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Challenges for IPP Promotion in the Indian Power Sector

Challenges for IPP Promotion in the Indian Power Sector. Kunio HATTORI General Manager, International Business Department CHUBU Electric Power Co., Inc. February 14, 2008 Japan-India Public Private Partnership Forum 2008. Contents. Ⅰ ． Expanding the relationship between India

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Challenges for IPP Promotion in the Indian Power Sector

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  1. Challenges for IPP Promotion in the Indian Power Sector Kunio HATTORI General Manager, International Business Department CHUBU Electric Power Co., Inc. February 14, 2008 Japan-India Public Private Partnership Forum 2008

  2. Contents Ⅰ．Expanding the relationship between India andJapan Ⅱ. Cooperation in the Indian Power Sector between India and Japan Ⅲ． Business model for the Power Sector Ⅳ． Possibility of IPP business in India

  3. Ⅰ．Expanding the relationship between India and Japan • Joint statement by Japanese government and Indian government (Aug 22.2007-At the official visit of Prime Minister Abe) • Commence immediate negotiation for the conclusion of an EPA (Economic Partnership Agreement) • Development of infrastructure and Promotion of Manufacturing, Trade and Investment (Promoting the participation of Japanese companies in the Indian power sector) • Human Resource Development to promote Manufacturing • India is the top country to receive Japan’s ODA loan. • Japanese auto companies have rapid expansion programs to establish large auto factories in India.

  4. Ⅱ．Cooperation in the Indian Power Sector between India and Japan • Cooperation in large power infrastructure development while sustaining economic growth • ◆ To support improvement of energy efficiency in the Indian Power Sector • ◆ To support environmental issue solutions (air pollution/ global warming)

  5. Ⅱ．Cooperation in the Indian Power Sector between India and Japan Recent ODA Projects (1) BAKRESWAR Thermal Power Plant 1. Project Outline  Project Site: Bakreswar in West Bengal (260km northwest from Kolkata), West Bengal Power Development Corporation Limited (WBPDCL). 3 x 210 MW units (Unit No.1, 2 & 3) - in operation 2 x 210 MW (Unit No.4 & 5) - under implementation. Consulted by J-Power and financed by Japanese ODA loans. 2. Current Situation  COD: Unit.1) Nov. 2000 / Unit.2) Apr.2001 / Unit.3) Oct.2001 / Unit.4) July.2007/ Unit.5) Oct. 2007 3. Main Equipment Boiler Type :Tangential Coal Fired Natural Circulation Manufacture:BHEL Co., Ltd.  Turbine Type :Multi Cylinder Horizontal Tandem Compound Manufacture:Fuji Electric Co., Ltd.

  6. Ⅱ．Cooperation in the Indian Power Sector between India and Japan Recent ODA Projects (2) PULURIA Hydro Pumped Storage Power Plant 1. Project Outline  Project Site: Puluria in West Bengal (50 km from Jamshedpur) Owned by WBSEB. More efficient operations of the electric power system. Primary power source (over 90 percent) is coal-fired. Low load-following capacity, while supplying electricity during evening peak hours. Funded by Japanese government ODA initiatives. It will deliver a maximum power of 900 MW with 4*225MW units. 2.Current Situation (Commissioning)  Unit 1) Jan. 2008/ Unit 2) Nov.2007/ Unit 3) Aug.2007/ Unit 4) July. 2007 3. Main Equipment & Civil Construction Civil Contractor: Taisei Co., Ltd. Main Equipment (Turbine)Type :Francis Manufacture: Toshiba Co., Ltd.

  7. Ⅲ．Business model for the Power Sector The following Business Models can be studied more in order to activate the investments in India ◆ Coal fired Power ◆ Hydro Power ◆ Biomass Power etc...

