PETITION NO. 54 /2012

Transcription

1 PUNJAB STATE ELECTRICITY REGULATORY COMMISSION PETITION NO. 54 /2012 Vetting of Capital Cost & Various Components of Tariff Calculations Submitted by Final Review Report (July 2013) Lahmeyer International (India) Pvt. Ltd. Intec House, 37, Institutional Area Ph Sector 44, Gurgaon Fax National Capital Region (INDIA)

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3 REVISION HISTORY Revision No. Date Prepared / Revision By Description A 31-Jul-13 LII Final Review Report H D01 00 Revision History i 31-Jul-13

4 TABLE OF CONTENTS

5 TABLE OF CONTENTS LIST OF ABBREVIATIONS LIST OF ANNEXURE LIST OF FIGURES LIST OF TABLES INTRODUCTION SCOPE OF WORKS PROJECT DESCRIPTION APPROACH ADOPTED FOR VETTING OF CAPITAL COST GUIDELINES FOLLOWED VETTING OF CAPITAL COST DPR COST Basis of the Cost Estimate Project Cost as per DPR ACTUAL COMPLETED COST VETTING OF TIME OVERRUN Geological Surprises Unprecedented Weather Condition Consultant s Evaluation of Time Overrun VETTING OF COST OVERRUN Infrastructure Works Major Civil & Hydro-mechanical Works Plant & equipment including initial spares Overheads IDC, FC, FERV & Hedging Cost SUMMARY OF COMPLETED PROJECT COST VETTING OF VARIOUS COMPONENTS OF TARIFF GENERAL USEFUL LIFE OF PROJECT CONSTRUCTION PERIOD CAPITAL COST H D01 00 Table of Contents Jul-13

6 7.3 INITIAL SPARES ADDITIONAL CAPITALIZATION SALE OF INFIRM POWER DEBT-EQUITY RATIO COMPONENTS OF TARIFF ANNUAL FIXED COST RETURN ON EQUITY (ROE) INTEREST ON LOAN CAPITAL DEPRECIATION INTEREST ON WORKING CAPITAL OPERATION & MAINTENANCE EXPENSES NORMATIVE ANNUAL PLANT AVAILABILITY FACTOR (NAPAF) DESIGN ENERGY AUXILIARY ENERGY CONSUMPTION AND TRANSMISSION LOSSES FREE POWER INTEREST DURING CONSTRUCTION (IDC) AND FINANCING CHARGES (FC) FOREIGN EXCHANGE RATE VARIATION (FERV) AND HEDGING COST TARIFF SUMMARY H D01 00 Table of Contents Jul-13

7 LIST OF ABBREVIATIONS ADHPL : AD Hydro Pvt. Ltd. APTEL : Appellate Tribunal Electricity BOQ : Bill of Quantities COD : Commercial Operation Date CEA : Central Electricity Authority CERC : Central Electricity Regulatory Authority DPR : Detailed Project Report EPPL : Everest Power Private Limited E&M : Electro mechanical GCC : General Conditions of Contract HEP : Hydro Electric Project HM : Hydro-mechanical HPSEB : Himachal Pradesh State Electricity Board HRT : Head Race Tunnel IDC : Interest During Construction LCB : Local Competitive Bidding MAT : Main Access Tunnel MOEF : Ministry of Environment and Forest MU : Million Unit MW : Mega Watt PGCIL : Power Grid Corporation of India Limited PSEB : Punjab State Electricity Board PSERC : Punjab State Electricity Regulatory Commission PSPCL : Punjab State Power Corporation Limited PTC : Power Trading Corporation TEC : Techno-economic Clearance H D01 00 Table of Contents Jul-13

8 LIST OF ANNEXURE Annexure I : Salient Features of the Project Annexure II : Project Layout Annexure IIIA : Project Construction Schedule as per DPR Annexure IIIB : Project Construction Schedule as per Civil Contract Annexure IIIC : Actual Project Construction Schedule Annexure IV : Quarterly Details of IDC Annexure VA : Affidavit by Project Company regarding insurance claim and liquidated damage Annexure VB : Affidavit by Project Company regarding adjustment from duty exemption/ drawbacks/ benefits/ other claims Annexure VI : Balance Sheet Annexure VII : Restructuring of REC loan Annexure VIII : State Bank of India letter dated September 13, 2012 regarding interest rate Annexure IX : Transmission Loss Calculation LIST OF FIGURES Figure 1: Figure 2: Location of Malana II HEP Schematic L-Section of Malana II HEP LIST OF TABLES Table No.6.1: Table No.6.2: Table No.6.3: Table No.6.4: Table No.6.5: Table No.6.6: Table No.6.7: Table No.6.8: Abstract of Hard Cost as per DPR Completed Project Cost as per DPR Completed Project Cost (` in Lakh) Commissioning Dates Various Contracts Anticipated and Actual levels of Foundation Rock in Dam Blocks Anticipated and Actual Rock Type Encountered in HRT Excavation Progress in HRT Reasons Delay Post synchronization of Units H D01 00 Table of Contents Jul-13

9 Table No.6.9: Preliminary including Development Works - DPR Cost Vs Completed Cost Table No.6.10: Details of Costs incurred on Land Table No.6.11: Comparison of Estimated Cost and Completed Cost of Land Table No.6.12: Comparison of Estimated Cost and Completed Cost of Buildings Table No.6.13: Contract Cost Infrastructure Works Table No.6.14: Communication DPR and Completion Cost Table No.6.15: DPR Cost and Completed Cost of Environment & Ecology Table 6.16: Completed Costs under Establishment to be considered under Miscellaneous Table No.6.17: Estimated Cost and Completed Cost of Miscellaneous Works Table No.6.18: Summary of DPR Cost and Completed Cost Infrastructure Works Table No.6.19: Negotiated Bid Price of Different Bidders Table No.6.19A: Contract Price Main Civil Works after deducting Cost of Materials Table No.6.20: Comparison of Cost of Civil works in DPR, Contract, Completed and Recommended by Consultant Table No.6.21: Escalation of Civil & HM Cost as per DPR and Completed Cost Table No.6.22: Summary of Major Civil & HM Cost as per DPR and Completed Cost Table No.6.23: Escalation of E&M Cost as per DPR and Completed Cost Table No.6.24: Summary of E&M Cost as per DPR and Completed Cost Table No.6.25: Details of Actual cost incurred on Establishment Table No.6.26: Summary of Overheads Cost as per DPR and Completed Cost Table No.6.27: IDC & FC as per DPR, Generating Company and Recommended by Consultant Table No.6.28: Total Completed Cost as per DPR, Generating Company and Recommended by Consultant Table No.7.0: Table No.7.1: Table No.7.2: Table No.7.3: Table No.7.4: Table No.7.5: Table No.7.6: Table No.7.7: Details of Infirm Power Sale Details of Debt. Sharing Details of Equity Sharing Details of Equity Sharing as per Tariff Forms & Balance Sheets Details of Return on Equity Details of Interest Rates of Different Banks Weighted Average Rates and Interest Amount on Loan Details of Repayment Period H D01 00 Table of Contents Jul-13

10 Table No.7.8: Table No.7.9: Rate of Depreciation Different Assets Average Depreciation Rates and Depreciation Amount Table No.7.10: Details of Interest on Working Capital Table No.7.11: Details of Operation and Maintenance Expenses Table No.7.12: Calculation of Design Energy after deducting Environmental Release Table No.7.13: Details of Design Energy and Saleable Energy Table No.7.14: Auxiliary Energy Consumption and Transmission Losses Table No.7.15: Details of IDC & Financing Charges as per Project Company Table No.7.16: Amount of Interest during Construction and Financing Charges as considered in Tariff computation Table No.7.17: Details of Energy Charge Calculations Table No.7.18: Calculations of 40 year Levelized Tariff Table No.7.19: Summary of Vetting of Various Tariff Components H D01 00 Table of Contents Jul-13

