38 Ritesh Sarve A

DECLARATION
I, Ritesh Biharilal Sarve, a student of MBA (Power Management) 2011-13 batch at Centre for
Advanced Management and Power Studies (CAMPS), NPTI, Faridabad, Roll No.
1120812256,completed my summer internship of eight weeks at Rural Electrification
Corporation Ltd, hereby declare that Summer Internship Report titled A) Entity Appraisal
and Project Appraisal of Private Transmission Project in Western Grid and B) Financing &
Implementation of RAPDRP scheme in Amritsar under PSPCL is an original work and the
same has not been submitted to any other institute for award of any other degree.
A Seminar presentation of the Training report was made on 31/08/12 and the suggestions as
approved by the faculty were duly incorporated.
Presentation In-charge
Ritesh Biharilal Sarve
NPTI, Faridabad
MBA in Power Management

NPTI, Faridabad
Counter Signature
(Director/Principal of the institute)
ACKNOWLEDGEMENT
Words often fail to pay ones gratitude oneself, still I would like to convey my sincere thanks
to the people who helped and extended their support in this Endeavour.
I would like to express my sincere thanks to Mr. Sanjeev Kumar Gupta, G.M. T&D, for
providing me with an opportunity to gain such an enriching exposure in this esteemed
Organization.
I also express my thanks to all the staff at REC, from all departments I got in touch with,
specially Mrs. H.K.Chani, Chief Manager (T&D) for providing us scholarly guidance
throughout the project which helped me to develop an insight into the project topic through
personal consultations. Without whom this dissertation would not have been possible. I
would also like to thanks Mrs. Valli Natarajan, DGM (T&D), Mr. Vivek aggarwal, Dy.
Manager (T&D), Mr. Debashish Mitra, Dy Manager (T&D) and Mr. Raman Garg, Engineer
(T&D) for their valuable inputs in completion of this project.
I also express my gratitude to my college authority and Mr. J.S.S. Rao, Principal Director,
National Power Training Institute, Mr. S.K. Choudhary, Principal Director, (CAMPS) NPTI
& Mrs. Manju Mam, Mrs. Indu Maheshwari, & Mr. Rohit Verma, Dy. Director,NPTI & Mr.
Amit Mishra, Asst.Director, NPTI for arranging my summer internship program with Rural
Electrification Corporation Ltd.
Ritesh Biharilal Sarve

10th Batch
MBA (Power Management)
National Power Training Institute
ii
EXECUTIVE SUMMARY
The Mission of the Government is to provide quality power to all at reasonable rates.
The enactment of the Electricity Act in June 2003 was a major milestone, which paved the
way for development of the power sector within a competitive and liberal framework while
protecting the interests of the consumers, as well as creating a conducive environment for
attracting investments in the sector.
To ensure that the benefits of the increased availability of power reaches the poorest of the
poor living in the rural areas, the Government has implemented the Rajiv Gandhi Grameen
Vidyutikaran Yojana with vigour and determination. The Governments R-APDRP initiative
aims at reducing AT&C losses through application of IT for energy auditing and accounting
and through technological up gradation and strengthening of distribution infrastructure. Apart
from availability and access, it is imperative to supply reliable and quality power.
Rural Electrification Corporation Ltd. working towards fulfilling power sector borrowers
requirements by providing timely and prompt services and by mobilizing the funds from
various sources at lowest possible cost and strive to improve the customers satisfaction on
continual basis.
During the period of 8weeks of my summer internship, I as a student of MBA (Power
Management) got an opportunity of thorough study of the two projects viz.
A) Entity Appraisal and Project Appraisal for the private transmission project in
western grid.
The main objective of this project is setting up 400kv D/C (Quad Conductor) transmission
line, LILO of existing 400KV S/C transmission line & 400 KV D/c (Twin Conductor)
transmission line and Substation work at various locations.
In this project I learned about the procedure of entity appraisal for private utilities. Two
stages of entity appraisal process i.e. a) Preliminary stages and b) Detailed Evaluation
Process.
In project Appraisal, I have studied various technical details of project, Clearances from all
concern entities and financial details of borrower.
iii
B) Financing and Implementation of RAPDRP scheme in Amritsar under PSPCL.

The main objective of the scheme is to reduce the AT & C loss 15% and make the system
economically viable and improve the reliability of supply to project Area.
This project gave me the thorough idea of RAPDRP programme of the government of India.
Also I came to know the financial benefits and other benefits under this scheme.
iv
LIST OF TABLES
Table 1: Category of Schemes Financed Under T&D ............................................................................ 8
Table 2: Business Analysis ................................................................................................................... 23
Table 3: Market Analysis ...................................................................................................................... 24
Table 4: Score Table ............................................................................................................................. 24
Table 5: Financial Capability ................................................................................................................ 24
Table 6: Past Financial Position ............................................................................................................ 25
Table 7: ROCE...................................................................................................................................... 25
Table 8: Operating Margin.................................................................................................................... 26
Table 9: DSCR ...................................................................................................................................... 27
Table 10: Total Debt to Net Worth ....................................................................................................... 27
Table 11: Cash Flow ............................................................................................................................. 28
Table 12: Finacial Flexibility ................................................................................................................ 29
Table 13: Equity Funding Potential ...................................................................................................... 29
Table 14: Raising of Fund..................................................................................................................... 30
Table 15: Project Cost & Indicating Score ........................................................................................... 31
Table 16: Management Analysis........................................................................................................... 31
Table 17: Final Analysis for Preliminary Stage .................................................................................... 32
Table 18: Business Analysis ................................................................................................................. 35
Table 19: Financial Analysis ................................................................................................................ 35
Table 20: Management Analysis........................................................................................................... 36
Table 21: Final Analysis for Detailed Evaluation ................................................................................. 36
Table 22: Transmission Line ................................................................................................................ 37
Table 23: Sub-station ............................................................................................................................ 38
Table 24: Technical Details .................................................................................................................. 38
Table 25: Status of Clearances .............................................................................................................. 40
Table 26: Project Cost ........................................................................................................................... 45
Table 27 : Financing Plan ..................................................................................................................... 47
Table 28: Operational Cost, Price & Assumptions ............................................................................... 48
Table 29: Cost Benefit Analysis ........................................................................................................... 53
Table 30: Pre-Construction ................................................................................................................... 53
Table 31: Construction .......................................................................................................................... 54
Table 32: Post Construction .................................................................................................................. 54
Table 33: Items Included by the Utility Under Part-B .......................................................................... 64
Table 34: Brief Profile of State/Utility ................................................................................................. 67
Table 35: Project Area Details .............................................................................................................. 68
Table 36:Commercial Information........................................................................................................ 68
Table 37:Project Funding ...................................................................................................................... 70
Table 38:Financial Benefits .................................................................................................................. 70
Table 39: AT&C Losses ....................................................................................................................... 71
ABBREVIATIONS AND ACRONYMS

ACSR
APDRP
AT&C
CEA
CO
COD
CPM
CPSU
DPR
EHT
EPC
EPS
FI
FIRR
GIS
GOI
HT:LT
HVDS
IE
LILO
LVDS
MOP
MOEF
NEF
NHA
NTPC
PFC
PGCIL
PTCC
P:SI
PSPCL
RAPDRP
RGGVY
ROW
SCADA
SERC
STPS
Aluminium Conductor with steel reinforcement

Accelerated Power Development & Reform Program
Aggregate Technical and Commercial Losses
Central Electricity Authority (of India)
Corporate Office
Commercial Operation Date
Chief Project Manager
Central Public Sector Undertaking (India)
Detailed Project Report
Extra High Tension
Engineering Procurement& Construction
Electric Power Survey (of India)
Financial Institution
Financial Internal Rate of Return
Geographic Information System
Government of India
Ratio High Tension: Low Tension Ratio
High Voltage Distribution System
Intensive Electrification
Line in line out
Low Voltage Distribution System
Ministry Of Power
Ministry of Environment & Forest
National Electricity Fund
National Highway Authority
National Thermal Power Corporation Ltd
Power Finance Corporation Ltd.
Power Grid Corporation of India Ltd
Power & Telecommunication Coordination Committee
Project System Improvement
Punjab State Power Corporation Ltd
Restructured Accelerated Power Development
&
Reform
Programme
Rajiv
Gandhi
Gramin Vidyutikaran Yojana
Right of way
Supervisory Control and Data Acquisition
State Electricity Regulatory Commission
Super Thermal Power Station
vi
TABLE OF CONTENTS
Declaration.....i
Acknowledgement.........ii
Executive Summery..............iii
List of tables..............................................................................................................................v
Abbreviations and Acronyms.......vi
CHAPTER -1
INTRODUCTION
1.1 TRANSMISSION SECTOR IN INDIA.............................................1
1.2 RAPDRP SCHEME IMPLEMENTATION........................................................................2
1.3 PROBLEM STATEMENT..................................................................................................2
1.4 OBJECTIVE.........................................................................................................................3
1.5 SCOPE OF WORK..............................................................................................................3
1.6 ORGANISATION PROFILE..............................................................................................5
1.6.1 Performance Highlights......6
1.7 CATEGORY OF SCHEMES FINANCED UNDER T&D.........8
CHAPTER-2
LITERATURE SURVEY, POLICY AND RESEARCH METHODOLOGY
2.1 REVIEW OF EXISTING LITERATURE ..........9
2.2 TRANSMISSION POLICIES IN INDIA......................................................................12
2.2.1 The Guideline..12
2.2.2 Objective of the Scheme..12
2.2.3 Scheme Area...12
2.2.4 Scope of Work.............................................................................................................13
2.2.5 Format of the Schemes14
2.2.6 Estimation of load Demand.14
2.2.7 Entity Appraisal...14
2.2.8 Extent of Exposure of Utility..14
2.2.9 Cost Data.....15
2.2.10 Project Implementation.............................................................................................15
vii
2.2.11 Deviation Proposal....................................................................................................16

2.2.12 Project Financing.......................................................................................................16
2.2.13 Enhancement of Loan Amount..................................................................................17
2.2.14 Interest during Construction (IDC)...........................................................................17
2.2.15 Disbursal of the Loan................................................................................................17
2.2.16 Financial Viability.....................................................................................................18
2.3 STEPS FOR APPROVAL PROCESS OF T&D SCHEMES............................................19
CHAPTER 3
ENTITY APPRAISAL AND PROJECT APPRAISAL OF PRIVATE TRANSMISSION
PROJECT IN WESTERN GRID
3.1 INTRODUCTION..............................................................................................................22
A) ENTITY APPRAISAL PROCESS FOR PRIVATE TRANSMISSION PROJECT.......22
A.1 PRELIMINARY APPRAISAL.......................................................................................22
A.1.1 Precondition for Evaluation......................................................................................22
A.1.2 Evaluation process...................................................................................................22
A.1.3 Scoring process.......................................................................................................22
A.1.4 Appraisal Process....................................................................................................23
A.1.4.1 Business Analysis................................................................................................23
A.1.4.2 Financial Analysis.................................................................................................24
A.1.4.3 Management Analysis Framework.......................................................................31
A.1.5 Final Analysis for Preliminary Stage.......................................................................32
A.1.6 Decisions Points based on the Result.....................................................................33
A.2 DETAILED APPRAISAL ..........................................................................................33
B) PROJECT APPRAISAL..................................................................................................37
B.1 Project Details.......................................................................................................37
B.2 Clearances and Approval........................................................................................41
B.3 Project Review........................................................................................................41
B.4 Implementation Plan...............................................................................................44
B.5 Project Cost.............................................................................................................45
B.6 Financial Plan.........................................................................................................47
B.7 Selling Arrangement...............................................................................................47
B.8 Operation Costs, Prices & Assumptions.................................................................48
B.9 Cost Benefit Analysis.............................................................................................53
B.10 Project Risk Analysis............................................................................................53
B.11 Strength & Weaknesses........................................................................................55
viii
B.12 Row & Forest Clearances Related issue ..............................................................56
CHAPTER 4
FINANCING AND IMPLEMENTATION OF RAPDRP SCHEME IN AMRITSAR
UNDER PSPCL
4.1INTRODUCTIOT TO RAPDRP PART-B.........................................................................62
4.2 PROJECT OBJECTIVE.....................................................................................................67
4.3 PROJECT AREA DETAILS.............................................................................................68
4.4 COMMERCIAL INFORMATION....................................................................................68
4.5 SCOPE OF WORK............................................................................................................69
4.6 PROJECT FUNDING........................................................................................................70
4.7 PROJECT BENEFITS.......................................................................................................70
4.8 PROJECT BENEFITS (AT & C LOSSES).......................................................................71
CHAPTER 5
CONLCUSION, LIMITATIONS, RECOMMENDATION AND FUTURE SCOPE
5.1 CONCLUSION..................................................................................................................72
5.2 LIMITATIONS..................................................................................................................73
5.3 RECOMMENDATIONS...................................................................................................74
5.4 FUTURE SCOPE ..............................................................................................................74
6. BIBLIOGRAPHY..............................................................................................................75
ix
CHAPTER 1
1.1 TRANSMISSION SECTOR IN INDIA
Power Sector forms one of the key constituents of Infrastructure essential for the growth of
the Economy. Compared to the other core sectors, the performance of the Power Sector
stands out during the fiscal 2012. A record 20,501 MW was added to the installed capacity in
the year 2011-12 against a capacity addition target of 17,601 MW. In accordance with the
projected estimates of the Planning Commission for XII Five year Plan, 88,425 MW of
capacity addition is required on all India basis. The overall fund requirement for the projected
addition has been estimated at around Rs. 16 lakh crore including commensurate back to back
investment in Transmission and Distribution network.
The transmission systems in the country consist of Inter-State and Intra State Transmission
System. Over decades a robust inter-state and inter-regional transmission system has evolved
in the country. Inter State (and Inter-regional) transmission system is mainly owned by
POWERGRID. In future, Inter-State Transmission System (ISTS) schemes would also be
built through competitive bidding by private sector entities. Already, a number of such
schemes by the private sector or joint venture between private sector and POWERGRID are
under construction. Planning and developing inter-state transmission system for IPP projects
is a challenging task because there is greater uncertainty about their actual materialization,
commissioning schedule and their beneficiaries are most often not known at the time of
transmission planning. The process of transmission planning and development has become
very dynamic in the market driven scenario.
At the time of Independence, power systems in the country were essentially isolated
systems developed in and around urban and industrial areas and the highest transmission
voltage was 132 kV. The state-sector network grew at voltage level up to 132 kV during the
50s and 60s and then to 220 kV during 60s and 70s. Subsequently, in many states (U.P.,
Maharashtra, M.P., Gujarat, Orissa, A.P., and Karnataka) substantial 400kV network was also
added as large quantum of power was to be transmitted over long distances.
Considering the operational regime of the various Regional Grids, it was decided
around1990s to establish initially asynchronous connection between the Regional Grids to
enable them to exchange large regulated quantum of power. Accordingly, a 500 MW
asynchronous HVDC back-to-back link between the NR - WR at Vindhyachal was
established. Subsequently, similar links between WR SR (1000 MW capacity at
Bhadrawati), between ER SR (1000 MW capacity at Gazuwaka) and between ER NR
1
(500 MW capacity at Sasaram), were established. In 1992 the Eastern Region and the NorthEastern Region were synchronously interconnected through a Birpara-Salakati 220kV double
circuit transmission line and subsequently by a 400 kV D/C Bongaigaon -Malda line.
Western Region was interconnected to ER-NER system synchronously through 400kV
Rourkela-Raipur D/C line in 2003 and thus the Central India system consisting of ER-NERWR came in to operation. In 2006 with commissioning of Muzaffarpur-Gorakhpur 400kV
D/C line, the Northern region also got interconnected to this system making an upper India
system (NEW grid) having the NR-WR-ER-NER system.
1.2 RAPDRP SCHEME IMPLEMENTATION
Ministry of Power, Government of India, has launched the Restructured Accelerated Power
Development and Reforms Programme (R-APDRP) in July 2008 with focus on establishment
of base line data, fixation of accountability, reduction of AT&C losses upto 15% level
through strengthening & up-gradation of Sub Transmission and Distribution network and
adoption of Information Technology during XI Plan. Projects under the scheme shall be taken
up in two parts. Part-A shall include the projects for establishment of baseline data and IT
applications for energy accounting/auditing & IT based consumer service centres. Part-B
shall include regular distribution strengthening projects and will cover system improvement,
strengthening and augmentation etc.
It is proposed to cover urban areas - towns and cities with population of more than 30,000
(10,000 in case of special category states). In addition, in certain high-load density rural areas
with significant loads, works of separation of agricultural feeders from domestic and
industrial ones, and of High Voltage Distribution System (11kV) will also be taken up.
1.3 PROBLEM STATEMENT
As there is no license required for Generation of power under the Electricity Act, the
generators who construct dedicated transmission lines defined separately in the Electricity
Act are not being governed by the Work of Licensee Rules applicable to Transmission &
Distribution Licensees. As a result, there are disputes between generating companies and
owner/occupier of the land over which such lines are laid, which are essentially on the issue
that dedicated transmission lines were laid without taking prior consent from the owner or
occupier.
Each state needed to test the adequacy of transmission with respect to various uncertainties
such as fuel shortage, contingencies, high load growth without commensurate increase in
internal generation etc. Such instances would be frequent and have to be factored for such
uncertainties. Investment in a robust transmission system would also allow greater economy
interchange.
1.4 OBJECIVES
The Company has been funding power generation, transmission and distribution projects
besides funding electrification of villages and Pumpsets energisation. It continued to play an
active role in creating new infrastructure and improving the existing ones under the
transmission and distribution network in the country. In line with the countrys objective to
provide power for all by the year 2012 and also reduce the AT&C losses, the Company
has been laying special thrust in expansion and strengthening of existing transmission
network and more importantly modernising of the distribution system by financing
investment in transformers, meters, capacitors etc. and for conversion of Low Voltage
Distribution to High Voltage Distribution System (HVDS).
In line with the national objective of providing power for all by the year 2012 and also of
reducing the AT&C losses, company has been financing schemes for expansion and
strengthening of the transmission network and more importantly, modernising the distribution
system.
1.5 SCOPE OF WORK
(A) Distribution Category- (13 years tenure except for Bulk loan which is for 7 years) Schemes covering voltage up to 11KV on secondary side of sub-station).
(i) System Improvement To overcome the system deficiencies and to improve the quality
and reliability of power supply, REC finances System Improvement schemes, based on
system studies of an electrical distribution network considering present status of system
capacities, connected demand, voltage profiles and level of losses, together with scope for
future load growths. System deficiencies and weaknesses are identified and suitable solutions
identified.
This broadly includes creation of new sub-stations and feeders, augmentation of existing
Capacities of sub-stations and feeders, installation of capacitors, provision of efficient and
tampers proof meters, introduction of innovative equipment and technologies which help in
energy savings and improving the quality of power supply. This results in the supply of better
quality and more reliable power to the consumers and increased revenue to the Power
Utilities. The system improvement programme also includes Bulk loan schemes meant for
procurement and installation of meters, transformers etc, and HVDS schemes meant for
conversion of LVDS to HVDS so as to improve the HT: LT ratio. System Improvement
schemes reduce the AT&C losses to a great extent. Since launch of the programme in 198788, REC has so far sanctioned projects for a loan assistance of Rs 84701 crores till March 12.
(ii) Intensive Electrification The scheme for intensive electrification of electrified villages
has been termed as Projects Intensive Electrification (P: IE). Schemes under this activity
mainly aim at intensive electrification of already electrified villages. The basic purpose is to
cover intensive load development for providing connections to rural consumers in already
electrified villages. The required infrastructure of DTs, 11 KV lines and 33 KV lines are
provided for in these schemes to extend supply to various types of consumers. Financing of
schemes under the nomenclature of IE started from 1998-99 onwards (similar works were
earlier covered under various categories of schemes for village/dalit basti and hamlet
electrification through RECs own sources of financing and under budgetary support). Since
then, till March 12, schemes for a loan assistance of Rs. 6070crores have been sanctioned
under P: IE category.
(iii) Pumpset Energisation REC started this programme to provide funds for schemes for
energisation of pumpsets, in order to facilitate agriculture. Thus the schemes are termed as
Special Project Agriculture (SPA). Since the start of the programme, till March 12, loan
assistance of Rs. 10582crores has been sanctioned under this programme.
(iv) APDRP Programme: The Accelerated Power Developments and Reforms programme
(APDRP) was launched by the GOI in 2001-02. The MoP sanctions the schemes based on the
recommendations of the concerned Advisor cum Consultants, who formulate the DPRs for
the utilities. The role assigned to REC regarding this programme is extending counterpart
funding to the states (which was 50% of project cost earlier, but now revised to 75%), based
upon the sanction of MOP. Since the launch of the programme, REC has provided a loan
assistance of Rs.5899 crores for year 2011-12
1.6 ORGANISATION PROFILE