  8. Ⅲ．Business model for the Power Sector Coal fired Power • Advanced technologies for the development and operation of highly efficient Power Stations, while reducing the environmental impact. - High efficiency generation technology (Ultra Super Critical) • - DeSOx technology • - DeNOx technology • - Dust removal technology • ◆ Know-how of business efficiency provided by Japanese private power companies • ◆ PPP scheme is available in the areas such as fuel transportation and transmission

  9. Ⅲ．Business model for the Power Sector Coal fired Power Public Partnership financed by ODA Transmission State electric company Energy Supplier IPP company Fuel Electricity • Fuel Transportation • - Port • - Road Support Public partnership State government Japanese sponsor(s) ・Tariff intensive ・Tax exemption - Mandatory purchase of generated electricity

  10. Ⅲ．Business model for the Power Sector Coal fired Power Ultra Super Critical Coal Fired Power Plant of CHUBU (Hekinan Power Station in Japan)

  11. Ⅲ．Business model for the Power Sector Hydro Power ◆ India has abundant hydropower potential and is accelerating its development for energy security in the country. ◆ The potential varies from small-mini scale to large scale with or without large reservoirs. ◆ Public sector can contribute to constructing multi-purpose dams, roads (high-ways) and transmission lines financed by an ODA scheme. ◆ Not only a single company but also multiple Japanese companies as a group may contribute to large scale hydropower projects. ◆ India is the top country to provide CDM to developed countries as a host country of CDM. CDM can be applied for small and mini scale hydro schemes.

  12. Ⅲ．Business model for the Power Sector Hydro Power Public Partnership financed by ODA Transmission State electric company Water, agriculture sector Road sector IPP company Electricity Multi purpose dam Road (highway) Support Public partnership CDM Small-mini scale State government Japanese sponsor(s) ・Tariff intensive ・Tax exemption - Mandatory purchase of generated electricity

  13. Ⅲ．Business model for the Power Sector Biomass Power • Bagasse, Rice husk, Wood Chip, Jatropha are abundant non fossil fuels in India. ◆ Using the non fossil fuels above, large scale development of biomass power projects (10MW～) in India are expected. ◆ Development of biomass power project is beneficial to both India and Japan. ◆ Since India heavily depends on fossil fuels, biomass power projects directly and efficiently contributes to the reduction of carbon dioxide emission. Japan needs emission trading to achieve the target goal of emission reduction set by the Kyoto Protocol. (6% reduction compared with emission level in 1990). ◆ India is the top country to provide CDM to developed countries as a host country of CDM. ◆ More than 50 projects in India were approved as CDM project by the UN.

  14. Ⅲ．Business model for the Power Sector Biomass Power State electric company Agriculture Sector IPP company Electricity Fuel • Biomass fuel collection • and supply Support Public partnership CDM State government Japanese sponsor ・Tariff intensive ・Tax exemption - Mandatory purchase of generated electricity

  15. Ⅲ．Business model for the Power Sector Example of CHUBU’s project Biomass Power Rice husk fired power project in Thailand • Installed Capacity 20MW • Completion December 2005 • Generates electric power from rice husk Started operation in December 2005 • State-owned EGAT purchases the electricity • Chubu takes 34.4% share • Our subsidiary handles its operation and maintenance

  16. Ⅲ．Business model for the Power Sector Biomass Power Pichit Power Station of CHUBU Power Plant Storage of rice husk

  17. Ⅳ．Possibility of IPP Business in India • IPPtrack record in Asia by Japanese companies (This data might not cover all of the IPP projects)

  18. Ⅳ．Possibility of IPP Business in India • IPPtrack record in Asia by Japanese companies (This data might not cover all of the IPP projects)

  19. Ⅳ．Possibility of IPP Business in India Japanese utilities and trading houses have accelerated the investment in IPP business in Asia • Suitable conditions for the investment (Example of Thailand) • Healthy financial performance of EGAT(Electricity Generating Authority of Thailand) as the offtaker • Government Support • Dollar-linked tariff system 20 companies participated in the IPP bid in 2007

  20. Ⅳ．Possibility of IPP Business in India General concerns for the investment in India • Data has not shown improvement of the financial performance of the State Electricity Companies. • In the event of PPA default by the State Electricity Company, foreign power developers have less power to resume tariff recovery mechanisms than local IPP developers have. • Tariff is linked only with Rupee, not Dollar. If these offtaker risks, policy risks and exchange rate risks are overcome, India could also be a big target for IPP Business by foreign investors

  21. Ⅳ．Business model for the Power Sector • Win-Win relationship between Local IPP developers and foreign investors • Suitable role sharing • Technological improvements to world standards • Utilization of Environmentally-friendly Japanese energy technology

  22. Thank you very much for your kind attention.

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