11 EXECUTIVE SUMMARY

12 EXECUTIVE SUMMARY A) Introduction Everest Power Private Limited (EPPL) has developed 2x50 MW Malana II Hydro Electric Project (HEP) in Himachal Pradesh (Project). The project was commissioned on July 12, 2012 and comprises of a 53m high Concrete Gravity Dam, a 4.99km long 2.9m dia Head Race Tunnel (HRT) aligned on the left bank of Malana Khad (tributary of Beas river), a 87m deep 6m dia Surge Shaft, 2.5m dia and 564 m high vertical & 260m horizontal Single Pressure Shaft (PS) and an Underground Power House Complex. PTC India Limited (PTC) has entered into a Power Purchase Agreement (PPA) dated July 25, 2005 with EPPL the purchase of the entire capacity and the electricity generated by the 100 MW Malana II HEP excluding the auxiliary power consumption, transmission and transmation losses upto the Delivery Point and free power to Home State of Himachal Pradesh. Based on the strength of the aesaid PPA, PTC has subsequently entered into a Power Sale Agreement (PSA) dated March 23, 2006 with Punjab State Power Corporation Limited (PSPCL), a successor company of the erstwhile Punjab State Electricity Board (PSEB) supply and sale of entire capacity and electricity generated by the Project, excluding the auxiliary power consumption, transmission and transmation losses upto the Delivery Point and free power to Home State. The PSA inter-alia envisages determination of Tariff by the Appropriate Commission based on the completed cost of the Project. EPPL has filed Petition no. 54/2012 to Hon ble Punjab State Electricity Regulatory Commission (PSERC) determination of Tariff of the project, in accordance with CERC Regulations Hon ble PSERC vide their letter no. PSERC/11627 dated February 21, 2013 has appointed Lahmeyer International India Private Limited (LII) as Independent Consultant assisting the Commission in the vetting of the Capital Cost and calculations of various components of tariff the Malana II HEP. The vetting will include time and cost overrun during the execution of the project attributable and not attributable to the generating company along with the reasons the same. Himachal Pradesh State Electricity Board (HPSEB) accorded the Techno-economic Clearance (TEC) of the project in the month of October 2004 at the estimated H D01 00 Executive Summary i 31-Jul-13

13 project cost of ` crore at December2002 price level. The project was proposed to be completed at an estimated project cost of ` 598 crore, as appraised by the Lenders in Against the approved Detailed Project Report (DPR) cost of ` crore, the completion cost till Commercial Operation Date (COD) reported by the generating company is ` crore. This cost includes cost of Civil works, Hydro-mechanical (HM) works, Plant and Equipment including initial spares (Electro Mechanical works), Transmission line works and Other Direct & Indirect cost. It also includes escalation, interest during construction and financing charges. Thus a cost difference of ` crore has emerged between approved DPR cost and completed cost while increase in completed cost of the project from that of appraised cost by Lenders based on contract cost is ` crore. Out of total completed cost of ` crore, ` crore is provisional cost and is required completion of balance works. The main reasons mentioned (page 1074 & 1075 of the Petition) cost overrun include time over run resulting in increase of Interest During Construction(IDC), price escalation, overhead expenses, geological surprises, increase in statutory levies & taxes, increase in minimum wages surface & underground works, change in Himachal Pradesh Hydro power policy and increase in lending institution s interest rates. B) Vetting of Time Overrun Implementation Agreement carrying out detailed investigations, techno-economic studies, preparation of DPR and implementation of 100 MW Malana II HEP was signed between Government of Himachal Pradesh and Everest Power Private Limited on January 14, The commissioning period of the project envisaged was as 90 months (July 13, 2010). Subsequently, DPR was prepared by EPPL and approved by HPSEB on October 15, The commissioning period envisaged in the DPR was 48 months from the award of contract of main civil works. The tender the construction of infrastructure and main civil works was floated in October Subsequent of completion of tendering process and contract negotiations, contract construction of infrastructure, main civil and HM works was signed with M/s Larsen & Toubro Limited (L&T) on March 26, The contract completion date in the contract has been specified as 36 months from the H D01 00 Executive Summary ii 31-Jul-13

14 commencement date which has to be reckoned after one week from the financial closure of the project (August 30, 2006). Accordingly, schedule contract completion date is September 05, Though the contract infrastructure and civil works was awarded to L&T in March 2005, the construction works at ground could start only after final est clearance in December During construction phase, project has been reported to experience inclement weather and encounter geological surprises in Dam, HRT, Pressure shaft and Power House. Major difference in geology occurred at Dam site and HRT and consequently the construction of project component was completed in July Thereafter, trial run tests were conducted on the units in August and September However, the project also got delayed from October 02, 2011 to July 11, 2012 due to damages in components like dam, HRT, Pressure Shaft and Powerhouse. The time lost in repair of damages in dam, pressure shaft and power house is attributable to generating company on account of inadequate safety margin considered in the design, while the damage in HRT is on account of presence of shear zone parallel to HRT invert at shallow depth which was difficult to identify on the basis of geological features exhibited on the excavated HRT sections and theree is attributable to geological surprises. Since repair of HRT, pressure shaft, dam and HRT were taken up parallely and repair of HRT consumed most of the repair period, delay in COD due to repair of damaged components and re-testing of units from October 02, 2011 to July 11, 2012 would be mostly attributable to geological surprises. C) Vetting of Cost Overrun The cost overrun of ` crore above the approved DPR cost is mainly on account of increase in cost of infrastructure works (` crore) due to high EPC contract cost, geological surprises and rectification of civil works in project components like dam, HRT, pressure shaft and power house (` crore), increase in establishment cost (` crore) and increase in IDC (` crore). The Consultant has reviewed head wise (as per Form-5B of the Petition) cost overrun from the DPR cost and the revised project cost on prudence check worked H D01 00 Executive Summary iii 31-Jul-13

15 out to ` crore which includes hard cost of ` crore and soft cost of ` crore. Approved cost of the DPR was based on price level of year 2002 and if major works of the DPR cost is escalated on price index of year 2006 along with the cost of preliminary & overhead expenses as per Central Electricity Authority (CEA) guideline (Guidelines mulation of DPRs hydro-electric schemes, their acceptance and examination concurrence, CEA, 2012), the escalated hard cost of the DPR is worked out as ` crore which compares well with the revised hard cost of the project of ` crore. The summary of DPR cost, completed cost and cost recommended by the Consultant is presented in the table below:- Sl No. Description DPR cost Cost as per CEA Guideline/ Market rate (` crore) Completed Cost Cost recommended by Consultant I II III IV V VI 1 Infrastructure Works 2 Major Civil & Hydro-mechanical works Hydro-mechanical Equipments 4 Plants & equipments including spares Included in item 2.0 above Taxes and duties Included in item 4.0 above 6 Construction & pre commissioning expenses 7 Overheads Capital cost without IDC, FC, FERV & Hedging cost IDC, FC, FERV & Hedging Cost Total H D01 00 Executive Summary iv 31-Jul-13

16 D) Vetting of calculation of various Components of Tariff S. No. The vetting of tariff components along with it s calculations the project has been done as per the Tariff Regulations issued by Central Electricity Regulatory Commission (CERC) period of 2009 to 2014 in January 2009 and the summary is presented below:- Item Description Tariff Parameters adopted by Project Company Basis used by Project Company Tariff Parameters adopted by Consultant Consultant's Remarks I II III IV V VII Useful Life of the project Debt. Contribution Equity Contribution Return on Equity (Pretax) Tax on Return on equity Maximum Depreciation limit Average depreciation applied 40 Years As per Implementati on Agreement 40 Years 70% As per CERC 70% 30% As per CERC 30% 15.5% As per CERC 16.5% 20.01% 100% 4.95% per annum As per Income Tax Laws As per Project Company As per CERC 20.01% first 10 yrs. & 33.99% beyond 10 yrs. 90% 4.95% first 12 yrs. & 1.09% beyond 12 yrs. Useful Life of Project should be considered as 35 yrs. as per latest CERC Tariff Regulations, However, project life of 40 yrs. has been considered as per Implementation agreement. As per CERC Tariff Regulations, 2009 Chpater-2,Clause no.12 As per CERC Tariff Regulations, 2009 Chpater-2,Clause no.12 As per CERC Tariff Regulations, rd Amendment Clause no.15 (2) As per Income Tax Laws As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.17(2) As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.17(4) H D01 00 Executive Summary v 31-Jul-13