REC (Rural Electrification Corporation Limited) a NAVRATNA Central Public Sector
Enterprise under Ministry of Power was incorporated on July 25, 1969 under the Companies
Act 1956. REC is a listed Public Sector Enterprise of Government of India with a net worth
of Rs. 14745 Crores as on 31.03.12. REC is a leading public Infrastructure Finance Company
in Indias power sector. The company finances and promotes rural electrification projects
across India, operating through its Corporate Office located at New Delhi and 17 field units
(Project Offices), which are located in most of the States. The company provides loans to
Central/ State Sector Power Utilities, State Electricity Boards, Rural Electric Cooperatives,
NGOs and Private Power Developers.
The Project Offices in the States coordinate the programmes of RECs financing with the
concerned SEBs/State Power Utilities and facilitate in formulation of schemes, loan sanction
and disbursement and implementation of schemes by the concerned SEBs/State Power
Utilities.
MISSION
To facilitate availability of electricity for accelerated growth and for enrichment of quality
of life of rural and urban population.
To act as a competitive, client-friendly and development oriented organization for financing
and promoting projects covering power generation, power conservation, power transmission
and power distribution network in the country.
OBJECTIVES
In furtherance of the Mission, the main objectives to be achieved by the Corporation are
listed below:
To promote and finance projects aimed at integrated system improvement, power
generation, promotion of decentralized and non-conventional energy sources, energy
conservation, renovation and maintenance, power distribution with focus on pumpset
energisation, implementation of Rajiv Gandhi Gramin Vidyutikaran Yojana, a
Government of India scheme for rural electricity infrastructure and household electrification.
To expand and diversify into other related areas and activities like financing of
decentralized power generation projects, use of new and renewable energy sources,
consultancy services, transmission, sub transmission and distribution systems, renovation,

modernization & maintenance, etc. for optimization of reliability of power supply to rural and
urban areas including remote, hill, desert, tribal, riverine and other difficult / remote areas.
To mobilize funds from various sources including raising of funds from domestic and
international agencies and sanction loans to the State Electricity Boards Power Utilities, State
Government, Rural Electric Cooperatives, Non-Government Organizations (NGOs) and
private power developers.
To optimize the rate of economic and financial returns for its operations while fulfilling the
corporate goals viz. (i) laying of power infrastructure; (ii) power load development; (iii) rapid
Socio-economic development of rural and urban areas, and (iv) technology up-gradation.
To ensure client satisfaction and safeguard customers interests through mutual trust and
self-respect within the organization as well as with business partners by effecting continuous
improvement in operations and providing the requisite services.
To assist State Electricity Boards/Power Utilities/State Governments, Rural Electric
Cooperatives and other loanees by providing technical guidance, consultancy services and
training facilities for formulation of economically and financially viable schemes and for
accelerating the growth of rural and urban India.
1.6.1 PERFORMANCE HIGHLIGHTS:-
1.7 CATEGORY OF SCHEMES FINANCED UNDER T&D

Table 1: Category of Schemes Financed Under T&D
S.No
Category
Distribution scheme
(i)
Project system Improvement:

P:SI
(ii)
SI:Meters, Transformers, etc
(iii)
P:SI (HVDS)
For conversion of LVDS to HVDS
(iv)
P:SI (APDRP)
(v)
Project Intensive
Electrification: P:IE
(vi)
Project Pumpsets: SPA:PE
For counterpart funding of APDRP schemes

sanctioned by MoP
To cover intensive load development for
providing connections to rural consumers in
already electrified Villages.
For energisation of pump sets.
2.
Transmission schemes
Project system Improvement:
P:SI
Purpose
To strengthen and improve the sub

transmission and distribution system in the
designated area.
For procurement and installation of meters,
transformers etc.
For evacuation of power from new generating

Stations and to strengthen/improve the
existing transmission System in the designated
areas.
CHAPTER 2
2.1 REVIEW OF EXISTING LITERATURE
Brown et al (2006) state that Electric utilities are on a never ending quest to attain higher
levels of performance for increasingly lowers costs. Often times this leads to project requests
that far exceed budget and resource constraints. Many utilities have started to manage this
problem through well-defined project evaluation and selection processes. At a minimum,
these processes are able to rank project proposals within a given category with respect to
expected cost and expected benefit. More mature systems are able to: trade-off capital,
operations, inspection, and maintenance; look at marginal project value; trade-off risk versus
expected performance; and manage performance over multiple years. The most common
project selection approach is to rank all projects based on the ratio of benefit to cost. By
forcing all projects to be assigned a benefit and a cost, projects across departments and
functions can be directly compared. By ranking all projects based on the ratio of benefit to
cost, projects can be selected in order until budgets are exhausted. This presentation suggests
a new approach to project ranking that is designed for multiple performance targets. This
allows a utility to identify a large number of benefit measures and to set performance goals
related to each measure. Once metrics and targets are identified, the methodology identifies a
project portfolio that achieves all performance targets for the least possible cost. This
methodology has been implemented in an easy-to-use tool called AMPS (asset management
project selection), which allows scenarios and sensitivities to be quickly explored
Project Finance: Project financing is an innovative and timely financing technique that has
been used on many high-profile corporate projects, including infrastructural and power.
Employing a carefully engineered financing mix, it has long been used to fund large scale
natural resource projects, from pipelines and refineries to electric-generating facilities and
hydro-electric projects. Increasingly, project financing is emerging as the preferred
alternative to conventional methods of financing infrastructure and other large scale projects
worldwide.
Project finance is different from traditional forms of finance because the credit risk associated
with the borrower is not as important as in an ordinary loan transaction; what are most
important are the identification, analysis, allocation and management of every risk associated
with the project.
Risk identification and allocation is a key component of project finance. A project may be
subject to a number of technical, environmental, economic and political risks, particularly in
developing countries and emerging markets. Financial institutions and project sponsors may
conclude that the risks inherent in project development and operation are unacceptable
(unfinanced able). To cope with these risks, project sponsors in these industries (such as
power plants or railway lines) are generally completed by a number of specialist companies
operating in a contractual network with each other that allocates risk in a way that allows
financing to take place. The various patterns of implementation are sometimes referred to as
"project delivery methods." The financing of these projects must also be distributed among
multiple parties, so as to distribute the risk associated with the project while simultaneously
ensuring profits for each party involved.
Project Appraisal: It is an assessment of a project in terms of its economic, social

and financial viability. A lending financial institution makes an independent and objective
assessment of various aspects of an investment proposition. It is defined as taking a second
look critically and carefully at a project by a person who is in no way involved or connected
with its preparation. He is able to take independent, dispassionate and objective view of the
project in totality, along with its various components. There are some steps for Project
appraisal.
Management Appraisal:
Management appraisal is related to the technical and
managerial competence, integrity, knowledge of the project, managerial competence

of the promoters etc. The promoters should have the knowledge and ability to plan,
implement and operate the entire project effectively. The past record of the promoters is
to be appraised to clarify their ability in handling the projects.
Technical Feasibility: Technical feasibility analysis is the systematic gathering and
analysis of the data pertaining to the technical inputs required and formation of
conclusion there from. The availability of the raw materials, power, sanitary and
sewerage services, transportation facility, skilled man power, engineering facilities,
maintenance, local people etc are coming under technical analysis. This feasibility
analysis is very important since its significance lies in planning the exercises,
10
documentation process, and risk minimization process and to get approval.

Financial feasibility: One of the very important factors that a project team should
meticulously prepare is the financial viability of the entire project. This involves the
preparation of cost estimates, means of financing, financial institutions, financial
projections, break-even point, ratio analysis etc. The cost of project includes the land
and sight development, building, plant and machinery, technical know-how fees, preoperative expenses, contingency expenses etc. The means of finance includes the
share capital, term loan, special capital assistance, investment subsidy, margin money
loan etc. The financial projections include the profitability estimates, cash flow and
projected balance sheet. The ratio analysis will be made on debt equity ratio and
current ratio.
Commercial Appraisal: In the commercial appraisal many factors are coming. The
scope of the project in market or the beneficiaries, customer friendly process and
preferences, future demand of the supply, effectiveness of the selling arrangement,
latest information availability an all areas, government control measures, etc. The
appraisal involves the assessment of the current market scenario, which enables the
project to get adequate demand. Estimation, distribution and advertisement scenario
also to be here considered into.
Economic Appraisal: How far the project contributes to the development of the
sector; industrial development, social development, maximizing the growth of
employment, etc. are kept in view while evaluating the economic feasibility of the
project.
Environmental Analysis: Environmental appraisal concerns with the impact of
environment on the project. The factors include the water, air, land, sound,
geographical location etc.
ANALYSIS
Offering credit is an operation fraught with risk. Before offering credit to an organization, its
financial health must be analyzed. Credit should be disbursed only after ascertaining
satisfactory financial performance. Based on the financial health of an organization, REC
assigns credit ratings. These credit ratings are used to fix the interest rate, exposure limit and
security criteria.
11
2.2 TRANSMISSION POLICIES IN INDIA

GUIDING PRINCIPLES FOR POWER SYSTEM IMPROVEMENT (P: SI)
SCHEMES
2.2.1 THE GUIDELINES
These guidelines are to help in formulation, appraisal, financing and disbursal of loans under
the P: SI category of schemes (of state and central sector borrowers and CPSUs) aimed at
system improvement of transmission, sub transmission and distribution systems, and
supersedes all guidelines issued earlier in this regard.
2.2.2 OBJECTIVES OF THE SCHEMES
The main stress of the schemes should be on:
i) Reduction in technical and commercial losses in the transmission, sub transmission and
distribution systems.
ii) Providing adequate system support for load development in the project area for the next
five years.
(iii) Providing the required infrastructure (lines/sub stations etc.) for power evacuation,
transmission, sub transmission and distribution.
iii) Improving the voltage regulation so as to bring it within the permissible limit.
iv) Improving the quality and reliability of power supply.
v) Improving the power factor in sub-transmission and distribution systems so as to optimize
the utilization of available system capacities.
vi) Introduction of innovative technology such as computerization, IT related projects, load
dispatch, SCADA, communication, GIS, R&D etc.
vii) Energy Audit.
2.2.3 SCHEME AREA

