are only four known projects (including the project proponent ECL’s project) in India to set-up a captive power plant based on waste heat from non-recovery type coke ovens. Of the four players, Electrosteel Castings Ltd. (ECL) and its sister concern Lanco Industries Ltd. (Lanco) are the two units recognized in the Project 0351 PDD and validated by the DOE. The fourth unit is Sesa Kembla Coke Company, Goa. JSPL is located in Chattisgarh, India and Sesa Kembla in Goa, India. Thus both ECL (in

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Eastern Region) and Lanco (Southern Region) are deemed to be pioneers in their own regions respectively to set-up a power plant based on non-recovery type of coke ovens. A survey conducted by ECL for the Eastern Region further proves that except ECL and JSPL all the other non-recovery based coke units do not have captive power plant based on waste gas from the coke oven batteries:

Sl. Name of Unit Location 1 Kalimati Steel Pvt. Ltd. Kharagpur, W.B. 2 Wellman Carbo Metaliks Kharagpur, W.B. 3 Jaiswal Neco Raipur,

Chhattisgarh 4 Shree Mahavir Carbon Limited Cuttack, Orissa 5 Shreeji Coke Combine (P) Ltd. Cuttack, Orissa 6 Apex Fuels Pvt Limited Cuttack, Orissa 7 Nandi Ghosh Coal & Coke (P)

Limited Cuttack, Orissa

8 Purbi Bharat Coal Products Limited Cuttack, Orissa 9 Neelachal Carbon Metallics Limited Cuttack, Orissa 10 I B Industries Cuttack, Orissa 11 Pyramid Coke Industries Cuttack, Orissa 12 Shree Jagannath Cuttack, Orissa 13 Shri Hanuman Coke Cuttack, Orissa 14 MB International Cuttack, Orissa 15 Konark Met Coke Cuttack, Orissa 16 Wellman Cuttack, Orissa

Also, out of a total of 30 non-recovery type coke oven units in India, as given in Annexure5, only the following five have so far installed power plant based on waste heat from the flue gas of non-recovery type coke oven batteries:

Name of Unit Location Electrosteel Castings Ltd Haldia, West Bengal (Eastern

region) Jindal Steel Works Torangullur, Karnataka (Southern

region) Lanco Industries Ltd. Srikalahasthi, A.P. (Southern

region) Jindal Steel & Power Ltd. Raigarh, Chhattisgarh (Eastern

region) Sesa Kembla Coke Co.Ltd Amona, Goa (Western region)

Annexure5 : List of major Non-recovery type coke oven plants in India

Please refer Annexures 3 and 4, where this is further substantiated.

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Further, the Project# 0351 claims to be the “first of its kind in the region” with evidence of starting date of project implementation from January 2005. It should be noted that ECL has started the implementation of the project in January 2004 after it issued the first letter of intent to the boiler manufacturer ‘Thermax Limited’ and paid advance money (copy of the LOI for the boiler has been submitted to the DOE as evidence). Furthermore, as a public evidence of the project to move in the line of CDM requirements, ECL conducted stakeholder meeting on 8th December 2004, whereas the registered project (ref# 0351) conducted its public hearing on 29th January 2005 as per the registered PDD and validation report. This further proves that ECL is the first project proponent in the host country to initiate the set-up of waste heat based power plant from non-recovery type cokeoven with CDM consideration as the part of the project. Please refer to Annexure 3 and 4 that substantiate this further. In regard to impact of CDM registration:

In the PDD we have reiterated that the registration of the project activity as a CDM project and financial benefits accrued thereby would encourage other entities in similar nature of work to pursue such kind of initiatives. Also it might trigger industries in other sectors (such as metals, power etc.) to look into their processes and identify opportunities wherein waste heat recovery would be materialized. Thus CDM registration would result in reducing GHG emissions and promoting new and cleaner technology. Annexures 1, 2, 3, and 4 contain letters from design and engineering partners and equipment suppliers. These documents refer to orders from other promoters in the sector in similar activities after they worked with ECL and surmounted the technological risks and challenges.

We have identified above that there is another similar project (Project # 0351) that is registered with UNFCCC that began after the conceptualization of the Electrosteel project. We think this is another evidence to show that our pioneering work was providing impetus for other entrepreneurs to conceive projects along similar lines. Comment #2 : The PDD states that “The crediting period for 12 MW of the installed capacity shall commence on 01/04/2006.” However, the crediting period cannot start before project registration. Response : We refer to decision in EB 26 which states that Clarification regarding registration procedure relating to retro-active crediting (paragraph 4 of decision 7/CMP.1)

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86. In order to operationalize paragraph 4 of Decision 7/CMP.1 the Board clarified that project activities that started in the period between 1 January 2000 and 18 November 2004 that have either submitted a new methodology by 11 January 2006 or have requested validation by a designated operational entity by 31 December 2005 can request retroactive credits if: (a) The request for registration of the project activity is submitted by the DOE through the electronic interface 31 December 2006, midnight GMT; (b) Any required registration fee is received by the secretariat before 31 January 2007; and (c) The request is complete and, hence published on the UNFCCC CDM website, by 15 February 2007. We analyze the requirements below: Requirement Document …that project activities that started in the period between 1 January 2000 and 18 November 2004

As mentioned in the PDD the project starting date is 1st January 2004, which is between 1st January 2000 and 18th November 2004. Evidence on start date has been provided to the DOE during the validation.