17 S. No. Item Description Tariff Parameters adopted by Project Company Basis used by Project Company Tariff Parameters adopted by Consultant Consultant's Remarks I II III IV V VII Annual operation & maintenance expenses during the first year Escalation on operation and maintenance charges Maintenance spares as % of O&M charges Receivables (in terms of monthly billing) Operation & Maintanence Expenses Working Capital Free Power to State 2% of capital cost 5.72% per annum 15% per annum As per CERC As per CERC As per CERC 2% of capital cost 5.72% per annum 15% per annum 2 months As per CERC 2 months 1 month As per CERC 1 month 12% first 12 years 18% beyond 12 years As per MOU with State Government 12% first 12 years 18% beyond 12 years As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.19(f)-v As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.19(f)-v As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.18(1)-c As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.18(1)-c As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.18(1)-c As per MOU with State Government 14 LADA Charges 1% of Design Energy As per MOU with State Government nil Additional free power over and above 12% was the first time introduced through Amendment to the Tariff Policy dated of the Central Govt. This policy has been made applicable with retrospective effect. If H D01 00 Executive Summary vi 31-Jul-13

18 S. No. Item Description Tariff Parameters adopted by Project Company Basis used by Project Company Tariff Parameters adopted by Consultant Consultant's Remarks I II III IV V VII Total Free Power to State including LADA charges Auxiliary Consumption Transmission Losses from Switchyard to Chhaur 13% first 12 years 19% beyond 12 years As per MOU with State Government 12% first 12 years 18% beyond 12 years 1.20% As per CERC 1.20% 1.25% As per Project Company 1.25% retrospective change is upheld, then the same being a change prompted under a central policy under the Act, will become pass through in tariff. However, the same has not been accounted in present tariff calculation as the company is not tendering the said amount to the Government of Himachal Pradesh. As per CERC Tariff Regulations, 2009 Chapter-4, Clause no.27(ii)(b)(ii) Transmission Losses of 1.25% from Switchyard to Chhaur is found to be in order as per calculations given in Annexure-IX Based on CERC tariff regulations and revised project cost and tariff parameters as above, the tariff per unit and comes out to be ` 6.65 and `5.69 respectively. 40 years levelized tariff comes out to be `5.05 per unit H D01 00 Executive Summary vii 31-Jul-13

19 MAIN REPORT

20 1.0 Introduction Everest Power Private Limited (EPPL) has developed 2x50 MW Malana II Hydro Electric Project (HEP) in Himachal Pradesh (Project). The project was commissioned on July 12, PTC India Limited (PTC) has entered into a Power Purchase Agreement (PPA) dated July 25, 2005 with EPPL the purchase of the entire capacity and the electricity generated by the 100 MW Malana II HEP excluding the auxiliary power consumption, transmission and transmation losses upto the Delivery Point and free power to Home State of Himachal Pradesh. Based on the strength of the aesaid PPA, PTC has subsequently entered into a Power Sale Agreement (PSA) dated March 23, 2006 with Punjab State Power Corporation Limited (PSPCL), a successor company of the erstwhile Punjab State Electricity Board (PSEB) supply and sale of entire capacity and electricity generated by the Project, excluding the auxiliary power consumption, transmission and transmation losses upto the Delivery Point and free power to Home State. The PSA inter-alia envisages determination of Tariff by the Appropriate Commission based on the completed cost of the Project. EPPL has filed Petition no. 54/2012 to Hon ble Punjab State Electricity Regulatory Commission (PSERC) determination of Tariff of the project, in accordance with Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009 (CERC Tariff Regulations, 2009). Hon ble PSERC vide their letter no. PSERC/11627 dated February 21, 2013 has appointed Lahmeyer International India Private Limited (LII) as Independent Consultant assisting the Commission in the vetting of the Capital Cost and calculations of various components of tariff the Malana II HEP. 2.0 Scope of Works The scope of works of the Consultant this assignment is to assist the Hon ble Commission in vetting of the Capital Cost of the Project and calculation of various components of tariff as per CERC / Commission s Guidelines / Regulations. The vetting will include time and cost overrun during the execution of the project attributable and not attributable to the generating company along with the reasons the same H D01 00 Final Review Report 1 of Jul-13

21 3.0 Project Description Malana II HE Project with an installed capacity of 100 MW was conceived as a high head, run-of-river project with 4 hour pondage and is located on Malana Khad, a tributary of the Parbati River. Parbati river is a tributary to River Beas joining at Bhunter in district Kullu. The project location falls in Kullu district of Himachal Pradesh and can be accessed from Bhunter airport, which is about 280 km from. The Project site is about 50 km from Bhunter and is approachable upto the Power House location through an all weather road. From power house to Malana II Dam site, 14km approach road with gravel surface has been constructed and bituminous surface coat is yet to be provided. It has been inmed that at the time of preparation of Detailed Project Report (DPR), only access from Malana I Weir site to Malana II dam site was through a treacherous foot track located on the right bank leading to Malana village. Fig.1: Location of Malana II HEP The project comprises of a 53m high Concrete Gravity Dam, a 4.99km long 2.9m dia. Head Race Tunnel (HRT) aligned on the left bank of Malana Khad, a 87m deep 6m dia. Surge Shaft, 2.5m dia. and 564 m high vertical & 260m horizontal Single Pressure Shaft (PS) and an Underground Power House Complex. The water H D01 00 Final Review Report 2 of Jul-13

22 conductor system is designed to carry 20 cumec design discharge to feed water to two vertical Pelton Turbines each of 50 MW capacity under 603 m net head. Schematic L-section of the project is given below in Fig. 2. The salient features and layout of the project are enclosed at Annexure I and Annexure II respectively. Fig. 2: Schematic L-Section of Malana II HEP 4.0 Approach adopted vetting of Capital Cost Site Visit The Consultant has carried out site visit from March 20 23, 2013 first hand inmation of the project site (accessibility, topography & geology), infrastructure works, project components, transmission lines and sub stations and works yet to be completed. As the project is under operation, critical components like dam, HRT, surge shaft and pressure shaft could be inspected from outside H D01 00 Final Review Report 3 of Jul-13

23 Review of Project Documents Following project documents have been collected and reviewed by the Consultant carrying out the assignment - Petition No. 54 /2012 along with annexure including IIT Roorkee s Report on Time and Cost overrun (March 2010), Lender Engineer (LE) s report on Time and Cost Overrun Report (October 2009) and Post Synchronization Geological Surprises Report - Detailed Project Report (DPR) & Techno-economic Clearance (TEC) by Himachal Pradesh State Electricity Board (HPSEB) - Implementation Agreement - Tender Document infrastructure and civil and Hydro-mechanical (H&M) works - Bid Evaluation Report infrastructure and civil and H&M works - Contract Documents infrastructure and civil and H&M works - Contract Documents Electro-mechanical (E&M) works - Contract Documents Transmission Line works - LE s Progress Reports - Progress Reports by Mr. G N Mathur (Consultant, Ministry of Power, Govt. of India) - Break up of completed cost estimate - As Built Drawings main civil works - Executed Quantities of infrastructure works and civil works main civil works 5.0 Guidelines Followed - Guidelines mulation of Detailed Project Reports Hydro-electric schemes, their acceptance and examination Concurrence, CEA (2012) - Guidelines vetting of the capital cost of hydro electric projects by designated Independent Agencies or Institutions Experts, CERC (2010) H D01 00 Final Review Report 4 of Jul-13