The scheme area shall normally be minimum of a district or tehsil or Electrical Division for
sub transmission and distribution schemes and a circle for transmission schemes. However, in
case it is not possible to follow the aforesaid stipulations, other schemes may be considered
on the specific merits of the case.
12
2.2.4 SCOPE OF WORKS

The project shall cater primarily to the needs of the transmission, sub-transmission and
Distribution systems of the scheme area for the purpose of system improvement as well as for
meeting the needs of system inadequacies covering all or part of the following need-based
works:
i.
Construction of new sub-stations at all voltage levels in transmission, sub-transmission

and distribution system along with its associated EHT/HT/LT lines/feeders.
ii.
Augmentation of existing sub-stations and lines at all voltage levels in transmission,

subtransmission and distribution system.
iii.
Conversion of LVDS to HVDS.
iv.
Conversion of three phase system to single phase system.
v.
Renovation & Modernisation of the existing HT and LT lines including LVDS.
vi.
Regrouping of loads, bifurcation, alignment and augmentation of existing heavily

loaded LT feeders and installation of energy efficient distribution transformers.
vii.
Provision of reliable and tamper proof meters at Consumers' premises.
viii.
Provision of metering and reliable protection on LT side of distribution transformers.
ix.
Provision of inter utility meters.
x.
Shunt compensation in LT system.
xi.
Bifurcation, alignment and augmentation of existing heavily loaded 11 KV feeders.
xii.
Provision of 11 KV automatically Switched capacitors directly on lines.
xiii.
Provision of 11 KV voltage boosters, sectionalisers etc.
xiv.
Shunt compensation at various substations in sub-transmission system, by installation

of HT capacitor banks.
xv.
Provision of metering equipment on all incoming and outgoing feeders in the

existing/ proposed power Sub-stations.
xvi.
Provision of service connections (utility share), as also its modernization.
xvii. Provision of controlling equipment, such as, circuit breakers, isolators etc. for the
existing feeders and power transformers wherever necessary.
xviii. Communication and automation equipment which includes computerization, IT
Related projects, load dispatch, SCADA, communication, GIS, R&D etc.
xix.
Metering and other Equipment for Energy audit.
xx.
Replacement of worn out sub-station equipment.
xxi.
Study, evaluation and consultancy relating to aforesaid scope of works at S.No (i) 13
(xx), if not specifically covered under the concerned project.

xxii. Preparation of DPR (upto 2% of the cost of the scheme).
2.2.5 FORMAT OF THE SCHEME

The schemes will be submitted by the borrower as per the prescribed structure of the project
report. Also, for transmission schemes, where the utilities are running load flow studies, the
same may be verified and accepted by the CPM, and values as derived from load flow studies
may be indicated in the appraisal note and also used for calculating the required scheme
parameters, without necessarily using the furnished formats. The copies of load flow studies
may be furnished.
2.2.6 ESTIMATION OF LOAD DEMAND

The load growth for the scheme area shall be considered for the next 5 years (referred to as
horizon year) based on either of the following:
(i) Load growth for the utility as per the latest tariff order; or
(ii) Load growth for the state as per the latest available EPS report of CEA.
However, if the projections in the scheme area are substantially higher due to some special
requirements, the same will be clearly spelt out and explained for consideration with proper
justification by the power utility/SEB and recommended by the CPM as a part of the
appraisal report.
The calculation of load growth as above may not be compulsory/applicable in case of certain
transmission schemes where erection of sub stations and lines for power evacuation are
involved and also for certain special types of distribution schemes like HVDS, feeder
separation etc.
2.2.7 ENTITY APPRAISAL

For appraising the capability of the borrower, the latest ratings as specified by the entity
appraisal division of REC may be followed.
2.2.8 EXTENT OF EXPOSURE OF UTILITY

At the time of project appraisal, the CPM shall ensure that the balance credit exposure for the
utility is available.
14
2.2.9 COST DATA

The schemes will be formulated by the utilities based on their latest approved schedule of
rates, and certified by the CPMs that they are as per the latest schedule of rates. If there is a
variation in the cost adopted in the scheme compared to the schedule of rates, the CPM
should give justification for the same. Where the utilities have not formulated the latest
schedule of rates, the cost as per the latest purchase orders can be adopted by the CPMs.
Alternatively, in such cases, the old approved schedule of rates with permitted escalation as
per utilitys norms may be used. In any case, the PO should invariably give its
recommendations in the processing note regarding the acceptability of the cost estimates
adopted by the power utility.
2.2.10 PROJECT IMPLEMENTATION
a) Project Period
Execution of the scheme shall be completed within the scheduled operating period agreed at
the time of the sanction (normally 2 years for Distribution and 3 years for transmission
schemes), with a grace period of one year (at the discretion of REC). However, the scheme
implementation period may be extended beyond the scheduled operating period agreed at the
time of the sanction, by the competent authority.
b) Execution of the project

The power utility in its project report should clearly indicate whether the scheme would be
executed departmentally or otherwise.
Normally, monitoring and quality assurance of the projects (with loan amount more than
Rs.50 crores) during its implementation should form an integral part of the project and this
shall be got done from a third party/independent agency. The cost of the same shall form part
of the loan assistance from REC.
Evaluation of the project (as applicable) after completion shall be got done by the borrower
from a third party/independent agency, the cost of which may also form part of loan
assistance from REC.
15
2.2.11 DEVIATION PROPOSALS

a) In the event there are some deviations in physical activities (as compared to the sanctioned
project) these will be considered on submission of a deviation proposal by the SEB, during
the project period, subject to the following conditions:
i) The deviations made shall be technically justified.
ii) The Financial commitment of REC is limited to the original loan amount including cost
escalation, if any (except for cases covered under 11b and 12 below).
iii) The scheme continues to meet the viability criteria as per stipulated norms (with the
deviations) despite changes in loss savings, sale of energy and overall cost of works, if any.
iv) The submission of the deviation proposal shall precede the submission of the last
reimbursement claim against the scheme by the SEB and approved by Competent Authority
of REC before release of this amount. This deviation proposal shall be forwarded by the
competent authority of the SEB, justifying the change with details of (i), (ii) and (iii) above.
b) However, enhancement in the loan amount due to change in scope of works may be
considered up to 20% of the original sanctioned loan amount subject to the revised proposal
meeting the prescribed technical and financial viability criteria.
2.2.12 PROJECT FINANCING

a) Provision for cost-escalation up to a maximum of 20% of the project cost (due to
unexpected price rise) will be permitted if desired by the borrower. This will hold good for
projects being executed departmentally or on turnkey or on partial turnkey mode. However,
the viability shall be tested on the capital base including 20% cost escalation.
b) Wherever the borrowers have not sought for such cost escalation towards price rise in the
original sanction, but due to unexpected price rise, the actual cost becomes higher than the
sanctioned amount, the borrower will have the option to revise the project cost on the basis of
actual expenditure incurred, subject to a ceiling of 20% of the original loan amount and seek
the approval of the corporation to the revised project cost, giving proper financial
justification.
c) Notwithstanding the above, in case of schemes to be executed on turnkey basis through
competitive bidding, the overall cost of schemes eligible for financing by REC shall be the
cost approved by the competent authority of the utility/Regulator after award of work. In such
cases, viability as applicable, as per guidelines, would be rechecked.
16
2.2.13 ENHANCEMENT OF LOAN AMOUNT
Enhancement of loan amount on account of both change in scope of works as per para 11 (b)
and price rise as per para 12 (b) shall also be considered, but subject to the total ceiling of
20% of original sanctioned loan amount.
2.2.14 INTEREST DURING CONSTRUCTION (IDC)
The Corporation may also consider financing of interest during construction, for schemes
with loan amount more than Rs. 100 crores, which are sanctioned for an implementation
period of more than 2 years.
2.2.15 DISBURSAL OF LOAN
a) The first installment of the loan amount will be released on execution of the loan
documents and compliance of terms and conditions stipulated in the sanction. The release of
first instalment would be regulated as follows:
i) If the loan amount is more than Rs.100 crore, the scheme may be considered as high value
schemes, and the 1st installment limited to 10% of the loan amount.
ii) In case of schemes where loan amount is more than Rs. 50 crore, but is up to Rs.100 crore,
the 1st installment is limited to 15% of the loan amount.
iii) For schemes having a loan amount of up to Rs. 50 crore, the 1st installment may be
considered up to 20% of the loan amount.
iv) Further in case of turn key projects where generally the power utilities provide advance to
contractors, REC may also consider to provide equivalent advance towards 1st installment to
meet this requirement, if sought by the utility, subject to ceiling of such advance up to 15% of
the loan amount.
v) The advance loan as above would be provided only where the borrower has provided
adequate acceptable upfront security to REC.
b) The 2nd and subsequent installments of loan will be released on pro rata reimbursement
basis depending upon the progress of works indicated in the claims preferred by the borrower
after pro rata adjustment of initial advance. However, release of loan installments beyond
17
50% of loan amount of the scheme shall be preceded by detailed monitoring in accordance
with monitoring guidelines.
c) The final 10% of the loan will be released after final field monitoring, evaluation as
applicable and other terms and conditions of sanction of the scheme.
2.2.16 FINANCIAL VIABILITY
i) The scheme shall be considered viable if it yields Financial Internal Rate of Return (FIRR)
of at least 12% on the investment made under the scheme. The viability calculations shall
normally be based on the benefits at the Horizon year on account of loss savings as well as
additional sale of energy. However, other quantifiable benefits as applicable could also be
considered, with suitable justifications and calculations, wherever applicable/available. The
capital base for calculation is the cost of the scheme including cost escalation charges, if any.
ii) However, for schemes for introduction of innovative technology such as computerization,
IT related projects, load dispatch, SCADA, communication, GIS, R&D, inter utility meters,
DT meters etc. and for schemes relating to energy audit, study, evaluation, consultancy etc.
the IRR is not required to be worked out.
iii) Further, in case of transmission schemes, the IRR is not required to be worked out,
provided the schemes are approved/posed to SERC. In exceptional cases, schemes other than
defined above could be considered on merits of the specific case. In such cases, the Utility
shall undertake that these schemes would be included in the next years approval by SERC.
At the time of sanctioning of a transmission scheme, schemes already sanctioned including
by other FIs/utilitys own resources would also be taken cognizance of.
18
2.3 STEPS FOR APPROVAL PROCESS OF T&D SCHEME

Receipt of
Scheme at PO
Evaluation and
Processing of
scheme at PO
Receipt of scheme
at CO complete in
all respect
Processing of
scheme at CO for
Approval
YES
Financial
concurrence
If loan amount is
less than 20 Cr
Approval by screening
committee
NO
Screening
Committee
Financial
Concurrence
If loan amount is
less than 100 Cr
YES
Approval: By CMD
NO
If loan amount is
less than 150 Cr
NO
YES
Recommendation
of CMD
Approval by Executive
Committee
YES
Recommendation
of CMD
Approval by Loan
Committee
NO
If loan amount is
less than 500 Cr
NO NO
Recommendation
of CMD
Approval: By
BOD
19
STEP 1: Receipt of scheme at PO
STEP 2: Evaluation & Processing of Scheme at PO
STEP 3: Receipt of Scheme at CO complete in all respect
STEP 4: Processing of Scheme at CO for approval
STEP 5: If loan amount is less than 20 Crore, Then Financial Concurrence and approval by
the Screening Committee
STEP 6: If Loan amount is more than 20 Crore, then Screening Committee and Financial
Concurrence
STEP 7: If loan amount is less than 100 Crore then approval by the CMD
STEP 8: If loan amount is less than 150 Crore, then recommendation of CMD and then
Approval by the Executive Committee
STEP 9: If loan amount is less than 500 Crore, then Recommendation of CMD and approval
by loan Committee
STEP 10: If loan amount is greater than 500 Crore, then recommendation of CMD and
approval by BOD.
The PO i.e. Project office plays a very vital role in the working of REC. All the details about
the Schemes are collected by PO. PO people are in direct contact with the Utilities or the
borrowers. The borrower first approaches the PO and then the Scheme is appraised by the PO
people.
PO people are also responsible for collecting the needed data and documents as per the REC
formats and guidelines. After the final appraisal by the PO people the Scheme is send to
corporate office (CO) for final technical and financial appraisal.
20
2.4 RESEARCH METHEDOLOGY

Review of project documents:
Review of the project documents will be helpful for understanding of the process of project
appraisal, risk associated with the financing of projects, economic condition of the concern
utility. This documents includes DPR of the scheme arrived for sanction, Appraisal
guidelines of REC, policy guidelines of CERC and presentations by different utilities, bid and
tender documents of transmission project etc.
Review of past experience:
Risk involved in financing private transmission project is more than the central or the state
utility. Past experiences might be helpful in assessing the risks, calculating the base score for the
utility. The projections of future financial performance are also evaluated with past financial
performance.
Project Appraisal: To evaluate the project rating and conducting the feasibility report of a
project based on the DPR/information memorandum/application form and other related
materials submitted by the borrower.
Assesses the capital needs of the business project and how these needs will be met.
Calculation of DSCR, IRR and sensitivity analysis.
Calculating the cost of generation and relevance.
Entity Appraisal: To assess the financial health of organizations that approach PFC for credit
for power projects. This would entail undertaking of the following procedures:
Analysis of past and present financial statements

Examination of Profitability statements
Integrated Rating: Financial feasibility of the project is checked by the calculation of IRR and
DSCR, various cost estimates, tariff calculation, Interest during Construction, working capital
requirement, levellised tariff, etc. On the basis of above data, sensitivity analysis is done at
different input conditions. With the help of these data project is rated and then composite with
entity rating to reach at Integrated project rating.
21
CHAPTER 3
3.1 INTRODUCTION
A) Entity Appraisal Process for Private Transmission
Project
The Entity appraisal process for private developers/utilities will be done in two stages,
namely:A.1. Preliminary Appraisal
A.2. Detailed Appraisal
A.1. Preliminary Appraisal
The evaluation process should be undertaken immediately on receipt of the loan application
form in the prescribed formats duly filled in with supporting attachments and documentation.
A.1.1 Precondition for Evaluation
a) The promoters prior to approaching REC should have identified 50% of the equity to be
eligible for preliminary evaluation. The name of the equity contributor should be clearly
mentioned and identified in the application. A letter expressing interest in contributing
interest in contributing equity to the project must be obtained from the identified equity
contributors.
b) Basic information on the promoters and their firm should be filled in as per the loan
application format. All the promoters who are eligible (contributing more than 10% of equity)
would undergo preliminary evaluation.
A.1.2 Evaluation Process
The preliminary evaluation involves the Business Analysis, Financial Analysis and the
Management Analysis of the promoters. For each of the parameters and sub-parameters
certain weightage have been assigned. Both quantitative and qualitative parameter has been
identified for assigning a score to each parameter. The project clears the preliminary
evaluation stage only if it scores the cut -off grade
Final score = (Business Analysis score) + (Financial Analysis score) + (Management
Analysis score)
A.1.3 Scoring Process
Scoring is being done for promoters both on quantitative factors and qualitative factors. The
relevant score is then considered for the evaluation. The appraising officer needs to assign the
score ranging from 1 to 4.The business analysis score, financial analysis score and
management analysis score of each of the promoters is weighted by their equity contribution
for a combined entity score.
The default by the promoters to any of the financial institutions has been considered as an
overriding criterion for scoring. The default should be analysed in terms of the level of the
default, factors leading to the default and the number of times this has occurred. High
incidence of default or the current default would bring down the score of the promoter to one.
22
However, if the company has not been in default at present but showed tendencies of default
in the past, then the promoter score should be notched down by 33%.
The quality of accounting disclosing companies transactions in transparent and manner shall
also be the subject of the evaluation by appraising officer. The poor accounting quality shall
notch down the overall scored by 15%.
The overall score reduction in case of poor accounting quality and the default is applicable
both for preliminary as well as the detailed entity Appraisal.
Credit Appraisal Framework
A.1.4 Appraisal ProcessA.1.4.1 Business Analysis (Weightage 10%)

The business analysis evaluates the performance of the current business of the promoters. The
analysis involves evaluation of the market position of the promoters and its market
reputation.
Table 2: Business Analysis
Factor to be considered
Indicative weights within the

group
Method of evaluation
Market Analysis
100%
Quantitative
23
a) Market Analysis
The market share of the company can be evaluated based on the ratio of the turnover
of the promoting company/divided by the turnover of the market leader in the
business.
Table 3: Market Analysis
Ratio to be considered
Turnover of the company/turnover of

the industry leader in the business
Quantitative analysis
The ratio so obtained is compared against the score table.