… have requested validation by a designated operational entity by 31 December 2005 can request retroactive credits if

DOE (DNV) was requested to validate our project before 31 December 2005. The project was web-hosted by DOE for a 30 days period from 31st August 2005 to 29th September 2005.

(a) The request for registration of the project activity is submitted by the DOE through the electronic interface 31 December 2006, midnight GMT; (b) Any required registration fee is received by the secretariat before 31 January 2007; and (c) The request is complete and, hence published on the UNFCCC CDM website, by 15 February 2007.

The request for registration was complete and, hence published on the UNFCCC CDM website, by 30th August 2006 to 26th October 2006 i.e. before 15 February 2007.

Hence the project qualifies for retroactive credits. Comment #3: The arguments for the IRR being below the ECL hurdle rate are not substantiated by any documented evidence. Response :

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During the time of validation, the DOE were provided with information on IRR calculations and background documentation available from our financial and accounting process that were duly checked by them. Out of the various records checked by the DOE, the following documented evidence were duly collected by them. We enclose these documents as below.

Annexure 6 : Internal Circular from Director (Finance) regarding hurdle rate and Calculation on Internal Rate of Return of the CDM project.

Annexure 7 : Papers related to three other projects with IRR

calculations. The above documents substantiate the argument as stated in the PDD that the IRR was below the ECL hurdle rate without CDM benefit. We hope that the above responses clarify the review request comments of the EB members and we look forward to the registration of the project. Thanking you. Yours faithfully, for Electrosteel Castings Limited

(K. K. Binani) Senior General Manager Contact Details 30 BT Road, Khardha, PO- Sukchar, Kolkata, West Bengal – 700115, India Telephone: 033 - 25532958 / 2987 /2991 FAX : 033 – 25530588 / 1893 Cell : +91 9831213988 E-Mail : kkbinani@electrosteel.com

Annexure 1

Annexure 1

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Annexure 2

Annexure 3

Annexure 4

Annexure 5

List of major non-recovery type coke oven plants in India Sl. Name of Unit Location Capacity(MT/month) 1 Gujarat N.R.E. Coke Jamnagar, Gujarat 20,000 2 Sesa Kembla Coke Co.Ltd. Amona, Goa 23,000 3 Saurashtra Fuels Porbandar, Gujarat 15,000 4 Mahashakti Coke Mundra, Gujarat 30,000 5 B.L.A.Industries Mithapur, Gujarat 15,000 6 Antai Balajee Coke Gandhidham, Gujarat 20,000 7 Usha Ispat Redi, Maharashtra 10,000 8 Shivamani Energy Tuticorin, Tamilnadu 5,000 9 Satvahana Ispat Ltd. Bellary, Karnataka 15,000 10 Coromandal Pvt. Ltd. Vishakhapatnam, A.P. 3,000 11 Electrosteel Castings Ltd. Haldia, West Bengal 12,500 12 Lanco Industries Ltd. Srikalahasthi, A.P. 12,500 13 Jindal Vijaynagram Steel Ltd. Bellary, A.P. 100,000 14 Jindal Steel & Power Ltd. Raigarh, Chhattisgarh 33,000 15 Kalimati Steel Pvt. Ltd. Kharagpur, W.B. 8,000 16 Wellman Carbo Metaliks Kharagpur, W.B. 4,500 17 Jaiswal Neco Raipur, Chhattisgarh 33,000 18 Shree Mahavir Carbon Limited Cuttack, Orissa 2,000 19 Shreeji Coke Combine (P) Ltd. Cuttack, Orissa 900 20 Apex Fuels Pvt Limited Cuttack, Orissa 1,400 21 Nandi Ghosh Coal & Coke (P) Ltd Cuttack, Orissa 3,000 22 Purbi Bharat Coal Products Limited Cuttack, Orissa 7,500 23 Neelachal Carbon Metallics Limited Cuttack, Orissa 4,500 24 I B Industries Cuttack, Orissa 3,000 25 Pyramid Coke Industries Cuttack, Orissa 1,500 26 Shree Jagannath Cuttack, Orissa 1,250 27 Shri Hanuman Coke Cuttack, Orissa 1,500 28 MB International Cuttack, Orissa 1,500 29 Konark Met Coke Cuttack, Orissa 8,750 30 Wellman Cuttack, Orissa 5,000

Annexure 6

Annexure 6

Annexure 7

Annexure 7

Annexure 7

Annexure 7

Annexure 7

Annexure 7