24 - Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, PSERC Guidelines - IS codes cost estimations river valley projects - Appellate Tribunal Electricity (APTEL) s Judgment in Appeal No. 72 of 2010 in the matter of Maharashtra State Power Generation Co. Ltd. vs. Maharashtra Electricity Regulatory Commission. 6.0 Vetting of Capital Cost 6.1 DPR Cost Cost estimate of Malana-II Hydro-electric Project (100 MW) has been worked out by calculating the quantities of different work items involved and multiplying with the applicable unit rates. The applicable unit rates civil works are based on the basic item rates prevailing in Himachal Pradesh, with labour rates and cost of transportation including loading, unloading & stacking charges Basis of the Cost Estimate The cost estimate in the DPR has been prepared to give an idea of total project cost at December 2002 price level which includes civil works (including HM works), infrastructure facilities, electrical & mechanical works and transmission line works. The rates have been derived by unit rate analysis taken all the inputs such as the cost of consumable construction materials at the project site inclusive of all levies & taxes, hourly use rate of plant & machinery and labour rates based on 2002 market rates. Since the works are planned to be executed through contracts, appropriate element of contractor s profit and has also been considered in the analysis of principal items of civil works. The applicable wages the manpower has been taken as prevalent in project area. Quantities have been worked out on the basis of various designs/drawings relating to project components. For certain items lump sum provisions have been made based on the experience gained in executing similar projects H D01 00 Final Review Report 5 of Jul-13

25 6.1.2 Project Cost as per DPR Civil & HM Works Civil & HM works cover the cost of various components like diversion channel, upstream & downstream cofferdam, dam, intake structure, trash rack, desilting chambers, headrace tunnel and adits, surge shaft, pressure shaft, powerhouse complex and tail race tunnel. It also includes the cost of related Hydro-mechanical works like spillway crest vertical gates, spillway stoplogs, intake bulkhead & service gates, surge shaft gate, pressure shaft liners and tailrace tunnel gate. The cost of civil and hydro-mechanical works was estimated as ` crore (excluding escalation of ` crore) in the DPR. Electro-Mechanical Works The cost of electro-mechanical works include generating equipments, electrical auxiliary equipments, mechanical auxiliary equipments, transmission line and terminal equipments etc. The total cost of Plant and Equipment including initial spares (Electro-mechanical works) was estimated as ` crore (excluding escalation of ` 5.93 crore) in the DPR. Other Direct & Indirect Works Other direct & Indirect works include the cost of preliminary works, Land, buildings, plantation, miscellaneous, maintenance, special T & P, roads & bridges, environment & ecology, losses on stocks, establishment, tools & plants, receipt & recoveries and audit & account charges etc. and was estimated as ` crore in the DPR. Total Hard Cost The total hard cost including civil works, hydro-mechanical works, electromechanical works, transmission line works and other direct & indirect works was estimated as ` crore including escalation of ` crore in the DPR. The abstract of estimated Hard Cost in DPR is given below in Table No H D01 00 Final Review Report 6 of Jul-13

26 Table No.6.1 Abstract of Hard Cost as per DPR Abstract of Cost (Original from DPR) Sl. No. Item Description Cost I II III A-Preliminary B-Land 1.36 C- Civil Works J-Power plant civil works K-Buildings 7.58 M-Plantation 0.00 O-Miscellaneous 8.68 P-Maintenance 2.38 Q-Special T & P 3.90 R-Communication X-Environment & Ecology Y-Losses on Stock 0.92 I-Works (Sub-total) II-Establishment III- Tools & Plants 2.57 IV- Suspense 0.00 V- Receipt & Recoveries 0.00 A Direct Charges I- Capitization of Abetment of Land Revenue 0.00 II- Audit & Account Charges 5.09 B Indirect Charges 5.09 C S-Power Plant EM Works D III- of Civil Works of E&M Works Total Hard Cost (A+B+C+D) H D01 00 Final Review Report 7 of Jul-13

27 Total Completed Cost The total completed cost including hard cost, escalation, Interest during construction and financing charges was estimated as ` crore in the DPR as per details given below in Table No Sl. No. Table No. 6.2 Completed Project Cost as per DPR Item Description Cost I II III 1 Project Hard Cost Escalation Project Hard Cost with Escalation Interest During Construction Financing Charges 4.46 Total Completed Cost * * - Difference is on account of rounding off to 2 decimal places 6.2 Actual Completed Cost Himachal Pradesh State Electricity Board (HPSEB) accorded the Techno-economic Clearance (TEC) of the project in the month of October 2004 at the estimated project cost of ` crore at December 2002 price level. The project was proposed to be completed at an estimated project cost of ` 598 crore, as appraised by the Lenders in Against the DPR cost of ` crore, the completion cost till COD including cost of some balance works reported by the generating company is ` crore. This cost includes cost of civil works, HM works, E&M works, transmission line works and other direct & indirect cost. It also includes escalation, interest during construction and financing charges. The completed cost of project reported by the generating company has been given below in Table No H D01 00 Final Review Report 8 of Jul-13

28 Sl. No. Head of works Table No. 6.3: Completed Project Cost (` Lakh) Original Completed Cost cost as approved Cost by already Authority incurred Cost appraised by Lenders (2006) based on Contract costs Provisional Cost (Balance works) Total Cost Cost Over Run I II III IV V VI VII=V+ VI VIII=VII - III 1.0 Infrastructure Works 1.1 Preliminary including Development 2, (2,136.08) 1.2 Land , , , Buildings , , Township Maintenance (238.00) 1.6 (a)tools & Plants (257.51) (b)special Tools & Plants (384.50) 1.7 Communication (Roads & Bridges) 3, , , , Environment & Ecology 2, , , (757.31) 1.9 Losses on stock (92.00) 1.10 Receipt & Recoveries Miscellaneous (787.94) LADA Total (Infrastructure 11, , , , , works) Major Civil & Hydro Mechanical Works - - Dam, Intake & Desilting Chambers 9, , , HRT, TRT, Surge Shaft & Pressure , shafts 12, , , Power Plant civil works 2, , , H D01 00 Final Review Report 9 of Jul-13

29 Sl. No. Head of works Original cost as approved by Authority Cost appraised by Lenders (2006) based on Contract costs Cost already incurred Completed Cost Provisional Cost (Balance works) Total Cost Cost Over Run I II III IV V VI VII=V+ VI VIII=VII - III Other civil works 2.4 (Contingencies & miscellaneous 1, (1,016.55) works) Escalation on Infra & Major Works 1, , , , Total (Major Civil Works) 22, , , , Hydro Mechanical equipments Included in item 2.0 Included in item Plant & Equipment including Initial spares. Generating Equipment Electrical Auxiliary equipment of power house Mechanical Auxiliary Equipment of the Power House Transmission Line and Terminal Equipment Escalation on Plant & Equipments Total (Plant & Equipment) , (2,674.65) , (276.10) , , , , (883.81) 5 Taxes and Duties 5.1 Custom Duty Included in the above Included in the above Other taxes & Duties - Total Taxes & Duties H D01 00 Final Review Report 10 of Jul-13

30 Sl. No. Head of works Original cost as approved by Authority Cost appraised by Lenders (2006) based on Contract costs Cost already incurred Completed Cost Provisional Cost (Balance works) Total Cost I II III IV V VI VII=V+ VI Cost Over Run VIII=VII - III 6 Construction & Precommissioning expenses Erection, testing & commissioning Included in item 4.0 Included in item 4.0 Construction Insurance Site supervision 6.4 Total (Const. & Pre-commissioning) 7 Overheads Establishment 1, , , , Design & 7.2 Engineering Audit & Accounts (509.04) Contingency Rehabilitation & 7.5 Resettlement LADA Total (Overheads) 1, , , , , , , Capital Cost without IDC, FC, FERV & Hedging Cost 56, , , , , IDC, FC, FERV & Hedging Cost Interest During Construction (IDC) 6, , , , H D01 00 Final Review Report 11 of Jul-13

31 Sl. No. Head of works Original cost as approved by Authority Cost appraised by Lenders (2006) based on Contract costs Cost already incurred Completed Cost Provisional Cost (Balance works) Total Cost Cost Over Run I II III IV V VI VII=V+ VI VIII=VII - III 9.2 Financing Charges (FC) Foreign Exchange 9.3 Rate Variation (FERV) Hedging Cost 9.5 Total of IDC, FC, FERV & Hedging Cost 6, , , , Capital cost including IDC, FC, FERV & Hedging Cost 63, , , , , Thus a cost difference of ` crore has emerged between approved DPR cost and completed cost while increase in completed cost of the project from that of appraised cost by Lenders based on contract cost is ` crore. Out of total completed cost of ` crore, ` crore is provisional cost and is required completion of balance works. The main reasons mentioned (page 1074 & 1075 of the Petition) cost overrun include time overrun resulting in increase of IDC, price escalation, overhead expenses, geological surprises, increase in statutory levies & taxes, increase in minimum wages surface & underground works, change in Himachal Pradesh Hydro power policy and increase in lending institution s interest rates Vetting of Time Overrun The project has been reported to face following major constraints during construction which have affected the implementation schedule H D01 00 Final Review Report 12 of Jul-13