Table 4: Score Table
Market Position
Indicative score
>0% but <=10%
>10% but <=30%
>30% but <=50%
Greater than 50%
A.1.4.2 Financial Analysis (Weightage 70%)

The analysis of financial capability of the borrower is based on the strength of the
existing business of the borrower. The evaluation further considers the level of
support, which could be available for the project appraisal project. The past five-year
results from the audited annual reports of the company are considered for the purpose
of the analysis under this section.
Table 5: Financial Capability
Indicative weights
a) Review of the past

financial position
20%
b) Financial flexibility
80%
Methods of evaluation
Quantitative analysis
The parameters that profile the strength of the business are detailed below.
24
A.1.4.2.1 Review of past Financial Position

The profitable operation of the business is an important criteria for lenders to draw
comfort that the company would be in a position to fund its equity contribution in the
project.
Table 6: Past Financial Position
Indicative Weights
Return on capital employed
20%
Operating margin
20%
Debt service coverage ratio
20%
Total Debt to total Net worth
20%
Cash generation from business
20%
Method of Evaluation
Quantitative Analysis
A.1.4.2.2 Basis of the award of the score has the score has been detailed below
a) Return on capital employed (ROCE): the ratio is computed for at least last three
years and average of the same is considered for evaluation. The ratio can be
computed as:
ROCE = profit before interest and tax (PBIT) / capital employed
Where,
Capital employed= (equity capital + Reserves + short term debt + Long term debtRevaluation reserves-capital works in progress)
ROCE is to be calculated as average of the last three years figure. In case the ratio
is lower than the one for the preceding year then the latest ROCE should be used
for calculation instead of the average. The ration obtained the score table.
Table 7: ROCE
ROCE range
Inductive score
<=5%
>5% but <=9%
1.00
>5% but <=9%
1.50
>5% but <=9%
2.50
25
>5% but <=9%
3.00
>5% but <=9%
3.50
Greater than 17%
4.00
b) Operating Margin(OM):
The ratio should be computed for the at least last three years and an average of the
same is considered for evaluation. The ratio can be computed as:
= operating profit before depreciation, interest and taxes (OPBDIT) / operating
income
Income and profit should be considered from the main operation of the company,
income from other sources, extra ordinary income and non-operating income
should be excluded.
In case the ratio is lower than one for the preceding year then the latest operating
margin (OM) should be used for calculation instead of the average .The ratio so
obtained is compared against the score table.
Table 8: Operating Margin
OM range
Indicative score
<=0%
>0% but <=5%
1.50
>5% but <=10%
2.00
>10% but <=15%
2.50
>15% but <=20%
3.00
>20% but <=25%
3.50
Greater than 25%
4.00
c) Debt Service coverage Ratio (DSCR): The ratio should be computed only for the
latest year. The ratio can be computed as:
=(PBDIT-Tax)/(repayment due to long term loan + interest on long term and short
term loan including interest capitalized)
The DSCR so obtained is compared against the score table.
26
Table 9: DSCR
DSCR range
Indicative score
<=1.0
>1.0 but <=1.1
>1.1 but <=1.2
1.50
>1.2 but <=1.3
2.00
>1.3 but <=1.4
2.5
>1.4 but <=1.5
3.00
>1.5but<=1.75
3.25
>1.75but<=2.0
3.50
Greater than 25%
4.00
d) Total Debt to Total Net Worth: - The degree of leverage of the current business
would indicate the ability of the borrower in raising funds for the purpose of
equity investment in the proposed project. The above would also influence the
borrowers ability to service his current and as well as future debt obligations. The
ratio should be computed only for the latest year. The ratio can be computed as:
= long term loan + other short term loan + WC loan from banks)/ (Equity share
capital+ reserves Revaluation reserves intangible assets)
The ratio so obtained is compared against the score table as indicated below.
Table 10: Total Debt to Net Worth
Total Debt to Total Net Worth range
Indicative score
0-0.5
4.0
>0.5 but <=1.0
3.0
>1.0but <=1.5
2.5
>1.5 but <=2.0
2.0
>2.0 but <=2.5
1.5
Greater than 2.0
1.0
27
Less than 0
`
e) Cash Generation from business:In many businesses, profitability may not necessarily indicate a strong cash
position for the business i.e. a profitable company may not necessarily generate
the positive cash flow from the business. This parameter analyses whether the
cash generation in the existing business has been positive or negative in the past
years and thus serves as an indication of the promoters capability in cash flow
management. The ratio should be computed only for the latest year.
= (cash flow from operation) / (long term loans + other short term loans + WC
loans from bankers)
Where,
Cash flow from operation= PAT+ Depreciation + non-cash expenses-increase in
working capital. The ratio so obtained is compared the score table as indicated
below.
Table 11: Cash Flow
CFO/Debt range
Indicative score
Less than 0
1.0
>0 but <=0.1
1.5
>0.1 but <=0.2
2.0
>0.2 but <=0.3
2.5
>0.3but <=0.4
3.0
>0.4but <=0.5
3.5
Greater than 0.5
4.0
A.1.4.2.3 Financial flexibility

Financial flexibility evaluates the ability of the promoters to financially manage
the project. The key factors to be evaluated in financial flexibility are:
28
Table 12: Financial Flexibility

Indicative
Weights
Equity funding potential
60%
Bridge finance ability
7.5%
Method of
evaluation
Track records of the funds 15%

raised
Total Debt to Total Networth
Quantitative
analysis
10%
Aggregate project cost handled. 7.5%
a) Equity Funding potential: the promoting company can contribute equity to the
project by either raising debt on its books or raising equity or through cash surpluses
in the books. The equity funding potential is the summation of following.
Ability of the company to raise debt upto certain debt/equity ratio of ( 1.5:1.0 ) and
debt service coverage ratio of 1.5.(overall ability is limited by the lower of the two
ratios)
Ability to raise equity from the market by diluting the equity of the promoting
company upto 10% of its average market capitalization. The average market
capitalization is reckoned by the average of the last one year.
Ability to use marketable securities to raise equity for the project.
Any other source of infusing equity into the project.
The summation of the above has to be divided by the equity committed by the particular
promoter. The ratio so obtained is compared against the score table as indicated below.
Table 13: Equity Funding Potential
Equity infusion potential
Indicative score
<=0
>0.00 but <=0.50
>0.50 but <=1.00
greater than 1.00
29
b) Bridge finance ability:

The borrower / promoters may have to arrange for bridge finance to overcome temporary
shortfall in funding for the project. These shortfalls may arise if disbursements from financial
institutions are not forthcoming as per the expected schedule or in case of the delay in tying
up of the debt funds. To evaluate the bridge finance ability of the promoters, the following
factor is compared with the project cost.
Quarterly cash surpluses= (annual cash flow from operation + Annual marketable
securities)/4
Where,
Annual cash flow from operation=PAT+ depreciation + non-cash expenses-increase in
working capital investments
The marketable securities considered for the equity infusion are not considered here.
Ratio is calculated as follows to judge the bridge finance ability.
Ratio=Quarterly cash surplus / total project cot
This ratio is compared with the indicative ratio in the following table and the corresponding
score is assigned.
c)
Track record of the funds raised:

This parameter examines the experience of borrower / promoters in respect of
raising resources from the market. The aggregate funds raised by the promoting
group in the last ten years as a promotion of the project cost is benchmarked
against the scores tabulated below.
Table 14: Raising of Fund
Fund raising track record
Indicative score
Less than 0.60
1.0
>0.60 but <=1.1
1.5
>1.1 but <=1.6
2.0
>1.6 but <=2.1
2.5
>2.1 but <=2.6
3.0
> 2.6 but <=3.1
3.5
Greater than 3.1
4.0
30
d) Aggregate project cost:

This parameter evaluates the ability of the project promoter to manage new projects. The
factor is scored by computing the aggregate cost of the project implemented by the promoting
group in the last ten years as a proportion of the cost of present project. The ratio so obtained
is compared against the score table as indicated below.
Table 15: Project Cost & Indicating Score
Aggregate project cost
Indicative score
Less than 0.3
1.0
>0.3 but <=0.8
1.5
>0.8 but <=1.3
2.0
>1.3 but <=1.8
2.5
>1.8 but <=2.3
3.0
> 2.3 but <=2.8
3.5
Greater than 2.8
4.0
A.1.4.3 Management Analysis framework (Weightage 20%)

In this section the managerial competence of the promoters of the in managing the company
is being evaluated. Some of the key factors that would be evaluated comprise of:
Table 16: Management Analysis
Indicative
weights
Organizational Experience
30%
Experience of key personnel
20%
Equipment supplier, EPC contractor

and project management Experience
30%
Project preparedness of the

promoters
20%
Methods of
evaluation
Qualitative
judgement
The score against each of these variables need to be given in a range of 1 to 4.
31
a) Organisational Experience: The experience of the borrower in the power sector needs to
be evaluated in terms of the organisation experience and the experience of the key personnel.
The sector experience of the borrower / promoters in all aspects of the power generation
business have to be analysed to evaluate the quality and relevance of their experience.
b) Experience of key personnel: the power sector experience of the personnel of the
borrower/promoters should be analysed under this section. Further it need to be gauged
whether the borrower is adequately geared up to manage the proposed power project.
c) Equipment Supplier, EPC contractor and project Management Experience:
Equipment Supplier, EPC contractor and project Management Experience of the borrower
/promoter should also be evaluated. Past experience in these aspects in increased comfort
level in executing the proposed project on schedule and within the budgeted cost. The size of
the projects executed and the industry to which these projects belong have been used to
analyse whether the borrower /promoter have the experience of executing similar capital
intensive projects and also managing projects requiring a substantial number of clearances.
d) Project Preparedness of the Promoter: promoters who have done the ground work for
execution of the project i.e. seeking requisite clearances and other project development
aspects should be awarded higher weightage. This factor being qualitative should be scored
on a scale of 1 to 4.
A.1.5 FINAL ANALYSIS FOR PRELIMINARY STAGE
Table 17: Final Analysis for Preliminary Stage
Average score
obtained
Grade
Comments
Possibility of
talking up for
detailed
appraisal
3.6 and Above
The fundamentally strong ability of the

promoters to set up the new projects Is
unlikely to be adversely affected by changes
in circumstances
Yes
>3.0=3.5
Adverse business conditions are unlikely to

affect the promoters ability to set up the new
projects.
Yes
>2.5=3.0
Promoters ability to set up projects is less

likely to be adversely affected by changes in
circumstances than for lower score.
Yes
>2.0=2.5
Changes in circumstances are more likely to

lead to weakened ability of promoters to set
up the project than for higher grades.
Yes
Grade I
32
>1.5=2.0
Grade-II
While such promoters are less susceptible to

default in setting up of the project than those
in lower grades, uncertainties faced by them
could adversely affect their ability to set-up
the project.
Only if the Risk

Appetite of the
organisation
allows
Below 1.5
Grade-III
Adverse business or economic conditions and Should not be

poor capabilities are likely to lead to
funded
promoters lack of ability to set up the project.
A.1.6 Decisions points based on the results

Based on the score arrived at from the above analysis decision can be considered.
Entity falling in grade-I: automatically considered for the detailed evaluation stage
subject to analysis in the technical and financial stage.
Entity falling in grade in grade II: to be referred to the management at REC for their
qualitative inputs subjects to specific comments of the appraising officer, regarding
the area of the low score. The project may be taken up for the detailed appraisal only
if the risk appetite of the organisation allows for such funding.
Entity falling in grade III: should not to be considered as investment grade and
should be returned back with specific comments of the apprising officer.
A.2. DETAILED APPRAISAL

The process of detailed evaluation should be undertaken once the project has satisfied the
necessary pre-conditions and the furnished all the information to the borrower.
A.2.1 PRECONDITION FOR APPRAISAL:
The promoter prior to approaching REC for detailed appraisal should have identified 70% of
the equity out of which 50% of the equity should be fully tied up. The tied up equity means
the firm written commitment from the investors and identified equity means the Expression
of the interest (EOI) by the parties to invest in the project.in case at least 50% is tied up and
the balance equity is shown to be invested by strategic investors the analysis will be carried
out by scaling up the stake of the promoters holding 50% shares in equity to 70% for the
analysis.
33
CREDIT APPRAISAL FRAMEWORK
A.2.2 EVALUATION PROCESS

The detailed analysis is done under the same heads as in the case of preliminary analysis. The
appraising officer can revise the score on the parameters in case of any new information or
significant changes in the assessment of promoters on the factors being evaluated. Under the
financial analysis another parameter for future financials comprises of
a) Analysis of future project of the promoting company
b) In case the promoter has a foreign player its individual rating by an international
rating agency can be taken as a surrogate for entity evaluation.
A.2.3 SCORING SYSTEM
The scoring approach in case of detailed evaluation is similar to the approach considered
under the preliminary evaluation stage.
A.2.4 APPRAISAL PROCESS
A.2.4.1 Business analysis (weightage 10%)
There is slight change to the parameters evaluated under the business evaluation stage. These
are as follows:
34
Table 18: Business Analysis

Indicative weight
within the Group
Market analysis
50%
Industry analysis
50%
Qualitative judgement
The market analysis will be carried out in the same way as in preliminary evaluation. The
industry Analysis will be based on the risk perception of the industry in which the promoting
company is operating.
A.2.4.2Financial Analysis (Weightage 70%)
In detailed evaluation stage the projections of the future financial performance of the
promoter is considered for evaluation. The projections for the next two years are considered.
Table 19: Financial Analysis

Indicative weights
Review of Past Financial

position
50%
Review of future financial

position
15%
Financial Flexibility
35%
Quantitative Analysis
Some of the additional factors that need to be evaluated are discussed below.
a) Review of future financial position
The same financial parameters, which were used for projecting the past financial position, are
used for evaluating the future performance of the promoting companies.
b) Review of financial Flexibility
Apart from the parameters already analysed under the preliminary analysis stage, the bridge
finance ability of the promoters needs to evaluate the future quarterly cash flows for the next
year instead of the past quarterly cash surpluses, as in the preliminary evaluation.
35
A.2.4.3 Management Analysis (Weightage 20%)

In the section the management competence of the promoters is reviewed by the appraising
officer based on the factors detailed below.
Table 20: Management Analysis
Indicative
weights
a) organizational Experience
20%
b) Experience of key personnel
30%
c) equipment supplier,EPC contractor

and Project Management Experience
30%
d) project Preparedness of the

Promoters
20%
Qualitative judgement
A.2.5 Final Analysis for detailed evaluation stage

