Mundra Ultra Mega Power Plant

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The Mundra Ultra Mega Power Plant Project involved the construction of a 4,000MW power plant facility divided in 5 units of 800 MW each near Mundra Port, Gujarat state. The facility was to be located in a special economic zone near Tundawad village about 22km from Mundra in Kutch district. The project was near the coastal port of Mundra and to be fueled by imported coal. The 12 to 15 million tonnes a year of imported coal would be transported to the site by a merry-go-round railway system from Mundra port, which can accommodate 125,000 deadweight tonne vessels and will hosts four 750-tonne an hour cranes and 1,500-tonne an hour conveyer belts to handle the coal. Mundra Ultra Mega Power Plant Project was one of the nine ultra mega power projects in the 2005-06 national program to eliminate the electricity shortage in the country. The program was developed by Power Finance Corp (PFC), Ministry of Power, and Central Electric Authority (CEA). The Government of India stipulated the use of supercritical technology to lower carbon emissions. Mundra Ultra Mega Power Plant Project together with Sasan Ultra Mega Power Plant Project were the first two Mega power plants (at least 4,000 MW) tendered by the government of India. In February 2006, PFC received 30 expressions of interest for the 4,000 mw Mundra project in Gujarat. The companies that expressed interests included Adani Exports, Aditya Birla, Ashok Leyland, Essar Power, India Power Corporation, Khanjee Holding of Texas, Korea Electric Power, Reliance Energy Ltd, Suez Energy, Sumitomo, Mitsui of Tokyo and Tronoh Alco of Malaysia. In June 2006, PFC received 13 Request for Qualifications for Mundra. Among the companies that submitted Request for Qualifications were Tata Power, Anil Ambani group firm Reliance Energy Ltd, Larsen and Toubro, Essar Power, Lanco and AES India, Sumitomo Corp and Khanjee Holdings said. In early December 2006, the tender took place using a 25-year levelised tariff as bidding criterion. PFC received six bids in the tender for Mundra power project. All bids came from domestic investors which included Adani group, Sterlite group, Tata Power, Essar Power, Larsen & Toubro, and Reliance Energy. Foreign investors who presented RfQ (Request for Qualification) pulled out at the time of bidding (China Light and Power and AES Corp) citing insufficient time for bidding as one of the key reasons for staying out of the tender. On December 24, 2006, PFC announced Tata Power as the winner by quoting the lowest tariffs for Mundra power project. Tata Power outbid the other five bidders by quoting Rs 2.26 per unit tariff (or US 5.65 cents per kWh) for the Mundra project. The offers of the other bidders for Mundra were Reliance Energy with a bid of Rs 2.66 per unit, Adani Exports Rs 2.70, Larsen & Toubro Rs 3.22, Sterlite Rs 3.74 and Essar Rs 4.06 per unit. Lanco-Globoleq consortium won Sasan Ultra Mega Power project by quoting a tariff of Rs 1.196 per unit. These tariffs were the average levelized tariffs for the supply of power from the plants to utilities in several states over a 25-year period. The bids were significantly lower than expected and were attributed to the good project planning. On December 27, 2006, run Power Finance Corporation signed with Tata Power the letter of intent to develop the project. Tata Power was awarded the project on build, own, operate & maintain (BOOM) basis and was granted 15 months for achieving financial closure and 64-69 months to commission the first of the five units of 800 MW each. The implementation of these projects was facilitated by changes in the legal framework as well as better project preparation. According to the 2003 electricity law, developers of the build-own-operate projects might sell electricity from the plants directly to high tension consumers or distribution licensees if the state-owned power utilities default on payment agreements. The lack of a proper payment security mechanism was the reason why the earlier mega power project program – involving thermal power projects with more than 1,000MW of capacity each – did not attract private investors. The PFC set up Coastal Gujarat Power Ltd as a shell company to facilitate the preparation of project reports, land acquisition, fuel and water arrangements, environmental and other administrative approvals, payment security mechanisms and other terms and conditions with the buyers of electricity from the projects. Through the shell companies, power purchase agreements (PPAs) for the Mundra project were signed with distribution companies in five states in October 2006. Power Grid Corp of India Ltd (PGCIL was setting up the transmission system for the proposed ultra mega power plant projects in November 2006. Electricity from the project would be distributed as followed 1,900 Mw to Gujarat, 800 Mw to Maharashtra, 500 Mw to Punjab and 400 Mw each to Haryana and Rajasthan with Gujarat Distribution Company was nominated as the lead procurer on behalf of all procurers. The signing of PPAs for tariff-based competitive bidding marked the beginning of a new approach to capacity addition, which was expected to facilitate private investment at a faster pace while providing power at the most competitive rates. PFC transferred Coastal Gujarat Power Ltd, the shell company to implement Mudra Ultra Mega power plant, to Tata Power in April 2007. At the same time Tata Power signed the power purchase agreement (PPA) and submitted performance bank guarantees worth Rs 300 crore. In May 2007 Tata Power signed an engineering, procurement and construction (EPC) contract with Korea's Doosan Heavy Industries & Construction Company for supply of super-critical boilers and development of ancillary civic structures. That contracted covered 45% of of the total orders of the project. In June 2007 Tata Power Company Ltd signed a contract with Japan's Toshiba Corp for sourcing five 800-megawatt steam turbine generators. Tata Power also acquired 30% of equity in two major Indonesian coal producers to ensure coal supply for the project. The project cost was US$4.2 billion. Financial closure was achieved in April 2008 with the following financial structure: US$1 billion of equity and the rest in debt. Debt came from IFC (US$450 million), ADB (US$450 million), Korean ECAs (US$800 million), and local banks (US$1.5 billion). The IFC loan had a 20-year tenor. The financing, which was raised by the special vehicle Coastal Gujarat Power, consisted of an INR55.5 billion, 14-year loan, provided by Indian banks and arranged by financial advisor State Bank of India, and an $1.8 billion, 18-year loan from foreign lenders and multilateral credit agencies. Tata provided INR42.5 billion in equity for the project, which is the first of nine so-called ultra mega power projects in India. Underwriting the $1.8 billion tranche were the Asian Development Bank, BNP Paribas, the Export-Import Bank of Korea, International Finance Corp. and Korea Export Insurance Corp. SBI syndicated the Indian tranche prior to closing to Housing and Urban Development Corp., India Infrastructure Finance Co., Oriental Bank of Commerce, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Travacore and Vijaya Bank. Construction started on September 2007 and commissioning was expected on June 2012.