32 6.3.1 Geological Surprises During Construction During construction of underground works, the general rock conditions encountered were not as good as envisaged at the DPR stage of investigation. The bad / difficult geology, other site specific conditions, change in scope of works led to rescheduling of the commissioning of the project. Some of the project components especially Dam and HRT encountered adverse and unanticipated geology which affected the scheduled commissioning of the Project. During the excavation of the HRT, due to encounter of shear zone, one of the faces had to be abandoned and the alignment of the HRT was shifted. However, again the shear zone was encountered with heavy water inflow which led to another shifting of the alignment. Out of total length of the HRT of 4.99 km, approximately 800m of shear zone was assessed by the geologist, which had resulted in slow progress in HRT. The excavation and the necessary treatment of this 800m shear zone took more than 17 months. Due to non-availability of the foundation rock the various dam blocks at anticipated level, as envisaged in DPR, extra excavation and thereby extra concreting had to be done. In case of Diversion Dam, foundation rock on the river bed blocks and on the left bank, the dam complex could not be found. Foundation rock was obtained 19 m deep from envisaged level. This additional quantum of excavation took about 6 months over and above schedule. Rock profile along hill slope anchoring the dam, with rock on left bank, was found to 62 m deep inside the overburden / slope wash material, which required more than m 3 of extra excavation. To avoid this extra excavation, additional muck disposal area & additional clearance from Environment & Forest Ministry the same, an additional component, horizontal drift, of about 62 m length & vertical trench of about 24m depth in overburden area, was constructed. The construction of this additional component took nearly 18 months. Major shear zone of about 22 m in length, was encountered in Main Access Tunnel (MAT), from which around 1300 m 3 of silt came along with red colour stained H D01 00 Final Review Report 13 of Jul-13

33 water as ingress during drilling. This ingress of water and treatment of this shear zone took around 2 months of time. After Synchronisation of Units The project components were completed and trial run operations commenced from August 03, 2011 onward. During testing period, initially minor leakages were observed from HRT and Pressure Shaft. These leakages suddenly increased from Pressure Shaft, Head Race Tunnel and Surge Shaft. In view of Power house hill stabilization, the project had to shut down on October 02, 2011 after completing the necessary inspection of all the project components. The repair and rectification works of damaged project components have taken almost 8 months and the project was able to resynchronise only in May Unprecedented Weather Condition Continuous inclement weather and unprecedented snowfalls has been faced during more than 3 months. The heavy snowfall brought the progress at site almost to stand still as the movement of men and machinery during the season was not possible. On dam site roads, more than 10 feet snow fall was recorded. The site shivered under intense cold with the minimum temperature going well below 0 C. Consequent to this, the progress at all open fronts got hit. During January 2010 & February 2010 also, more than 4 feet snowfall was recorded on dam site roads which affected the progress on all open fronts Consultant s Evaluation of Time Overrun As per the various project documents, project commissioning dates are given below in Table No Table No.6.4 Commissioning Dates Various Contracts Sl. Document Proposed Commissioning Schedule Remarks No. Effective Date Period Commissioning Date I II III IV V VI 1 Implementation Agreement January 14, months July 13, 2010 Time overrun vetting of 2 TEC March 48 March 25, Capital Cost 26, 2005 months (Award of 2009 shall be based on H D01 00 Final Review Report 14 of Jul-13

34 Sl. No. Document Proposed Commissioning Schedule Remarks Effective Date Period Commissioning Date contract commissioning civil schedule as &HM contract) per project 3 Project Contracts EPC Contract Infrastructure, Civil & HM works with L&T EPC Contract infrastructure works with NEC EPC Contract Civil & HM works with NEC E&M Contract with Abir Construction Transmission Line Agreement One week after Financial Closure of the Project (August 30, 2006) January 2006 January 15, 2007 October 09, 2006 August 20, months 15 months 30 months 30 months 10 months September 5, 2009 April 2007 July 14, 2009 March 08, 2009 June19, 2009 contracts i.e. September 05, 2009 Implementation Agreement carrying out detailed investigations, techno-economic studies, preparation of DPR and implementation of 100 MW Malana II HEP was signed between Government of Himachal Pradesh and Everest Power Private Limited on January 14, The commissioning period of the project envisaged was as 90 months (July 13, 2010). Subsequently, DPR was prepared by EPPL and approved by HPSEB on October 15, The commissioning period envisaged in the DPR was 48 months from the award of contract of main civil works. The tender the construction of infrastructure and main civil works was floated in October Subsequent of completion of tendering process and contract negotiations, contract construction of infrastructure, main civil and HM works was signed with M/s Larsen & Toubro Limited (L&T) on March 26, The contract completion date has been specified as 36 months from the commencement date which has to be reckoned after one week from H D01 00 Final Review Report 15 of Jul-13

35 i) Handing over encumbrance free site ii) iii) iv) All statutory and other clearances necessary to proceed with the work Documentary evidence regarding financial closure the project Forest clearance v) Financing arrangements to the satisfaction of the Contractor The est clearance the project was obtained in December 2005 and subsequently financial closure was achieved on August 30, Thus the effective date Contract civil & HM works may be considered as September 06, 2006 and accordingly scheduled commissioning of the project is considered as September 05, Though the contract infrastructure and civil works was awarded to L&T in March 2005, the construction works at ground could not start pending est clearance from Ministry of Environment and Forest (MoEF) (process of est clearance by EPPL initiated in October 2003 and final est clearance was obtained in December 2005). Meanwhile, the EPC contract of L&T was split and a separate contract construction of infrastructure works was signed with Navyuga Engineering Company Limited on December 20, 2005 with contract completion period of 15 months. Subsequently on significant completion of construction of approach roads to various project components under infrastructure contract, separate contract construction of main civil works was also signed with Navyuga Engineering Company Limited on January 15, 2007 with contract completion period of 30 months after cancellation of L&T contract signed in March Thus initial delay in start of construction works about 9 months is on account of delay in according Forest Clearance by MoEF which is not attributable to generating company i.e. EPPL. During construction phase, project has been reported to encounter geological surprises in Dam, HRT, Pressure shaft and Power House. The geological surprises are mainly on account of less investigations carried out during DPR stage due to difficult and inaccessible terrain. Additional geological investigations were proposed to be carried out during pre construction survey. Major difference in geology occurred at Dam site and HRT which are presented below: H D01 00 Final Review Report 16 of Jul-13

36 Dam Complex The anticipated and actual levels of foundation rock different dam blocks are summarised below in Table No.6.5. Table No.6.5: Anticipated and Actual levels of Foundation Rock in Dam Blocks Location Anticipated level Actual level Difference (m) as per DPR (m) encountered (m) I II III IV Block 1& Block 2 EL EL Junction Block 2 & Block 3 EL EL Junction Block 3 & Block 4 EL EL Junction Block 4 & Block 5 EL EL Junction Block 5 & Block 6 EL EL Junction Block 6 & Block 7 EL EL Junction Block 7 & Block 8 EL EL Junction Block 8 & Block 9 EL EL Junction Block 9 & Block EL EL Junction Further, rock profile along hill slope anchoring the dam with rock on left abutment was not found as envisaged in the DPR. During execution rock was obtained at a much lower level and 62 m deep inside the overburden / slope wash material. On account of this a horizontal drift of 62 m and vertical trench of 24 m depth had to be constructed to tie the dam with the left abutment rock. Head Race Tunnel In HRT the rock condition encountered during actual construction was found poorer than envisaged in the DPR. The rock type envisaged as per DPR and actually encountered during tunnel excavation is summarised below in Table No H D01 00 Final Review Report 17 of Jul-13