Table 21: Final Analysis for Detailed Evaluation
Average
score
obtained
Grade
Comments
3.6 and
Above
Grade I
The fundamentally strong ability of the promoters to set up the new

projects Is unlikely to be adversely affected by changes in
circumstances.
>3.0=3.5
Grade
II
Adverse business conditions are unlikely to affect the promoters

ability to set up the new projects.
>2.5=3.0
Grade
III
Promoters ability to set up projects is less likely to be adversely

affected by changes in circumstances than for lower score.
>2.0=2.5
Grade
IV
Changes in circumstances are more likely to lead to weakened ability

of promoters to set up the project than for higher grades.
>1.5=2.0
Grade
V
While such promoters are less susceptible to default in setting up of the

project than those in lower grades, uncertainties faced by them could
adversely affect their ability to set-up the project.
Below 1.5
Grade
VI
Adverse business or economic conditions and poor capabilities are

likely to lead to promoters lack of ability to set up the project.
36
B) PROJECT APPRAISAL
B.1 PROJECT DETAILS

B.1.1 PROJECT PROFILE AND TECHNLOGY
B.1.1.1 PROJECT OBJECTIVES AND SCOPE
I. Objectives
ABC Ltd is setting up the Super Thermal Power Project at location A for an ultimate capacity
of 2000 MW with 2 X 600 MW in the first phase. STPP is to be located in western region.
The STPP has obtained all permits and clearances and part of the debt finance from REC has
also been tied up. The financial closure of the projects is also completed.
Approx 60% of the capacity from STPP (Approx. 700 MW in phase I ) would be sold to
XYZ Steel Limited and balance power (Approx. 400 MW) shall be sold to state in which
plant is to be set up under an MOU with state government for setting-up the STPP.
II. Scope of work

The works covered in the project are as under:
Table 22: Transmission Line
Sl. No.
Transmission Line
Approx
line
length (Kms)
(i)
400kV D/c (QUAD conductor) Transmission Line from location

A to location B sub-station
315
(ii)
LILO of existing 400kV S/c transmission line C-D at location A
20
(iii)
400kV D/c (Twin conductor) transmission line from switchyard

at location E to Location F
97
37
Table 23: Sub-station

(iv)
3x500 MVA Transformer, 400/220kV Substation at location F
(v)
2x50 MVAR line reactor at location Bs pooling sub-station
(vi)
2x50 MVAR line reactor at location A
(vii)
1x80 MVAR, 420 kV switchable bus reactor at location A along with its
associated 400 kV bay
(viii)
2 Nos. of 400 kV line bays at location Bs pooling sub-station
(ix)
2 Nos. of 400 kV line bays at location Es switchyard
(x)
Nos. of 400 kV line bays at location A TPS
B.1.2 Technical Details

400 kV Double circuit lines from A to B, shall be constructed with ACSR Quad Moose
conductor and LILO, E- F line shall be constructed with ACSR TWIN MOOSE conductor.
Table 24: Technical Details
Item
400 kV D/C from A-B 400 kV D/C LILO and

lines
E-F Line
Conductor type
ACSR Moose
ACSR Moose
Conductor per phase
4 (Quad Bundle)
2 (Twin bundle)
Conductor size (mm)
54/3.53 Aluminium
54/3.53 Aluminium
+7/3.53 Steel
+7/3.53 Steel
Overall conductor diameter (mm)
31.77
31.77
Earthwire (mm)
Galvanised steel 7/3.66
Galvanised steel 7/3.66
Overall EW diameter (mm)
10.98
10.98
EPC TL PACKAGE
The scope of work as envisaged under Scheme A and Scheme B.
38
Scheme A consists of:
Part-1: 400kV Double Circuit Transmission Line from 2 x 600 MW location A TPP to B
with Quadruple Moose ACSR Power Conductor Approx. - 315km,
It has been decided to change configuration of the line from triple to quad to take care of
future expansion and to optimise the ROW. PQR LTD already been taken the approval from
PGCIL for changing of conductor configuration from Triple to Quad (Annexure A)
And
Part-2: 400kV Double Circuit LILO of 400kV S/C line from C to D at S village to location A
TPP with twin moose ACSR conductor- Approx. - 20km.
Scheme - B consists of:
400kV Double Circuit Transmission Line from E to 400/220 KV Substation of PQR Ltd,
with Twin Moose ACSR Power Conductor Approx. - 97km
SCOPE OF WORK
The scope of work covers performance of transmission line detailed route survey and check
survey along the specified alignment, geotechnical investigation, profiling and tower
spotting, identifying types of towers, tower optimization, estimation of line material and
designing of normal and special towers and foundations, proto testing, fabrication &
galvanizing of towers & tower hardware and supply of all the line material (Galvanized
Stranded Steel Earth wire, conductor and earth wire accessories and insulator string
hardware) excluding Power Conductor and Composite Polymer Insulator units and
construction of normal and special tower foundations, erection of normal and special tower,
stringing of conductor & ground wire and testing & commissioning of the complete
transmission line to the satisfaction of the Owner.
Detailed Terms and Conditions are as mentioned in Bid Document for TL PKG which is
supplied already to the Contractor.
EPC 400/220 KV SUB STATION Package
SCOPE OF WORK -
39
The Scope of work is to cover the design, manufacture, assembly, testing at manufacturers
works, supply & delivery, properly packed for transport at Project Site, of all equipment,
system and accessories, steel structures including Civil, Structural, Architectural work, Fire
Protection, Air-conditioning and Ventilation, complete and efficient erection, site testing,
commissioning & putting into successful commercial operation of new 400/220KV
substation.
Detailed Terms and Conditions are as mentioned in Bid Document for SUBSTATION PKG
which is supplied already to the Contractor.
B.2 CLEARANCES & APPROVALS

B.2.1 Status of Clearances
The latest status of various clearances/approvals/contracts/agreements/facilities is as follows:
Table 25: Status of Clearances
S.N
Item
o
Agency
Status
Remarks
Location A-B/LILO/Location E-F
1.
Transmission License CERC

to PQR Ltd
2.
Installation of O/H
trans
line
under
Electricity Act 2003
Obtained
Vide CERCs letter dated April 29,,

2008
Section 68 :
MoP,
GOI
Obtained
Vide MoPs letters dated 26.05.08
Section 164
MoP,
GoI
Obtained
vide gazette notification dated 16.06.09

from MoP
3.
Forest Clearance
MoEF
In process
Forest clearance proposal prepared

and submitted to concern DFOs. Joint
verification with DFO is complete,
Detailed forest proposal is submitted
along with all necessary documents
and maps.
3.
Environmental
clearance
MoEF
No environmental clearance is required

for transmission projects as per MoEF
notification dated September 14, 2006.
40
S.N
Item
o
Agency
PTCC
(Required
charging)
5.
Railway Crossing
Clearance PTCC
before
(Required
stringing)
before
Highway Crossing
(Required
stringing)
7.
before
Power Line Crossing

(Required before
stringing)
8.
Airport
(Civil)
(Required
charging)
9.
Remarks
Location A-B/LILO/Location E-F
4.
6.
Status
In Process
Will be taken up during construction

activity
Concerne
d DRM
In Process

activity
Concerne
d NHA
In Process

activity
Power
Utility
In Process

activity
In process

activity
In Process

activity
Authority Airport
Authority
of India
before
Clearance
for CEA
charging
(Required
before charging)
B.3 PROJECT REVIEW

B.3.1 Project details
Project area houses many super thermal power stations due to availability of coal and water,
which are the two main raw materials for a power plant. coalfields at project area comprises
of two main basins.one basin has been well developed and a number of large coal mines of
Coal India are already operational and supplying to NTPC power plants nearby and also to
numerous other plants in the country. Another main basin however is largely unexploited and
is a virgin coalfield. In order to exploit this, Ministry of Coal GoI has taken steps by
allocating coal blocks to various end user projects. M/s ABC Limited jointly with H Ltd has
41
been allotted a coal mine in the 2nd main basin having geological reserve of 144 Million Ton
to be shared between the two projects of ABC Ltd and H Ltd.
To implement the power generation project, XYZ limited has been formed as a subsidiary
company of ABC Ltd. The Super thermal power project at location A has been planned for an
ultimate capacity of 2000 MW commencing with 2 X 600 MW in the first phase. Approx
60% of the capacity (700 MW) from the first phase of project at location A would be sold to
K Steel Limited & balance power (400 MW) will be sold to project implementation state.
In order to evacuate the 1100 MW power from the TPP at location A as above, PGCIL had
carried out a detailed study based on which application for open access was applied. Western
Region Coordination Committee had deliberated on the various options and Open access was
accorded for evacuating the power through construction of;
a) D/C 400 KV dedicated transmission lines from location A to B which is the injection
point and from location E to F at the consumer end along with a 400/220 KV Sub-station at
location F all three schemes to be executed by ABC Ltd.
b) WR system strengthening and 765 KV line from location B to location G to be carried out
by PGCIL.
In order to implement the transmission systems for which ABC Group has been
mandated, a subsidiary company viz PQR Ltd. has been constituted with the intent of not
only setting up of the associated transmission systems of the generation projects of ABC
Group but also to establish ABC Group in the transmission sector as an independent power
transmission company. PQR Ltd can thereafter participate in the private transmission projects
which are planned by Government of India to be awarded thru a competitive bidding process.
B.3.2 Need & Justification
Generation Capacity addition is one of the primary objective of Government of India and
capacity addition of 78,000 MW has been planned in the Eleventh plan. While there is a
need for capacity addition however with the policy of competitive procurement of power,
there is also a need for ensuring low cost of power generation. Thus the delivered cost of
power plays a significant role. It has been established that setting up of a pit-head power
plant and transmitting the power to load centre is more cost effective than transportation of
coal to a distant load centre based power plant.
42
700 MW of Power from the STPP at location A will be supplied to the K Steel Plants
and 400 MW shall be supplied to the state of plant location. The power purchase agreements
with the respective steel companies have been executed and an MOU has been executed with
state Government for supply of upto about 400 MW.
The delivered power cost to the steel plants from the location A power project after
factoring the transmission cost works out much lower than the cost of power from alternate
sources viz grid / gas based power plants & the transmission system is well justified.
The transmission systems schedule is planned such as to synchronize with the
commissioning schedule of the power project. However, the initial requirement of start up
power & power evacuation till the commissioning of the regular system shall be met thru the
LILO line on the C-D transmission line.
Approved scheme for Power Evacuation
Power Grid Corporation of India Limited (PGCIL) had carried out detailed load flow studies
for evacuation of power from the STPP to the beneficiaries. The studies were carried out
considering Western region load generation scenario corresponding to 2010-11 time frames.
It was also assumed that transmission system of location B and western region strengthening
schemes like WRSS I, II, III, IV etc. would be available in that time frame.
For injection of 1100 MW power from TPP at location A into the western grid, two
alternatives were studied.
Alternative I: Establishment of a 400 / 765 KV WR pooling station near location B by
LILO of 765 KV B-G line and 400 KV interconnection of location As TPP with the Pooling
station.
Alternative II: 400 KV interconnection between TPP at location A and Jabalpur, along
with LILO of 400 KV C-D lines at location As TPP.
The various issues related to the above two options were deliberated at the WR coordination
committee and long term open access for transmission of 1100 MW power from location A to
its beneficiaries was accorded by the committee.
B.3.3 Techno Economic Consideration

The project has been appraised from techno economic angle as per RECs appraisal
procedure and found eligible for financing. In line with the new Electricity Act 2003, techno-
43
economic clearance from Central Electricity Authority (CEA) and investment decision from
the Planning Commission are not required for transmission project.
B.4 IMPLEMENTATION PLAN

4.1
Implementation Arrangement
4.1.1 Project Management
The Project Management for the Project is proposed to be divided into the following
processes:
Execution (to be carried out by PQR)
The execution stage includes the actual implementation of the design / plan. Letter of Awards
would be issued to suppliers and actual execution of the Project would commence. This will
include casting of foundations also. Subsequently, the towers would be erected, stringing will
be done etc. Right of Way (ROW) issues will be addressed by PQR Ltd. on an on-going
basis.
Closing (to be carried out by PQR)
Closing includes the formal acceptance of the Project and the ending of implementation
Phase. After the Project has been completed, commissioning tests would be carried out. The
contracts with contractors would be closed and final payments to the contractors would be
effected.
Controlling (to be carried out by PQR)
There will be processes in place to monitor and control the development on the basis of
various important metrics of the Project. Some of the important parameters that would be
monitored include Project cost and expenses vis--vis the budget, the timelines of various
activities of the Project vis--vis the planned targets, etc.
Quality Management (to be carried out by PQR)
Project Quality Management processes include performing all the activities of the
organization that determine quality policies, objectives, and responsibilities so that the
Project satisfies the needs for which it had been undertaken. For this purpose, manufacturing
quality plan and field quality plans of PQR Ltd shall be adopted. Site offices at necessary
locations would be established during Project implementation. Site offices at all locations
have already been established with requisite manpower mobilized.
44
Execution Management
The Construction Works of Foundation, Tower erection and Stringing shall be carried out
under the strict supervision of site engineers overseen and controlled by Project Manager.
The Project Managers organization shall include a Quality and Safety Engineer. Random
checks shall be carried out by Project Manager and other senior officials. Dispute Resolution
System shall be developed for any site related disputes and efforts shall be made to solve
them without loss of time.
The following is the responsibility of PQR Ltd:
Obtaining Right of Way;

Payment of crop compensation; and
Obtaining statutory clearances from Government authorities.
Obtaining Forest Clearances.
B.5 PROJECT COST

As indicated in above, Bid documents circulated by PQR Ltd for the various packages
contained provision for escalation of package value over and above the bid amount,
depending on the increase in the input costs /cost of raw materials from the bidding date to
actual procurement of the packages. All the components like Tower, Earthwire, Hardware
Fittings, MSCJ for Earthwire, MSCJ for Moose, Vibration Damper for Earthwire, Erection
Civil Works, Placement of Reinforcement Steel, Concreting, Conductor, Insulator etc. of
each package were linked to different escalation rates. Escalation rate for each component is
computed by weighted average increase of the benchmark indexes like Diesel index, Labour
index, Iron / Steel index, Cement index, Non Metallic index, Steel / Zinc index, Steel /
Cacmai index, Aluminium index, GS Wire index. The weights were pre-defined in the
respective packages. The indexes to be used to find final input cost of the equipments are
IEEEMA, CACMAI, and WPI of RBI etc. The completion cost for the project as per Jan
2006 base rate for placement of orders was Rs.1335 crores excluding IDC & Margin money.
Table 26: Project Cost
( Rs in Crore)
Project Cost
Units
EPC Costs
45
Location A & B LILO
Location F
Value
Value
Value
Equipments Supply Cost ( Conductor &

Insulator)
Rs. Crs
309.30
9.60
43.80
Erection & Civil Cost ( Towering & Other

Rs. Crs
supply)
332.30
25.70
74.20
Sub Total
Rs. Crs
641.60
35.30
118.00
Total EPC costs
Rs. Crs
794.90
Land and Site Development
Rs. Crs
66.81
0.25
1.59
Pre-Operative Expenses / Overheads
Rs. Crs
6.42
0.35
1.18
Contingencies
Rs. Crs
24.43
1.08
3.62
Spares included in EPC cost
Rs. Crs
EPC Management Cost
Rs. Crs
96.24
5.30
17.70
Sub Total
Rs. Crs
193.90
6.98
24.10
Total Non EPC Cost
Rs. Crs
224.97
140.00
Non EPC Cost
Others
400/220KV S/S at location F
Rs. Crs
Bay & Reactor at A/B
Rs. Crs
59.00
Margin Money for WC
Rs. Crs
16.62
Financing Charges
Rs. Crs
10.28
Interest During Construction
Rs. Crs
89.30
Sub Total
Rs. Crs
175.20
140.00
Rs. Crs
1,010.69
42.28
282.10
Rs. Crs
1,335
Total Project Cost
46
B.6 FINANCING PLAN

