The Tata Mundra Project

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The Tata Mundra Project
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Tata Mundra Project, India
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Tata Mundra Project, India

• 4,000 MW greenfield coal-fired plant located near
  Mundra Port, Gujarat
• Indias first private sector power project using
  supercritical technology most energy efficient
  plant in the country
• Awarded by Ministry of Power through tariff-based
  competitive bidding in December 2006
• Levelized tariff of US 5.65 cents per kWh
• Project cost of US4.2 billion to be financed by
  equity (US1 billion) and debt from IFC (US450
  million), ADB (US450 million), Korean ECAs
  (US800 million), local banks (US1.5 billion)
• Will sell electricity to state-owned utilities in
  5 states Gujarat, Maharashtra, Haryana,
  Rajasthan and Punjab
• First unit of 800 MW to be commissioned in July
  2011
• Will import coal from Indonesia and other
  countries through the Mundra Port
• Main equipment from Korea and Japan
• Sponsor is Tata Power, Indias largest private
  sector power company with operating capacity of
  2,355 MW (1,838 MW in thermal, 457 MW in hydro
  and 62 MW in wind)

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Electricity Demand and Supply in India

• India is facing energy shortages of 11 of demand
  and even higher peak shortages of 14
• Demand-supply gap is more acute in Western region
  (where 70 of the Projects power will be
  supplied) with energy deficit at 16 and peak
  deficit at 21
• Capacity additions of 160,000 MW required in the
  next 10 years to satisfy Indias power needs
• New capacity will need to come from a combination
  of coal, hydro, gas, nuclear and wind projects

Indias Installed Capacity (132,329 MW)
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Indias generation alternatives

• Natural Gas
• Limited availability of indigenous gas high
  price of LNG
• Gas shortages expected to persist despite new
  domestic production
• Hydro
• India has substantial hydro potential mainly in
  the North and Northeast
• High capital costs, long gestation periods and
  ES issues
• Run-of-river hydros affected by seasonality of
  rainfall
• Wind
• Intermittent nature makes wind unsuitable for
  large scale base load demand
• India has a moderate wind regime with low load
  factors of 20-25
• Nuclear
• India has ambitious plans for nuclear power but
  faces many challenges
• Coal
• Domestic coal resources are abundant in Eastern
  India
• Imported coal is reasonably accessible for
  coastal locations
• Coal is a viable alternative for meeting base
  load demand

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The Ultra Mega Power Plant (UMPP) Initiative

• GoI made a comprehensive assessment of Indias
  future energy needs and alternatives for energy
  supply
• Detailed consultation process with various
  stakeholders
• Large scale capacity additions needed to address
  the countrys poverty alleviation agenda
• Launched a program in 2005-06 to bid out 9 UMPPs
  of 4,000 MW each
• Economies of scale and competitive bidding
  expected to benefit consumers through lower
  tariffs
• GoI stipulated use of supercritical technology
  because it results in lower carbon emissions
• Coastal Gujarat Power Limited is the first UMPP
  to be awarded in December 2006 financial closure
  required by April 22, 2008
• Since then, two more UMPPs awarded to Reliance
  Power

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Development Impact

• Access to electricity is essential for reduction
  in poverty and improved health, education and
  economic development
• Project will increase Indias generation capacity
  by 3 likely to impact about 16 million domestic
  consumers in the country and, hence, in line
  with our inclusive growth strategy for
  infrastructure
• Creation of 5,000 construction jobs and 700 jobs
  during operations
• Project will sell competitively-priced power at
  US 5.65 cents per kWh and provide affordable
  energy to consumers
• First private sector project in India using
  supercritical technology most energy-efficient
  plant in India (40.5) compared to existing
  assets (about 27) therefore lower GHG
  emissions
• Projects tax transfers of about US790 million
  to GoI
• Growth in port and power transmission capacity
  will further create infrastructure and employment
  for the country

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IFC Role Additionality

• IFC requested by GoI to support this first
  private supercritical project in the country
• IFC participated in pre-bid consultations to
  improve Projects bankability
• Success is important to boost confidence of
  domestic international investors in Indias
  power sector
• Project has significant risks due to size and
  complexity
• First private project using supercritical coal
  technology in India
• Significantly larger than any previous project by
  the sponsor, tripling its generation capacity
• IFC played a key role in financial structuring on
  behalf of all lenders
• IFCs presence contributes indirectly towards
  mitigation of political and regulatory risk
• Project requires very long maturities (20 years)
  to achieve a low tariff for consumers
• IFCs financing is critical to meet large debt
  financing needs
• Local banks are providing significant debt but
  are unable to meet entire debt needs due to
  exposure limits
• International commercial banks have limited
  appetite for long maturities because of
  refinancing risks and poor creditworthiness of
  state-owned offtakers
• IFCs involvement requires CGPL to comply with
  more stringent ES standards than GoIs

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Fit with IFCs Climate Change Strategy in the
Electricity Sector

• India has few scalable alternatives to coal IFC
  encourages use of more efficient coal technology
  which results in lower carbon emissions
• Project will have amongst the lowest GHG emission
  rates globally - lower by 40, 18 and 16
  compared to the average GHG emission rate of coal
  based plants in India, across the globe and OECD,
  respectively
• First supercritical project sets a precedent for
  efficient coal usage consumes 1.7 million tons
  of coal less per year than traditional
  subcritical plants of comparable size
• IFC support for this project will have a strong
  demonstration effect for other developing
  countries that need to develop coal-fired
  generation
• Project may be eligible to sell carbon credits
  under the Clean Development Mechanism

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Environmental and Social Issues

• Environment Issues
• Project site is sparsely vegetated with marginal
  cultivation remotely situated from eco-sensitive
  spots impacted coastal area devoid of mangrove
  vegetation and coral reefs
• Robust air quality monitoring program by CGPL to
  evaluate conformity with IFCs and Indian
  National Ambient Air Quality Standards
• Project will meet IFCs ES Performance Standards
  which are more stringent than those of GoI
• Social Issues
• No physical displacement resulting from Projects
  land acquisition
• Key Livelihood Impact Loss of access to grazing
  land Company has developed a mitigation plan
  consistent with PS 5
• IFC has confirmed Broad Community Support for the
  Project
• Community development plan by Coastal Gujarat
  Power Limited to ensure accrual of Project
  benefits to the affected communities
• IFC will closely monitor compliance with the
  agreed Environmental Social Action Plan

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Risks Mitigants

• Largest ever power plant in India with
  significant implementation risks including delays
  and cost overruns
• Key technology supplied by reputable contractors
  at fixed price adequate contingencies and
  sponsor support for cost overruns and delays
• Fuel supply risks from imported coal could expose
  Project to volatility in coal pricing
• Long term coal supply contract at reasonable
  prices Coastal Gujarat Power Limited plans to
  further diversify coal sources
• Delays in completing the requisite transmission
  lines and port infrastructure
• Transmission port infrastructure developed by
  reputable companies with good track record
• Off-take risks from poor creditworthiness of the
  state-owned utilities
• Projects tariff is highly competitive ensures
  that state utilities are incentivized to pay
  power sector reforms progressing in most Indian
  states
• Refinancing risks after 10 years of operations
  because of insufficiently long tenors from local
  banks
• IFC and other foreign lenders providing long-term
  loans with 20 year tenor which will help mobilize
  other commercial lenders when needed