37 Table No. 6.6: Anticipated and Actual Rock Type Encountered in HRT Sl. No. Rock Type Envisaged as per DPR Actually encountered % length Length (m) % length Length (m) I II III IV V VI 1 Good 40% % Fair 50% % Poor 10% % Extremely 0% 20% poor Total 100% % It is seen from above that about 80% of tunnel length was excavated in poor to extremely poor condition against anticipated 10% length in poor rock zone. In the extremely poor condition, the tunnel was also required to be detoured. In IIT Roorkee s March 2010 Report, the project completion was envisaged as June In order to assess, reasons delay beyond June 2010, face wise monthly progress of HRT was obtained and studied. It was observed that the excavation of Face 3 and Face 4 between Adit 1 and Adit 2 totalling 2.02 km (out of 4.99 km length of HRT) was on critical path and hence their monthly progress was analysed as summarised below in Table No.6.7. Table No.6.7: Excavation Progress in HRT (m) Month HRT Excavation Remarks Adit1 Adit 2 Face 3 Face 4 I II III IV V VI May Jun Jul Aug Adit Excavation Sep Oct Nov Dec Face 3 & Face 4 Jan encountered mica schist in the face, excavation Feb Mar Apr May Jun Jul continued with continuous rib erection and e poling H D01 00 Final Review Report 18 of Jul-13

38 Month HRT Excavation Remarks Adit1 Adit 2 Face 3 Face 4 Aug Sep Extreme Poor Geology encountered in Face 3. (this zone was below a nalah. The rock mass was sheared and Oct crushed. With the gush of water rock mass started flowing in the excavated part of the Nov Dec Jan Feb Mar Apr May Jun Jul tunnel) Coarser flown crushed materials deposited near the heading and the Face got blocked. Forepolling (creation of umbrella by steel rods in the crown portion of the tunnel) also did not help in achieving the progress as shear zone was slightly oblique to the alignment of the tunnel and the tunnel could not be proceeded further in the original alignment. First De-tour taken towards LHS after struggling two months. Face blocked and second De-tour taken towards LHS. Aug Sep Oct Nov Dec Progress affected due to H D01 00 Final Review Report 19 of Jul-13

39 Month HRT Excavation Remarks Adit1 Adit 2 Face 3 Face 4 Jan inclement weather Feb Mar Apr May Jun Face progressed only Jul Aug Sep Total from one side due to poor rock conditions From above, it is seen that the monthly progress of tunnel excavation in good rock condition varied from 70 m to 105 m which can be considered as reasonably good progress. However, progress of tunnel excavation in poor rock condition reduced significantly due to increase in cycle time providing rib support system. Further, the progress of Face 3 excavation was badly affected 3 months from December 2009 to February 2010 due to inclement weather. From above, it may be inferred that slow progress of tunnel excavation was mainly on account of poor geological condition. The tunnel excavation was completed in September 2010 and thereafter concrete lining, steel lining, invert concrete and other miscellaneous works was completed in July 2011 in next 10 months which can be considered as reasonably good progress. From above, it is clear that the slow progress of excavation of HRT and consequently delay in project construction upto July 2011 is on account of inclement weather and poor geology encountered in Face 3 and Face 4 and is not attributable to generating company. After completion of construction of HRT, filling of the reservoir and water conductor system was taken up and pre commissioning and trial run tests were conducted in the month of August and September However, the project also got delayed from October 02, 2011 to July 11, 2012 due to damages in components like dam, HRT, Pressure Shaft and Powerhouse during trial run tests. The reasons damages reported by the generating company along with consultant s view are presented below in Table No H D01 00 Final Review Report 20 of Jul-13

40 Table No.6.8: Reasons Delay Post synchronisation of Units Sl Project Details of Reasons Time Consultant s remarks No Component Damages provided by repair generating company works I II III IV V VI 1 Pressure shaft Cracks in ferrule 2 HRT Invert lining damaged in Face 3 and Face 4 3 Dam Left bank protection works damaged Ferrule designed considering 30% load participation by adjoining rock mass. Steel materials procured from Steel Authority of India limited (SAIL) use in ferrule found of inferior quality Failure of invert concrete lining was found on account of presence of shear zone at shallow depth parallel to HRT invert which was not possible to detect during the lining. Invert concrete lining got damaged due to uplift pressure on result of swelling of clay materials on saturation after charging of HRT Unexpected cloudburst October 2011 January 2012 October 2011 to April 2012 October 2011 February 2012 Assumption of load participation by rock should be based on assessment of rock parameters during detailed engineering and thus this may be termed as inadequate safety margin considered in design. Further, ensuring use of proper quality of steel ferrules pressure shaft is responsibility of generating company and theree damage in pressure shaft is attributable to generating company* Based on detailed investigations carried out after the damage of invert concrete lining, it was established by the generating company that shear zone at shallow depth parallel to HRT invert exist. Based on the available geological inmation collected during HRT excavation, it was difficult to assume that the shear zone would run parallel to the HRT invert at the shallow depth. The consultant agrees that it is not a general practice to investigate invert and theree presence of shear zone at shallow depth parallel to HRT may be categorized under geological surprises and hence damage in HRT lining may not be attributable to generating company The dam protection works should be designed considering extreme weather condition and hence damage H D01 00 Final Review Report 21 of Jul-13

41 Sl No Project Component 4 Power house Details of Damages during August 14-20, 2011 Cavity mation in crown and left wall Reasons provided generating company Inadequate protection measures shear zone H D01 00 Final Review Report 22 of Jul-13 by of Time repair works December 2011 February 2012 Consultant s remarks to dam protection works is attributable to generating company* Cavity mation after completion of civil works is attributable to generating company* * - Impact has been accounted by disallowing cost of rectification works in para From above, it is clear that the time lost in repair of damages in dam, pressure shaft and MAT is on account of inadequate safety margin considered in the design and is theree attributable to generating company, while the damage in HRT is on account of presence of shear zone parallel to HRT invert at shallow depth and is theree attributable to geological surprises. Since repair of HRT, pressure shaft, dam and HRT were taken up in parallel and repair of HRT consumed the longest span of time during the repair period, delay in COD during repair and re-testing from October 02, 2011 to July 11, 2012 is mostly attributable to geological surprises. The project construction schedules as per DPR, contract and actually implemented are given in Annexure IIIA, IIIB and IIIC respectively. 6.4 Vetting of Cost Overrun Review of Head wise (as per Form-5B of the Petition) cost over run from the DPR cost is presented in following sections Infrastructure Works Infrastructure works comprises of I II III IV V VI Preliminary including Development Land Buildings Township Maintenance Tools & Plants and Special Tools & Plants

42 VII Communication (Roads & Bridges) VIII Environment & Ecology IX X XI XII Losses on Stock Receipts and Recoveries Miscellaneous LADA I- Preliminary including Development The provision under this head covers works relating to pre-construction investigation and surveys, preparation of Feasibility Study Report (FSR), DPR & tender documents, detailed design & engineering, site specific seismological studies, environmental & ecological studies, etc. The Provision made under this head in the DPR is ` crore but the completed cost reported by generating company is ` 4.04 crore. However, on detailed review of completed cost it is observed that amount of ` 8.48 crore consultancy & professional charges, ` 1.65 crore survey & investigations, ` 0.28 crore publication of reports and ` 0.18 crore advertisement expenses have been incurred which is listed in Establishment head (refer Table 6.25). The above cost should be considered under Preliminary. After accounting above costs, the total completed cost preliminary works out to ` crore which is reasonable and also less than the DPR provision. Details of expenses on preliminary works are given below in Table No Table No.6.9: Preliminary including Development Works - DPR Cost Vs Completed Cost Sl Description No. DPR cost Cost as per CEA Guideline Completed Cost Cost as per Consultant I II III IV V VI 1 Conception, investigation and (2% of I- detailed engineering works) including surveys, explorations, model testing, numerical models, detailed engineering & project management ( *+1.646* *) H D01 00 Final Review Report 23 of Jul-13