The cost of the Project estimated at Rs.1335 crore is proposed to be financed at a debt /
equity mix of 70:30. The details are as under:
Table 27 : Financing Plan
PARTICULARS
AMOUNT
(RS. CRORE)
CAPITAL CONTRIBUTION
ABC LIMITED
400.5
30%
934.5
70%
DEBT FINANCE
RUPEE TERM LOANS
Total
1335.0
100%
B.7 SELLING ARRANGEMENT

PQR Limited has entered into Transmission Service Agreement on 20th Oct 2008 with XYZ
Limited for Evacuation of the Power. Transmission Service Charge or TSC shall mean the
tariff for transmission of electricity as defined under the CERC Regulations, 2004. As per the
current CERC regulations, Transmission Service Charges include:
(a) Interest on loan capital;
(b) Depreciation, including Advance Against Depreciation;
(c) Return on equity;
(d) Operation and maintenance expenses; and
(e) Interest on working capital.
The Transmission Charges shall be payable by XYZ Ltd from the date when PQR Ltd declare
commercial operation of the Transmission system.
Billing & Payment: PQR Ltd shall raise an invoice on XYZ Ltd for the previous month on
47
the first day of the succeeding month for the payment of Transmission charges. XYZ Ltd
shall make the payment to PQR Ltd within 30 days from the date of the date of invoice for
the payment of Transmission charges. The payment shall be made by XYZ Ltd by way of
direct transfer to the designated bank account of PQR Ltd.
PAYMENT SECURITY MECHANISM

The payment of transmission charges shall be secured by XYZ Ltd by opening an
unconditional, revolving and irrevocable letter of credit (LC) for an amount equivalent to 3
(three) months of estimated average monthly billing of transmission charges. The LC shall be
from a bank acceptable to PQR Ltd. All cost relating to opening and maintenance shall be
borne by PQR Ltd.
B.8 OPERATIONAL COSTS, PRICES AND ASSUMPTIONS
Table 28: Operational Cost, Price & Assumptions
Location
A&B
Transmission Capacity
MW
Construction Start Date
dd-mmm-yy
Construction Period
Months
Commercial Operations Date
dd-mmm-yy
Useful Life
Years
Operational Till
dd-mmm-yy
No of quarters
LILO
Location F
1,200
1,200
700
01-Oct-08
01-Jul-09
01-Jul-09
30
18
21
31-Mar-11
31-Dec-10
31-Mar-11
25
25
25
29-Feb-36
30-Nov-35
29-Feb-36
10
Distance
Kms
315
20
98
Project Cost
Units
Value
Value
Value
309.30
9.60
43.80
EPC Costs
Equipments Supply Cost ( Conductor
& Insulator)
Rs. Crs
48
Erection & Civil Cost ( Towering &

Other supply)
Rs. Crs
Sub Total
Total EPC costs
332.30
25.70
74.20
Rs. Crs
641.60
35.30
118.00
Rs. Crs
794.90
Land and Site Development
Rs. Crs
66.81
0.25
1.59
Pre-Operative Expenses / Overheads
Rs. Crs
6.42
0.35
1.18
Contingencies
Rs. Crs
24.43
1.08
3.62
Rs. Crs
Non EPC Cost
EPC Management Cost
Rs. Crs
96.24
5.30
17.70
Sub Total
Rs. Crs
193.90
6.98
24.10
Total Non EPC Cost
Rs. Crs
224.97
140.00
Others
400/220KV S/S at Hazira
Rs. Crs
Bay & Reactor at Mahan/Sipat
Rs. Crs
59.00
Margin Money for WC
Rs. Crs
16.62
Financing Charges
Rs. Crs
10.28
Interest During Construction
Rs. Crs
89.30
Sub Total
Rs. Crs
175.20
140.00
Rs. Crs
1,010.69
42.28
282.10
Total Project Cost
Rs. Crs
1,335
0%
0%
0%
Contingencies
3%
3%
3%
EPC Management Cost
15.00%
15.00%
15.00%
49
Means of Finance
Units
Value
Debt-Equity
30%
70%
2
Debt-Equity Ratio
Debt
Rs. MM
934.5
Equity
Rs. MM
400.5
Upfront Equity
50%
Return on Equity (ROE)
15.5%
Debt
Units
Moratorium
Months
Repayment Start Date
dd-mmm-yy
Repayment Period
Quarters
Last Repayment Date
dd-mmm-yy
Interest Rate on Rupee Term Loan
DSRA
Months
Interest on W.C. Loan
% p.a.
12.5%
Margin
Capital
Money
for
Value
12
31-Mar-12
48
30-Mar-24
12.50%
Working %
25.0%
Interest on DSRA
% p.a.
8.0%
Generation
Units
Transmission Capacity
MW
1,200
Actual PLF
85%
Auxiliary Consumption (for Tariff)
% of
Generation
8.5%
Power given free
% of Net
Generation
Value
50
7.5%
Availability
100%
Capacity Allocation
% of Net
Generation
MW
Capacity allocated to UVWTCL
30.00%
Free
capacity
UVWTCL
allocated
329.40
329.40
245.27
82.35
82.35
61.32
62.50%
686.25
686.25
510.98
100.00%
1098.00
1098.00
817.57
to 7.50%
Capacity allocated to K Ltd
O & M Cost
Net of Loss
Units
Value
Norms for O & M expenses per ckt-Km and per bay

FY
2010-11
Dedicated TL
0.0099
CERC
Bay
0.5540
CERC
Location
A&B
location F
315
20
98
315
20
98
No. of Bays
13
O & M Cost
5.35
1.31
8.17
5.72%
5.72%
5.72%
Distance
Kms
LILO
Total ckt
Escalation in O&M cost
Working Capital Requirement
Units
O&M Expenses
no. of months
Receivables
no. of months
Maintenance Spares
of historical cost
Escalation in Spares
per annum
Value
51
15% of O&M exp.
Depreciation
Units
Value
Total % of assets to be %
depreciated
100.00%
Total Value of assets to be Rs. Crs

depreciated
1,266.41
Residual Value of Assets
10%
Building
5.28%
Plant and Machinery
5.28%
Building
10.00%
Plant and Machinery
15.00%
Book Depreciation Rate - SLM
Book Depreciation Rate-WDV
SLM
Book Depreciation Method
Tax Depreciation Rate - WDV

Building
10.00%
Plant and Machinery
15.33%
Tax
Units
Value
Corporate Tax Rate
33.99%
MAT Rate
11.33%
Years
15
Consecutive years in which to Years

be claimed
10
Tax Holiday under Section 80IA

To be claimed in
52
B.9 COST BENEFIT ANALYSIS

The cost benefit analysis of the project, assuming a total project cost of Rs. 1335.0 crore is as
follows:
Table 29: Cost Benefit Analysis
Parameter
Value
Project cost, Rs. Crores
1335.0
DSCR
-Minimum
1.38
-Average
1.65
-Maximum
2.21
Project FIRR, pre-tax, 25 years
12%
B.10 PROJECT RISK ANALYSIS

B.10.1 Risk Matrix
Table 30: Pre-Construction
S.
No.
Risk
Mitigation / Allocation
Grant
approvals
clearances
of Major approvals such as transmission license, MoP approval for

/ transmission line, forest clearance, etc. have been obtained/are in
advance stage. Most of the clearances/consents/permits in a
transmission project can be obtained during the construction period.
Suitable conditions have also been stipulated for obtaining all
clearances/approvals and ensuring compliance with the same.
Finalisation of All the contract bids have been evaluated and finalised by PQR Ltd.
Contracts
The awards are ready to be placed. A suitable pre-disbursement
condition has been stipulated in this regard.
Procurement of Land procurement is not involved in the proposed project.

land
53
Table 31: Construction

S. No.
Risk
1.
Construction
ABC Group / ABC Power is the leading reputed company in the

field of implementation of power projects. They have already
commissioned 1100 MW at location F and two more projects are
in advance stage of commissioning i.e. 1200 MW location A TPP
and 1200 MW at location H.
2.
Cost
increase
and
price
escalation
beyond
estimated
project cost
The Project is proposed to be implemented on individual package

basis/turnkey basis The contracts for individual packages as bid
out provide for an adjustment in price variation and the tariff
would be commensurate to the Project Cost thus derived.
Also, adequate contingency provision has been made in the Project
cost to take into account, any variation in costs. Suitable condition
is also being stipulated with regard to increase in project cost.
3.
Finalisation
Project
Contracts
of All the Key Contracts has been Finalised & signed with ECIL
4.
Completion
delay
All contracts also provide for provision of Liquidated damages.

Also, the major contracts in terms of value and scope of work are
tower packages, which are being awarded to reputed contractors
having a proven past record. Thus the risks due to delay are
minimal.
5.
Country risk
All equipment which shall be supplied are indigenous.
6.
Equity Infusion
The promoters contribution aggregating Rs. 400.5 crore for the

Projects The ABC Group has demonstrated its commitment to
Various large and small sized projects undertaken by it and its
equity contribution in its project is noticeable as reflected in the
Groups equity holding structure.
Table 32: Post Construction

S.
No.
Risk
1.
Regulatory risk
Tariff shall be as per CERC based on the prudence check of the

Project Cost which shall be paid by the Beneficiaries.
2.
System
Full transmission service charges shall be recoverable at
54
S.
No.
Risk
Availability
normative availability of 98.00%. However, in case the same is

not achieved, the tariff charges shall be reduced as per CERC
provisions.
3.
Payment
Security
Transmission Service Agreement has been signed between

company PQR & XYZ. Company XYZ shall pay to PQR Ltd
entire transmission charges, to be decided as per CERC norms.
4.
O&M
5.
Technology risk
The maintenance of the transmission lines would be the

responsibility of PQR.
Technology involved in implementation of transmission lines is
casting of foundations with cement, concrete and steel, erection of
lattice structured towers, installation of insulators and stringing
together of cables at the top of the tower. The same technology has
been in use since many years in India and PGCIL being the largest
transmission company in India is currently implementing its
Projects on similar technology. Therefore, no technological
challenges are envisaged.
6.
Force Majeure
Though risk will have to be borne by the project company, it may

impact lenders too. To mitigate this, company PQR proposes to
obtain insurance against various risks as may be necessary for
which a condition has been stipulated.
7.
Environmental
Hazards
Power transmission systems do not impact the environment as no

emissions are involved in these Projects.
B.11 STRENGTHS AND WEAKNESSES

Strengths
ABC Group / ABC Power is the leading reputed company in the field of
implementation of power projects. They have already commissioned 1000 MW at
location F and two more projects are in advance stage of commissioning i.e. 1200
MW location A TPP and 1200 MW at location H.
The project has been approved by CERC and recommended by Planning Committee
for evacuation of power from upcoming location A TPP.
PQR Ltd has already obtained transmission license from CERC.
PGCIL already given the approval for Long Term Open Access.
55
The financial closure for Generation project is achieved.
All the equipment shall be indigenous and shall be supplied by reputed players in the
area of transmission.
Weaknesses
Some of the clearances and approvals of the Project would be obtained in various
Phases/stages during the construction period. The company should take necessary
steps to obtain the same in time.
B.12 ROW & forest clearance relates issues are required to be taken up on priority
Basis.
I.
SECURITY PACKAGE AND TERMS & CONDITIONS
1.
Primary Security
a) A first pari passu charge by way of mortgage (or assignment of lease deed in favour of
REC as may be applicable) on the immovable properties, including land, present and future,
and hypothecation of movable assets, present and future, of the Company, including movable
plant & machinery, machine spares, tools and accessories, furniture, vehicle and all other
movable assets. To make such charge meaningful, appropriate provision will be made to the
Satisfactions of REC, to allow REC the right to inspect, take possession thereof, and sell the
same in accordance with the provisions of the securitisation Act. The company also needs to
create a first pari passu charge by way of mortgage on project related infrastructure subject to
specific charge created/to be created and first charge on current assets in favour of Working
Capital Lenders. The mortgage/assignment of lease deed of the land in favour of REC may be
completed within a maximum period of 6 months from date of documentation.
(b) An assignment of all the title and interest of the company in to and the entire project
document and other documents as allowed by the applicable laws of the land to which the
company is a party and all other contracts relating to the project, in favour of
REC/Consortium Lenders.
(c) Pledge of Promoters shareholding in the project aggregating to 51% of the equity share
capital in the company in favour of REC/consortium lenders of primary debt.
(d) An assignment of right, title and interest of the company by way of first pari passu charge
in, to and under all the Government Approvals, Insurance policies and uncalled capital of the
56
Company, as allowed by the applicable laws of the land.

