The Tata Mundra Project

1. The Tata Mundra Project

2. Tata Mundra Project, India

3. Tata Mundra Project, India • 4,000 MW greenfield coal-fired plant located near Mundra Port, Gujarat • India’s 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 US$4.2 billion to be financed by equity (US$1 billion) and debt from IFC (US$450 million), ADB (US$450 million), Korean ECAs (US$800 million), local banks (US$1.5 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, India’s 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)

4. 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 Project’s 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 India’s power needs • New capacity will need to come from a combination of coal, hydro, gas, nuclear and wind projects India’s Installed Capacity (132,329 MW)

5. India’s 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 potentialmainly in the North and Northeast • High capital costs, long gestation periods and E&S 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 • GoI is emphasizing the use of cleaner technologies

6. The Ultra Mega Power Plant (“UMPP”) Initiative • GoI made a comprehensive assessment of India’s future energy needs and alternatives for energy supply • Detailed consultation process with various stakeholders • Large scale capacity additions needed to address the country’s 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

7. Development Impact • Access to electricity is essential for reduction in poverty and improved health, education and economic development • Project will increase India’s 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 • Project’s tax transfers of about US$790 million to GoI • Growth in port and power transmission capacity will further create infrastructure and employment for the country

8. 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 Project’s bankability • Success is important to boost confidence of domestic & international investors in India’s 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 • IFC’s presence contributes indirectly towards mitigation of political and regulatory risk • Project requires very long maturities (20 years) to achieve a low tariff for consumers • IFC’s 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 • IFC’s involvement requires CGPL to comply with more stringent E&S standards than GoI’s

9. Fit with IFC’s 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

10. 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 IFC’s and Indian National Ambient Air Quality Standards • Project will meet IFC’s E&S Performance Standards which are more stringent than those of GoI Social Issues: • No physical displacement resulting from Project’s 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

11. 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 • Project’s 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