43 Sl No. Description including all types of services such as expert s opinions 2 Publication of Reports 3 Computer and drafting stationary DPR cost Cost as per CEA Guideline Completed Cost Cost as per Consultant * Training of Engineers and Technicians Total * - Expenses shifted from Establishment head of Table 6.25 II Land The provision under this head covers acquisition of land the project including compensation property, interest charges, solatium charges, demarcation & measurement charges, etc. The total amount of ` 1.36 crore was estimated in the DPR which was on the lower side when compared with the cost of land as per CEA guidelines. The actual expenditure incurred reported by the generating company is ` crore, out of which ` crore has already been spent and ` 1.47 crore shall be spent later on acquisition of small part of sub-station land, switchyard and project roads. The completed cost on Land increased significantly due to high charges paid to est land, Government lease and compensation private land. Amounts of ` 0.31 crore, ` 8.28 crore, ` 0.53 crore and ` 2.44 crore have been incurred on private land, est land & Government lease, sub-station land and land compensation respectively. The increase in cost on Land the project has been vetted by the Consultant and the details of actual expenditure incurred on Land are given below in Table No S.No. Table No.6.10: Details of Costs incurred on Land Description H D01 00 Final Review Report 24 of Jul-13 Area (Ha) Actual Expenditure I II III IV 1 Private Land Forest Land + Govt. Lease

44 S.No. Description Area (Ha) Actual Expenditure I II III IV (a) Ropeway - Forest Land (b) Project Area Forest Land Sub-total (c) Project Land From DC (Lease) Sub-total 2 (a+b+c) Sub-Station Land (a) Advertisement Charges (b) Advertisement Charges (c) Crop compensation (d) Land Acquisition through Notification (e) Advertisement Charges (f) Fruit Trees compensation (g) Land Lease 90 Years (h) Cost of Trees to Forest Dept (i) Compensation charges (Crop/Tree) at substation (j) Land acquisition office cum sub Division officer, Kullu Sub-total 3 (a+b+c+d+e+f+g+h+i+j) Land compensation (a) Land Compensation Project Roads (b) Land Compensation Transmission Line Sub-total 4 (a+b) Grand Total From above, it is seen that the cost of ` crore incurred on Land is reasonable and also matching with the cost as per CEA guideline. Amount of ` 1.47 crore earmarked purchase of additional land may be deferred in order to reduce tariff in initial years of operations. A comparison of estimated cost, completed cost and cost recommended Land by the Consultant is given below in Table No H D01 00 Final Review Report 25 of Jul-13

45 Sl No. Table No.6.11 Comparison of Estimated Cost and Completed Cost of Land Description DPR cost Cost as per CEA Guideline Completed Cost Cost as per Consultant I II III IV V VI 1 Private Land required all project components 2 Acquisition of Private Land Towers (provision) Compensation of private land transmission line 4 Other charges including solatium charges, legal charges, establishment charges and labour & material charges etc Total III Buildings As per DPR a total cost of ` 7.58 crore is envisaged this head which covers the Residential / Non residential buildings of temporary & permanent nature, office buildings, guest house, field stores, field workshops, testing laboratory and other service buildings, community centre. This also includes the charges fencing, land development, internal colony roads etc. Total completed cost on Buildings reported by generating company is ` crore, out of which ` crore has already been incurred and ` 4.17 crore shall be incurred later on development of colonies and permanent residential buildings. Construction of buildings is covered under EPC contract infrastructure works and main civil works awarded to L&T in March 2005 at a lump sum contract price on ` crore. Later on scope of infrastructure works was removed from the original EPC contract and was awarded to Navyuga Engineering Company Limited on lump sum price of ` 140 crore (same considered by L&T in their EPC cost). Original scope of infrastructure works included construction of approach roads, bridges, winch arrangement at top of surge shaft, residential buildings & non residential building and retaining walls dumping yard. However, during construction of infrastructure works, scope of works was revised in the meeting H D01 00 Final Review Report 26 of Jul-13

46 dated September 02, 2006 to include installation of 6 nos. of ropeways to various project components. During the meeting, cost break up of the various works under infrastructure EPC contract was finalised payment of progress bills. Accordingly, the cost of building works was finalised as ` crore (rounded off to ` crore). This cost is higher than the DPR cost of ` 7.58 crore (` 9.16 crore of escalated DPR cost on 2006 price level) on account of higher unit rates considered to match with overall EPC cost. As the contract cost of individual items under EPC contract may be higher or lower, the cost of ` crore appears to be reasonable. Out of ` crore, ` crore has already been incurred mainly on construction of temporary residential buildings, non residential buildings and 420 sq ft permanent building. ` 4.17 crore has been proposed to be incurred on the construction of project colony which may be deferred in order to reduce tariff in initial years of operation. A comparison of estimated cost, completed cost and cost recommended by Consultant is given below in Table No Table No.6.12 Comparison of Estimated Cost and Completed Cost of Buildings Sl No. Description DPR cost Cost as per Market Rate Contract Cost Completed Cost Cost as per Consultant I II III IV V VI VII 1 Mobilisation Charge 2 Building at Dam Site Development of Permanent Residential colony 4 Temporary Residential colony 5 Non residential Buildings (Provision) Total (Rounded off to 16.50) ( (Provision)) H D01 00 Final Review Report 27 of Jul-13

47 IV Township No separate cost has been considered development of Township (except construction of permanent residential colony) either in DPR or in actual completed cost. V Maintenance As per applicable norms, the provision under this head covers the cost of maintenance of all works during the construction period and should be 1% of the total cost under the heads of Civil works and Buildings. A sum of ` 2.38 crore was allocated maintenance works in DPR. Actual cost of Maintenance is covered under Infrastructure and Civil Works Contract. VI Tools & Plants A provision of ` 2.57 crore tools & plants and ` 3.90 crore special tools & plants was kept in the DPR to bear the expenses essential equipments not covered under contract packages. The cost incurred under this head is ` crore only purchase of ambulance. VII Communication (Roads & Bridges) An estimated cost of ` crore (comprising of ` crore approach roads and ` 2.60 crore bridges) was set aside in the DPR the construction of various approach roads to project components & colonies, temporary or permanent bridge over river, road side drains and widening & repair of existing roads. As mentioned earlier, construction of infrastructure works was awarded as Lump sum EPC contract at a price of ` 140 crore which included construction of 20 km of approach road, construction of 4 nos. bridges, 1no. winch arrangement at top of surge shaft, residential and non residential buildings and muck retaining structures. However, during construction of infrastructure works, scope of works was revised in the meeting dated September 02, 2006 to include installation of 6 nos. of ropeways to various project components (this has resulted into reduction of length of approach road from 20 km to km). During the meeting, cost break up of H D01 00 Final Review Report 28 of Jul-13

48 the various works under infrastructure EPC contract was finalised as detailed below in Table No Table No.6.13: Contract Cost Infrastructure Works Sl No. Item Contract Cost I II III 1 Approach Road ( km) Bridges (4 nos.) Ropeway (6 nos.) Buildings (rounded off to 16.50) 5 Muck retaining structures Total Thus contract cost of communication (Road & Bridges) is ` 105 ( ) crore which is much higher than DPR provision of ` crore. Since the EPC cost of ` 140 crore infrastructure works was based on overall EPC contract of civil works of L&T at a contract price of ` ( ) crore (average price level of year ) which compares well with overall cost of civil and infrastructure works of ` ( ) crore of DPR cost escalated at a price level of year 2006, EPC cost of infrastructure works of ` 140 crore seems to be justified. The completed cost on communication reported by generating company is ` crore comprising of ` crore construction of approach roads, ` crore construction of bridges, ` crore installation of ropeways, ` 7.17 crore against geological surprises (source: as per details provided by the generating company) and ` 4.06 crore of provisional cost to be incurred on black topping of approach roads and purchase of earth moving equipments. The cost of ` ( ) crore on communication is as per contract provisions. ` 7.17 crore incurred against geological surprises comprises of ` 4.92 crore additional cutting of hill slopes and ` 2.25 crore construction of road tunnel. As variation in quality of excavation material in open works like approach road and geological surprises resulting into provision of road tunnel would only be attributable to inadequate investigations & improper planning and not to geological surprises and hence the amount of ` 7.17 crore should not be included in capital cost particularly considering very high unit rate of approach road construction. Similarly provisional cost of ` 4.06 crore incurring on black H D01 00 Final Review Report 29 of Jul-13