(e) First pari passu charge on the letter of credit/escrow account, trust and retention account,
DSRA and other reserves and any other bank account of the Company wherever maintained.
(f) The borrower shall undertake that if at any time during the subsistence of this agreement,
the corporation is of the opinion that the security provided by the borrower has become
inadequate to cover the balance of the loans then outstanding, the borrower shall provide and
furnish to the Corporation, to their satisfaction, such additional security as may be acceptable
to Corporation to cover such deficiency.
(g) Corporate Guarantee for 100% of the loan amount sanctioned by REC. This Corporate
Guarantee shall be of the Holding Company of the borrower. i.e. ABC Limited.
The above charges will rank pari-passu amongst the participating Lenders, including working
capital Lenders for the Project. Working capital lenders will have first charge on current
assets and second charge on the fixed assets subject to specific charge created/to be created.
2.
Pre-Commitment Conditions
Before execution of the loan document, the Company shall to the satisfaction of REC,
(a) Provide an undertaking that the completion cost of the Project shall not exceed Rs.
1335.06 crore and in case of any cost over-run, the same shall be met by the Promoters from
further equity contribution /subordinated debt from the Promoters or loans arranged by
Promoters without recourse to Project assets, in a manner and to the satisfaction of the
Lenders.
(b) Agree for appointment of Lenders Independent Engineer (LIE), Lenders Legal Counsel
(LLC) and Lenders Insurance Advisor (LIA) and any other agencies as may be necessary for
the review and monitoring of the project and agree that expenditure incurred for availing the
services from these agencies shall be borne by the Borrower.
(c) Undertake that without the written consent of REC, the Company shall not make any
modifications to any of the Project Documents for the project, undertake any new project, or
augment, modernize, expand, or otherwise change the scope of the aforesaid project, make
any investments or take lease.
(d) Prepay any loan
(e) Create any security interest in favour of any person, firm or company;
57
(f) Undertake to open a Trust and Retention Account (TRA) in favour of REC and REC shall
have pari passu priority in cash flow along with other lenders of the project.
(g) Undertake to furnish to REC such information and data as may be required by them or
any agency appointed by the Lenders to ensure that the physical progress as well as
expenditure incurred on the project are as per the schedule and also agree that the
disbursements shall be made by REC on the recommendation of the lenders engineer about
the physical progress (actual & anticipated) of the works and on compliance of conditions
precedent to disbursement.
(h) Agree that all important contracts shall be reviewed by LIE and LLC and that REC
reserve the right to insist or recommended changes, as applicable, which shall be carried out
by the Borrower to the satisfaction of REC.
(i) Undertake to obtain/renew/keep in effect all applicable statutory & non-statutory
clearances and approval required during implementation and for operation of the Project up
to commissioning of the Project.
(j) Agree to modify its Memorandum of Association and Articles of Association, for
enhancement of the authorized share capital and borrowing power as per the envisaged
financing plan, if required, and incorporate any other changes if required by REC.
(k) Agree to finalize the insurance package and submit the same for review by the Lenders
Insurance Advisor/ Lenders and submit the certificate regarding adequacy of insurance.
(l) Agree that REC reserve the right to appoint any independent /concurrent auditors for the
review of the Project as deemed fit during the currency of the loan.
(m) Agree that conditions stipulated for financial assistance by other participating lenders,
except for interest rate and fees, shall apply mutatis mutandis for RECs financial assistance
for the project, if acceptable to REC.
(n) Undertake to make necessary arrangements for operation & maintenance of the project at
least 6 months prior to the COD of the project to the satisfaction of REC.
(o) Agree that REC shall have the right to stipulate any other condition, as deemed fit before
documentation of loan.
(p) Submit an undertaking that the securities would be created as per the stipulation of the
58
sanction.
(q) Provide an undertaking that the company shall not, without prior intimation to REC: Declare any dividend, Commit fresh equity in any other new project till their committed
equity is subscribed to in full and paid up.
(r) Agree that the REC shall have a right to appoint one nominee Director on the Board of
Directors of the Company.
(s) Accept the unqualified right of Lenders/RBI/appropriate body to disclose or publish, in
case of default, the details of the default, name of the company and its directors in such
manner and through such media, as they may, in their absolute discretion, see fit.
3. Pre Disbursement Conditions
Prior to first disbursement under the Facility, the Borrower shall, to the satisfaction of the
Lenders, have complied with the following:
(a) Submission of certificate: a) That the company has no over dues or defaults in respect of
the financial assistance obtained from its lenders; b) The disbursement from REC shall be
utilised for meeting the cost of transmission project as mentioned in the sanction of loan.
(b) Demonstrate to REC that arrangements have been made for tie-up of equity from the
promoters to the satisfaction of the REC. Based on the advice of the REC in the matter,
other Lenders shall also agree to the same.
(c) The EPC/BOP contracts shall stipulate adequate liquidated damages for shortfall in
performance guarantees. The Lenders Independent Engineer shall vet the cost of project,
contracts for supply of major equipments, including provision for liquidated damages and
performance guarantee and other major contracts. LIE will also examine the reasonability
of these contract prices. REC/Lenders will have right to transfer/sale Assets of the Project
to the third party in case of default by the borrower.
(d) Open a Trust and Retention Account (TRA)/Escrow to the satisfaction of lenders through
which all the Project cash flows would flow.
(e) Agree that management and control of the Company shall not change during the currency
of the loan without the consent of the lenders. Remove the directors, whose names appear
in RBI defaulters list from its Board, or get their names deleted from the list.
(f) Submit an undertaking that it has borrowing power for the requisitioned loan as per the
prevailing legislation.
(g) Disbursements would start after tie up of entire loan for the project by PQR Ltd.
59
(h) That the upfront equity of 50% has been incurred/ brought in the TRA account for the
project.
(i) That the loan documents have been executed, the security for the loan has been created as
per the satisfaction of REC and the terms and conditions of the loan.
(j) That the PQR has submitted the project execution schedule showing all the major
milestones of the project and the draw down schedule.
(k) That the 400 MW power to be wheeled to respective state or its nodal agency is firmed up
with that state or any other buyer before COD otherwise the same will be included in the
CG to be provided by ABC Ltd. So that PQR gets the tariff against full capacity
(l) That all the EPC Contracts for the project execution has been awarded and copies of the
EPC contracts are submitted to REC
(m) The land for the 400 KV substation at location F has been acquired (by purchase or on
lease). That the agreements with PGCIL and NTPC for use of their sub stations at
location B and E have been executed.
(n) That the first stage of forest clearance for construction of transmission line/substation has
been obtained within 6 months from first disbursement.
(o) That the Transmission Service Agreement with XYZ Ltd. has been amended so as to
incorporate that the XYZ shall pay to PQR the wheeling charges (as per CERC norms)
for the designed and installed capacity of the transmission system irrespective of the
quantum of power wheeled.
(p) That the Transmission Service Agreement with XYZ Ltd. has been amended so as to
incorporate that the XYZ would pay and bear the cost of the LILO of C-D line at location
A along with ROE, either as a part of wheeling tariff or otherwise so as to recover the
entire cost of the LILO line, as the LILO arrangement is proposed to be after the
dedicated transmission system is available.
(q) That the project documents and statutory clearances as allowed by the laws of the land
have been assigned / charged in favour of REC.
(r) That the PQR Ltd shall provide an undertaking to the effect that in the event of working
capital loan is not arranged prior to drawl of 90% of debt for the project, it shall
contribute the amount equal to working capital margin from its own sources.
(s) PQR Ltd shall constitute a Project Management Committee of Directors/senior executives
for the purpose of supervision and monitoring of the progress of the project.
(t) PQR Ltd shall pay lead FI charges (0.25% of the loan at present), upfront fee (as
applicable) as per the loan policy circular of REC.
60
4. Clearances / Approvals
The borrower should obtain all applicable statutory and other clearances required for
implementation of the Project, as and when required, including the following, not later than
schedule given below:
a) 1st Stage Forest clearance for the project from MoEF, GoI within 6 months from first
disbursement;
b) 2nd Stage (Final) Forest Clearance for the project from MoEF, GoI within twelve months
from date of first disbursement.
c) Section 164 from MoP, GoI within six months from date of first disbursement
d) NOC for the project from Airport Authority of India, if applicable, within six months
from the date of first disbursement.
e) Clearances/Approvals for Railway Crossing, Highway Crossing & Power Line Crossing,
at least six months before COD of the project.
f) PTCC Clearance & Clearance for charging the transmission lines from CEA, at least three
months before COD of the project.
The amendments of the transmission license from CERC and approval from MOP, GoI to be
obtained for change of triple conductor to quad conductor for A-B line within six months
from date of first disbursement
5. Other Conditions
i)
Lenders reserve the right to withhold disbursement of the amount of loan equivalent to
the provision against margin money for working capital in the cost of the project till
such time as the project is near completion and the build-up of the working capital
commences.
ii)
In case of default in repayment of the principal amount or payment of interest or any

other dues on due dates, the Lenders / RBI / CIBIL shall have right to disclose details of
the default and/or other information and the name of the Borrower and of its directors
as defaulters.
iii)
The Lenders acting through REC will have the right to examine the books of accounts
of the Borrower and to have the Project site inspected from time to time by officers of
the Lenders and/or outside consultants. Reasonable expenses incurred by the lender in
this regard will be borne by the Borrower.
61
CHAPTER 4
4.1 INTRODUCTION TO RAPDRP PART-B
1) Part B of the R-APDRP covers system improvement works mentioned in the DPR Volume IV.
This aims at achievement of AT&C losses to 15% in town areas. Any other work may be
considered if utility justifies that the implementation of the same would lead to Loss Reduction in
the project area.
2) The utilities will be required to achieve target AT&C loss reduction at the entire utility level
every year starting one year after the year in which first project of the Part-A is completed. Utilities
having
AT&C
loss
above
30%
Reduction
by
3%
per
year.
Utilities having AT&C loss below 30% Reduction by 1.5 % per year.
3) Utility shall submit detailed cost benefit analysis of the works planned to be implemented along
with the DPR. It should include existing loss level, works proposed and loss level after
implementation.
4) The Part-B project shall be completed within three years from the date of its sanction. Fund to
be released to the Part-B project shall be limited to first three years, from the date of its sanction.
5) Utility has to appoint a Nodal Officer who shall be involved from concept to commissioning of
the system and shall also be the contact point for Nodal Agency for any clarification, issue etc.
6) The Utility will have to certify and sign the DPRs prepared by them stating that the DPR is in
line with guidelines issued by Ministry of Power/ PFC for Part B, R-APDRP and is aligned
completely with the Utilitys business processes before the same is forwarded to PFC.
7) Utility should prepare a comprehensive plan for R-APDRP implementation. All the proposed
towns under the scheme (both Part-A and Part-B) shall be clearly listed and DPR of each town
shall be forwarded to PFC for consideration. Any standalone/ piecemeal scheme for any Project
Area for subsequent integration is liable to be rejected.
8) Utility has to ensure timely availability of any other infrastructure or facilities that are essential
for implementation of Part-B works but are not in the scope of Contractor viz. land acqusition, pole
location etc.
9) Works in progress should not be included in the new schemes under R-APDRP.
10) Utility shall provide detailed information regarding existing infrastructure, any bottleneck in
implementation of the works and the works proposed in the project to the Contractor before award
of contract.
62
11) Utility shall submit separate DPR for each Project Area. For all practical purposes, boundaries
of the Project Area shall be considered as defined in the Part-A of R-APDRP by the Utility.
12) Utility shall submit DPRs of all Project Areas (Towns) preferably together to nodal agency
(PFC) for approval of Steering Committee.
13) DPR shall be annexed with digital single line diagrams (SLD)/Nodal drawings of existing and
proposed distribution network of the Project Area. DPRs without the same would not be
considered for sanction.
14) The cost estimates should not include any departmental overhead expenses and cost of
consultancy. All such expenditures should be borne by the utility.
15) The Utility shall work out the AT&C loss of the project / town and facilitate with independent
agency (to be appointed by MoP/ Nodal Agency) for validation of the same including providing
documents etc. The AT&C loss of the project area duly certified by TPIEA before start of Part-B
works will be treated at Base Line AT&C loss of the project area for all purposes.
16) Scope variation on account of increase of consumer base during the currency of contract or any
other reason would be to Utilitys account.
17) For the project areas envisaged for implementation of SCADA, distribution system shall be
made compatible so as to ensure interface with SCADA/DMS system. The cost of such enabling
features shall be covered in present DPR.
18) Utility has to ensure Ring Fencing of the project area including establishing the Baseline
AT&C losses before implementation of Part-B project. The following guidelines have to be
adhered to while ring fencing is done for project area
a) All input points shall be identified and metered with downloadable meters for energy
inflow accounting in scheme area
b) All outgoing feeders are to be metered in sub-station with downloadable meters.
c) Scheme area should be ring fenced i.e. export and import meters for energy accounting
shall be ensured
d) Arrangement for measuring total energy flow in the rural load portion of project area by
ring fencing if rural load feeder is not segregated.
19) Cost of consumer meters installed under R-APDRP should not be charged to consumer.
20) Distribution Transformers procured under R-APDRP scheme shall have efficiency level
equivalent / better than that of three star ratings of BEE, where ever BEE standard is applicable.
For other DTs, where, BEE standard is not applicable, CEA guidelines shall be followed.
63
21) In case of new 11 KV feeders/sub-stations / DTs are installed at any point of time after
sanction of Part-A, utility must make provision for installing AMR at appropriate points and
ensure integration with IT system proposed/installed in Part-A
22) Return on investment for the project shall not be less than 10%.
23) Project shall be preferably executed on turnkey basis.
24) Planning for LT lines, DTs etc shall be done, considering load growth for three years and
existing utilization of transformation capacity & lines.
25) Planning for 11 KV lines, Power Transformers and Primary S/S shall be done, considering
load growth for five years.
26) For calculation of future Load, the growth may be on the basis of average of last five year load
growth.
27) Total capacity of Distribution Transformers may be upto 200% of the Power Transformer
capacity.
28) Capacity enhancement of DTs shall not be done in isolation. Capacity enhancement of LT
lines shall also be clubbed with capacity enhancement of DTs.
29) All categories of consumer meters can be proposed in Part-B of R-APDRP scheme for
replacement from electromechanical to electronic meters. AMIs can be considered for deployment.
The meters shall be tamper proof electronic meter, as per R-APDRP guidelines issued from time to
time.
30) In case of any new asset created at any point of time after sanction of Part-A, utility must
make provision for installing AMR at appropriate points and ensure integration with IT system
proposed / installed in Part-A. Utility should also use GPS survey through GPS machine for new
assets created during implementation of Part-B scheme and subsequent thereof.
31) The following items may be included by the utilities under PART B:
Table 33: Items Included by the Utility Under Part-B
Sr.no
1
Nature of work
Evaluation Method
Replacement of existing HT & LTCT Electromechanical The utility shall provide

consumer meters with two way (AMR compatible, open the number of such
protocol) tamper proof electronic meters. For replacement of consumers.
whole current electromechanical consumer meters, the
guidelines of CEA shall be adopted.
64
If existing service line is prone to tamper and pilferage the The

replacement
of
same shall be replaced with armoured or XLPE cable for service
cable
for
which minimum configuration should be :
maximum
25%
consumers of the town
(i) Single Phase consumers: min. 4 sq.mm
may be allowed. In
exceptional case the
(ii) Three Phase consumers: min. 6 sq.mm
quantity
can
be
increased.
Installation of new Distribution Transformers in following Each

Distribution
cases:
Transformer of 25 KVA
& above shall be
(i) If the length of LT feeder is more than 300 mtr then new provided with minimum
Distribution transformer may be proposed to improve HT: two LT feeders. In case
LT ratio.
of only one existing LT
(ii) If existing peak load on DT is more than 70% of its rated feeder, scheme for laying
new LT circuit may be
capacity then new DT may be proposed.
prepared.
(iii) Even if the length of LT feeder is below 300 meter but
the peak load on the feeder is more than 70% of rated
thermal capacity of the conductor, new DT should be
installed or conductor should be replaced by higher size.
Provision of Isolator, HT fuse / horn gap & LA at each
Distribution Transformer, if not provided earlier.
Alternatively this isolator, HT fuse / horn gap fuse can be
replaced with drop out fuse with On Load maintenance
facility thereby reducing system interruptions.
Provision of LT distribution box for control and protection

of outgoing LT circuits.
Each Distribution Transformer of 25 KVA & above shall be

provided with minimum two LT feeders. In case of only one
existing LT feeder, scheme for laying new LT circuit may be
prepared.
If the peak load on existing 11KV feeder is more than 75%

of rated thermal capacity of the conductor, conductor with
higher capacity may be proposed or feeder bifurcation may
be proposed.
If peak load on existing 33/11KV S/S is more than 80% of

its transformer capacity or the O/G 11KV Feeders have peak
load more than 75% of their thermal capacity , new
65
33/11KV S/S may be proposed.

9
11 KV feeder segregation may also be proposed for (i)

reducing boundary metering points (ii) reduce complexities
involved in consumer indexing, GIS based asset mapping
(iii) fixing greater accountability and responsibility
10
Intelligent Ring main unit & sectionaliser may be proposed

for such town which fulfill any of the following criterion :
(i) Where SCADA is proposed.
(ii) Population of Town is more than 1 lakh.
(iii) Annual energy input is more than 100MU.
(iv) Any other specific requirement.
11
The Distribution Transformer may be provided with the

capacitors of following ratings at LT side:
(i) 100 KVA : 12 KVR
(ii) 63 KVA : 8 KVR
(iii) 40 KVA : 6 KVR
(iv) 25 KVA : 4 KVR
12
Installation of ABC cables in dense, theft prone & congested

areas. Both HT & LT ABC may be proposed. The capacity
of ABC shall be 20% more than that of bare conductor, as
thermal overloading capacity of ABC is less than Bare
conductor.
13
In theft prone area and to improve HT: LT ratio, HVDS may

be proposed. Total capacity of HVDS shall be higher by
20% than conventional LT S/S.
14
For the towns where SCADA has been proposed , the

following electrical interfaces shall be included in PART B :
(i) Battery Charger at each 33KV S/S if not available.
(ii) Conversion of overhead 11 KV line with Underground
11 KV line with installation of Fault Passage Indicators.
(iii) Motorized breaker for all incoming & outgoing feeders
at 33 KV substations.
66
(iv) Open protocol electronic relays

(v) Ring Main Unit (SCADA Ready) / sectinaliser.
(vi) Separate CTs for SCADA purpose may be considered.
15
10% line length of 11 KV lines may be considered for auto

re-closer (self healing) scheme.
32. Following documents shall be submitted for cost justification:

(i) Utility shall provide approved schedule of rate of current financial year for proposed works
against justification of cost.
OR
(ii) Utility shall provide approved stock issue rate of current financial year for justification of
material cost.
33. Utility shall submit cost estimate of each and every proposed work. This will ensure the
preliminary study and preparedness of the utility about the work. This will also help in appraising
the proposed cost in DPR.
4.2 PROJECT OBJECTIVE
The main objective of the scheme is to reduce the AT & C loss 15% and make
the system economically viable and improve the reliability of supply to project Area
consumers.
Table 34: Brief Profile of State/Utility
Name of State
Name of Utility (Short Name)
Date of Incorporation
Total Number of Utility Consumers
Punjab
PSEB
20-Oct-60
6631407
Previous Financial Year

Billing Efficiency
Collection Efficiency
AT&C Losses
%
%
%
67
75.01%
100.17%
24.86%
4.3 PROJECT AREA DETAILS

Table 35: Project Area Details
Data for AT&C Losses Computation for Project
Area
(Available data for Previous FY Before Project
Sanction)
Energy Input
Energy Sales
Total Revenue Billed
Total Revenue Collected (including arrears)
Arrears {Actual or Total Revenue collectedRevenue billed}
M Units
M Units
Rs. Lac
Rs. Lac
Data for
Previous
FY 200809
2008-09
1369.61
945.69
33832
33990
Rs. Lac
158
Billing Efficiency
AT&C Losses
{Assessed for Base Year-0}
%
%
%
Loss Reduction Trajectory

Year-1
Year-2
Year-3
Year-4
Year-5
Year-6
Unit
%
%
%
%
%
%
Unit
FY
69.05%
100.00%
30.95%
Projection
29.50%
27.00%
23.00%
19.00%
15.00%
15.00%
4.4. COMMERCIAL INFORMATION

Table 36:Commercial Information
Particulars
Peak Demand (Met)
Peak Demand (Unrestricted)
Energy Input
Metered Energy Sales
Assessed Energy
Total Energy Billed
Revenue Billed
Revenue collected
Billing Efficiency
AT&C Losses
DT Failure rate (Yearly)
MW
MW
MU
MU
MU
MU
Rs. Lac
Rs. Lac
%
%
%
%
FY 08-09
346.08
428.53
1369.61
940.88
4.81
945.69
33832
33832
69.05%
100.00%
30.95%
8.57
68
FY 07-08
330.76
413.97
1360.54
935.91
4.7
940.61
34269
34143
69.14%
99.63%
31.12%
9.93
FY 06-07
320.32
398.91
1294.21
884.28
3.27
887.55
32132
31752
68.58%
98.82%
32.23%
10.33
Project Cost
Scheduled date of completion (Part-B Project)
Energy Input
AT&C Losses
{Assessed for Base Year-0}
Rs. Cr
M Units
%
246.29
31/03/2013
1369.61
30.95%
4.5 SCOPE OF WORK

Write-up on system strengthening and other works to be covered in the Project along with need
and justification.
Utility shall submit a report of detailed study along with survey report to bring down the AT&C
loss of project area from present level to 15%. This shall be inclusive of all proposed works along
with justification for the same.
Present level of AT&C losses of Amritsar City is 30.95% during the base year 2008-09. These will
be brought down to 15% in 6 years & following types of work will be executed to bring down the
losses
1.Sub Transmission System I
1.1 66/11 or 33/11 KV SS : New/Augmentation
As the existing S/S are overloaded due to increase in load new 5no. 66KV Grid S/Stn, Capacity
Augmentation of existing power transformers running at more than 80% capacity and
additional 3no Transformer has been proposed
1.2 66 or 33 KV Line : New Feeder/ Feeder Bifurcation/Augmentation
For new S/S new 5no feeders have been proposed
1.3 11 kV Line : New Feeder/ Feeder Bifurcation
For increasing the reliability following are proposed:
- Installation of automated RMUs along with aux power supply to
Operate sw/breaker -
235 Nos.
- Installation of remote communicable FPIs (O/C, E/F)
402 Nos.
- Installation of remote switchable breakers
89 Nos.
- Installation of new feeder
33 Nos.
- Augmentation of Conductors
188 Km
- Feeder Bifurcation (with proper justification)

- Associated Civil Works
235 Nos.
69
- Any other work that can lead to loss reduction

1.4 Distribution Transformer: Capacity Augmentation/ New Transformer
Existing D/Ts are overloaded :
- Installation of New Transformers
613 Nos
1.5 LT Line : New Feeder/ Feeder Bifurcation

1.6 Capacitor Bank
1.7 Aerial Bunched Cables
2. HVDS
3. Consumer Metering
3.1 Some consumers still have old EM type meters, which need to be replace with new
Tamper Proof Electronic meters.
4. Mobile Service Centre
4.6 PROJECT FUNDING

Table 37:Project Funding
Cost Item
Total Cost
Total Setup Cost
Rs.Cr
GoI
(25%)
246.29
PFC/
FIs
61.57
Utility
184.72
0.00
4.7 PROJECT BENEFITS

Table 38:Financial Benefits
Base Year0
AT&C
Losses
30.95%
Internal Rate of Return (IRR)
Year-1
Year-2
Year-3
Year-4
Year-5
Year-6
29.50% 27.00% 23.00% 19.00% 15.00% 15.00%
70
37.6%
4.8 PROJECT BENEFITS (AT & C LOSSES)

Table 39: AT&C Losses
For the Project Area
Unit
Assessment
of Existing
Losses for
Base Year
Energy Input
Energy Sales
Total Revenue Billed
Total Revenue Collected (including arrears)
Arrears
{Actual or Total Revenue collected-Revenue
billed}
M Units
M Units
Rs. Lac
Rs. Lac
1369.61
945.69
33832
33990
Rs. Lac
158
Billing Efficiency
AT&C Losses (Assessed)
%
%
%
69.05%
100.0%
30.95%
It is envisaged that with implementation of the project the AT&C Losses shall be
reduced progressively as shown below
Base Year
%
30.95%
29.50%
Year-1
%
27.00%
Year-2
%
23.00%
Year-3
%
19.00%
Year-4
%
15.00%
Year-5
%
15.00%
Year-6
%
Project IRR
Payback Period
38%
0.00
71
CHAPTER 5
5.1 CONCLUSION
The project has been appraised from techno economic angle as per RECs appraisal procedure and
found eligible for financing. In line with the new Electricity Act 2003, techno-economic clearance
from Central Electricity Authority (CEA) and investment decision from the Planning Commission
are not required for transmission project.
Assessment of the financial feasibility of the Proposed Project, delivers satisfactory financial
parameters as per base financial model. It has also assessed the viability of the Project under
the impact of various scenarios, which could be at variance with the base case scenario
assumed.
The delivered power cost to the steel plants from power project of the same utility after factoring
the transmission cost works out much lower than the cost of power from alternate sources viz grid /
gas based power plants & the transmission system is well justified.
On the basis of business analysis, financial analysis and the management analysis of this project it
has been found that project is financially viable.
The focus of the RAPDRP programme is on actual, demonstrable performance in terms of AT&C
loss reduction. The coverage of programme is urban areas towns and cities with population more
than 30,000 (10,000 for special category states). Private distribution utilities are not covered under
the programme and to be reviewed after two years from date of approval of R-APDRP. The
prescribed implementation period for Part A and Part B projects is 3 years from date of sanction
and 5 years respectively. Further, the repayment tenure for Part A is 10 years (including 3 years
moratorium) and for Part B is 20 years (including 5 years moratorium).
The level of AT&C losses of Amritsar City was 30.95% during the base year 2008-09. These will
be brought down to 15% in the next 6 years.
72
5.2 LIMITATIONS
The development of a complete financial plan must include consideration of cash flows for
expenses and revenues, both capital and operating, on a year-by-year basis from the current year
through and beyond the design year selected for the estimation of tariff. This analysis should
examine alternative pay-as-you-go and debt financed scenarios, be conducted in year-ofexpenditure dollars, and address the underlying uncertainties associated with inflation, interest
rates, project cost (exclusive of inflation), foreign exchange rate, grant funding levels and rates of
payment, and other factors over which the project sponsor will have no direct control.
The assumptions and sources of information underlying the development of the capital and
operating cost estimates are an integral part of the financial analyses documented in this
report. Uncertainties associated with fluctuating economic conditions and other factors may result
in the actual results of the financial program varying from the projections in the financial
analyses.
Some of the major limitations and issues regarding the project appraisal are as follow:
Risk analysis depends on contracts used to allocate risk to different parties
Credit rating of the utility is based on the financial, management and business analysis.
Less credit rating in one of the three analysis directly affect the sanction of project.
The process explained in the report is the one adopted by REC for power projects appraisal
and financing. It may not be generalized in on the similar lines for projects of the other
sectors and financial institution like health, retail etc.
In case the promoter has a foreign player its individual rating by an international rating
agency can be taken as a surrogate for entity evaluation.
73
5.3 RECOMMENDATIONS
With the deficit of electricity in our country, there is need of many projects and the
exposure limit should be increased to effectively assist the new projects. The exposure
limit of some utility is going to reached, which resist REC to fund.
To minimize the risk, the extent of financing to a single project should be proportionate; it
will also affect the exposure limit for borrower or utilities and chance to fund in more projects
rather in some.
Currently REC has less % funding in generation projects, REC should also concentrate to
increase its share in power generation projects.
Nuclear power projects should be taken as a future prospect business of REC.
The entity appraisal is very detailed and sensitive part of project financing, manual work
should be replaced with good software.
With the changes in project parameters, the re-rating of project should be done at an
appropriate time and linkages of interest rate, exposure limit and security to the new
project rating should be done.
There should be more bifurcation in the linkages to integrated project rating. A detailed
and comprehensive model study should be made for accordingly.
5.4 FUTURE SCOPE

During 11th Plan, a number of 765kV lines and substations have been added and a few more
are under-construction. The trend of increasing 765kV system in the grid is going to continue
in the 12th Plan as well. A number of new 765kV lines and substations have been planned for
evacuation of bulk power .this indicates more investments in the transmission sector
HVDC transmission line system is future for this sector, that will help to strengthening of
transmission sector country.
Smart transmission Grid system is implementing in India.

RAPDRP cover assistance to state utilities and private distribution companies also.
National Electricity fund scheme -The poor state of distribution sector requires investment
for replacement of obsolete equipment and technology upgradation. Under this scheme, it was
proposed that interest subsidy would be extended to the Distribution Utilities which would be
linked to reforms. This is expected to reduce the burden of servicing the interest on the
utilities.
74
BIBLIOGRAPY
Documents
[1] REC Guidelines of financing Norms, Entity Appraisal and project appraisal for Private
Transmission projects.
[2] PFC Guideline of project Appraisal
[3] Central electricity Regulatory Commission Regulations,2009
[4] Ministry of Power Annual Report 2011-12
[5] Ministry of Power Annual Report 2010-2011
[6] Report on The Working Group on Power for Twelfth Plan (2012-2017)- Ministry of Power,
Government of India
[7] Guidelines for RAPDRP during XI Plan 2011-12
[8] Guideline for National Electricity Fund(Interest Subsidy Scheme)
[9] REC 42nd Annual Report 2010-11
[10] REC 43rd Annual Report 2011-12
[11] PFC guideline for RAPDRP
[12]Brown, R.E ,Transmission and Distribution Conference and Exhibition, 2005/2006 IEEE
PES
[13] Financial Management: by I.M.Pandey
Websites[14] www.recindia.nic.in
[15] www.powermin.nic.in
[16] www.cea.nic.in
[17] www.cercind.gov.in
[18] www.mptransco.nic.in
[19] www.ntpc.co.in
[20] www.mppgenco.nic.in
[21] www.mnre.gov.in
[22] www.essar.com
75
[23] www.forumofregulators.com
[24] www.cpri.in
[25 ] www.scribd.com/doc/91071555/8/Literature-Survey
[26] www.apdrp.gov.in
76

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DECLARATION

Ritesh Biharilal Sarve

MBA in Power Management

Ritesh Biharilal Sarve

B) Financing and Implementation of RAPDRP scheme in Amritsar under PSPCL.

ABBREVIATIONS AND ACRONYMS

Aluminium Conductor with steel reinforcement

2.2.11 Deviation Proposal....................................................................................................16

B.12 Row & Forest Clearances Related issue ..............................................................56

1.6 ORGANISATION PROFILE

consultancy services, transmission, sub transmission and distribution systems, renovation,

1.6.1 PERFORMANCE HIGHLIGHTS:-

1.7 CATEGORY OF SCHEMES FINANCED UNDER T&D

Project system Improvement:

SI:Meters, Transformers, etc

For conversion of LVDS to HVDS

Project Pumpsets: SPA:PE

For counterpart funding of APDRP schemes

To strengthen and improve the sub

For evacuation of power from new generating

Project Appraisal: It is an assessment of a project in terms of its economic, social

Management appraisal is related to the technical and

managerial competence, integrity, knowledge of the project, managerial competence

documentation process, and risk minimization process and to get approval.

2.2 TRANSMISSION POLICIES IN INDIA

2.2.3 SCHEME AREA

2.2.4 SCOPE OF WORKS

Construction of new sub-stations at all voltage levels in transmission, sub-transmission

Augmentation of existing sub-stations and lines at all voltage levels in transmission,

Conversion of LVDS to HVDS.

Conversion of three phase system to single phase system.

Renovation & Modernisation of the existing HT and LT lines including LVDS.

Regrouping of loads, bifurcation, alignment and augmentation of existing heavily

Provision of reliable and tamper proof meters at Consumers' premises.

Provision of metering and reliable protection on LT side of distribution transformers.

Provision of inter utility meters.

Shunt compensation in LT system.

Bifurcation, alignment and augmentation of existing heavily loaded 11 KV feeders.

Provision of 11 KV automatically Switched capacitors directly on lines.

Provision of 11 KV voltage boosters, sectionalisers etc.

Shunt compensation at various substations in sub-transmission system, by installation

Provision of metering equipment on all incoming and outgoing feeders in the

Provision of service connections (utility share), as also its modernization.

Metering and other Equipment for Energy audit.

Replacement of worn out sub-station equipment.

(xx), if not specifically covered under the concerned project.

2.2.5 FORMAT OF THE SCHEME

2.2.6 ESTIMATION OF LOAD DEMAND

2.2.7 ENTITY APPRAISAL

2.2.8 EXTENT OF EXPOSURE OF UTILITY

2.2.9 COST DATA

2.2.10 PROJECT IMPLEMENTATION

b) Execution of the project

2.2.11 DEVIATION PROPOSALS

2.2.12 PROJECT FINANCING

2.2.13 ENHANCEMENT OF LOAN AMOUNT

2.2.14 INTEREST DURING CONSTRUCTION (IDC)

2.2.15 DISBURSAL OF LOAN

2.2.16 FINANCIAL VIABILITY