49 topping of approach roads and purchase of earth moving equipments may be deferred to reduce tariff in initial years. Thus ` ( ) crore executed works under Communication appears reasonable against ` crore reported by the generating company. Details of cost of communication works envisaged in the DPR, completed cost and cost recommended by Consultant is given below in Table No VIII Sl No. Table No. 6.14: Communication DPR and Completion Cost Description DPR Cost as Contract Completed Cost cost per Cost Market Rate Cost as per Consultant I II III IV V VI VII 1 Approach road & Tunnel ( (provision)) 2 Bridges Ropeway Total ( (provision)) Environment & Ecology This sub-head generally covers the provisions of the items like compensatory afestation, restoration of land in construction areas, removal of trees, control of aquatic weeds in submerged areas, measures to prevent est fires, public health measures, treatment of the watershed around reservoir rim, catchment area treatment and treatment of degraded/highly degraded lands along the reservoir etc. A total cost of ` crore was provided on the above mentioned works/developments in the DPR. Actual expenditure incurred till COD environment & ecology reported by generating company is ` crore which is reasonable. Provision of an additional amount of ` 0.13 crore has been made stabilization of muck disposal sites. As stabilization of muck disposal site was part of EPC contract, this additional amount is not justified. A comparison of estimated cost and actual cost is given below in Table No H D01 00 Final Review Report 30 of Jul-13

50 IX Sl No. Table No.6.15: DPR Cost and Completed Cost of Environment & Ecology Description DPR Cost as Contract Completed Cost as per cost per CEA Cost Cost Consultant Guideline I II III IV V VI VII 1 Muck retaining As per structures actual ( (provision)) 2 Catchment area treatment plant 3 Others Total ( (provision)) Losses on stock A provision of ` 0.92 crore was made under this sub-heading in the DPR. As per applicable norms, this has been worked out as 0.25% of the total cost of civil works and Buildings. Actual expenditure incurred under this head is ` 0.18 crore which is included in the Establishment head in the completed cost reported by the generating company and the same has been shifted under loss on Stock by the Consultant. X Receipt & Recoveries This head is meant to account estimated recoveries by way of resale or transfer of temporary buildings and special T&P. Miscellaneous receipts like rent charges of buildings, electricity charges etc., may also be accounted under this head. The recoveries on account of temporary buildings may generally be taken at 15% of the cost unless a higher recovery is anticipated due to some special reason such as tubular construction, vicinity to city / village / town industrial undertaking etc. No provision has been kept in the DPR receipt and recoveries. An amount of ` 0.49 crore has been reported by the generating company to be recovered by the resale of iron and angles but has not been included under this head. However, as per CEA guidelines, 15% of cost of temporary buildings should be considered receipt & recoveries which works out to ` crore (15% of ` crore) H D01 00 Final Review Report 31 of Jul-13

51 XI Miscellaneous The provisions under this head covers the capital cost & maintenance of construction power, water supply, sewage disposal and drainage works, fire fighting arrangements, telecom & wireless communication, medical assistance, recreation facilities, inspection vehicles, school bus and security arrangements. It also includes visit of dignitaries, inaugural ceremonies, compensation to workmen, publicity & inmation centre. A sum of ` 8.68 crore was estimated these services in the DPR. The completed cost on miscellaneous works is ` crore only out of which ` 0.56 crore has already been spent office equipments, wireless system, V-sat communication Power House and Malana village. Remaining ` 0.24 crore has been proposed to be incurred on security camera and online mandatory release system. The amount of ` 0.56 crore incurred is reasonable. The provisional cost of ` 0.24 crore is proposed to be deferred in order to reduce tariff of initial years. On detailed review of incurred costs on the project, it is observed that the following costs as given in Table 6.16 have been considered under Establishment head (refer Table 6.25) which should be considered under the Miscellaneous head. Table 6.16: Completed Costs under Establishment to be considered under Miscellaneous Sl. No. Description Cost incurred Remarks I II III IV 1 Insurance 5.41 The costs incurred are 2 Travelling and conveyance Communication expenses Administration Expenses Security Charges Electricity charges Donation 0.28 Total Source: As per details provided by the generating company listed under Establishment head which should be considered under Miscellaneous head H D01 00 Final Review Report 32 of Jul-13

52 After accounting above costs under the Miscellaneous head, the actual cost worked out is ` crore which is comparable with the cost of miscellaneous works of ` crore as per CEA guideline. The comparison of estimated cost, completed cost and cost recommended by Consultant miscellaneous works are given below in Table No Sl No. Table No.6.17: Estimated Cost and Completed Cost of Miscellaneous Works Description DPR cost Completed Cost Cost as per CEA Guideline Cost as per Consultant I II III IV V VI 1 Miscellaneous Expenses ( ( ) +0.24(provision)) Total The summary of DPR cost, Completed cost and Cost recommended by the Consultant Infrastructure Works are given below in Table No Sl No. Table No.6.18: Summary of DPR and Completed Costs Infrastructure Works Description DPR cost Cost as per CEA guideline / Market Rate Contract Cost Completed Cost Cost recommended by Consultant I II III IV V VI VII I Preliminaries II Land ( (provision)) III Building ( (provision)) IV Township V Maintenance VI Tools & Plants including special tools & plants VII Communication (Roads & ( Bridges) (provision)) VIII Environment & H D01 00 Final Review Report 33 of Jul-13

53 Sl No. Description DPR cost Cost as per CEA guideline / Market Rate Contract Cost Completed Cost Cost recommended by Consultant Ecology ( (provision)) IX Losses on stock X Receipts & Recoveries (0.896) (0.896) XI Miscellaneous ( (provision)) Total ( (provision)) * * - Recommended cost by consultant is more than the completed cost on account of shifting of some of the expenditures from Establishment head to Preliminaries (` crore) and Miscellaneous heads (` crore) under infrastructure works Major Civil & Hydro-mechanical Works In tariff petition m, cost of Civil & hydro-mechanical works have been grouped as under I II III IV V Dam, Intake & Desilting Chambers HRT, TRT, Surge Shaft & Pressure Shaft Power Plant civil works Contingencies & miscellaneous works Escalation on infra and civil & hydro-mechanical works As the major works civil & hydro-mechanical works comprising items I to IV above have been constructed under single EPC contract, the same have been combined and discussed below: I Main Civil & Hydro-mechanical works The cost of main civil & hydro-mechanical works was estimated as ` crore (excluding provision of escalation of ` crore) in DPR. Total completed cost of main civil & hydro-mechanical works reported by the generating company is ` H D01 00 Final Review Report 34 of Jul-13

54 crore (excluding escalation of ` crore), out of which ` crore (excluding escalation of ` crore) has already been incurred. There is a provision of ` 1.76 crore to be incurred on trash rack cleaning machine (TRCM) and drilling & grouting of tertiary holes. There is also a provision of ` 1.73 crore to be paid on account of escalation of balance infrastructure works. For construction of infrastructure and civil works, bids were invited in October 2004 from following six bidders following Limited Competitive Bidding procedure a) Navyuga Engineering Company Limited, Vishakhapatnam b) Skansa Cementation India Limited, Mumbai c) Larsen & Toubro Limited, Mumbai d) Progressive Construction Limited, Hyderabad e) Soma Enterprises Limited, New Delhi f) Patel Engineering Limited, Mumbai Bids were received from four out of above six bidders (except Progressive Construction Limited and Patel Engineering Limited) in December Negotiations were held with all four bidders and the negotiated bid price and the time of completion were as under (Table 6.19) Sl. No. Table 6.19: Negotiated Bid Price of Different Bidders Bidder Bid Price Original Negotiated Construction Time (months) I II III IV V 1 Larsen & Toubro Limited Navyuga Engineering Company Limited 3 Skansa Cementation India Limited 4 Soma Enterprises Limited Based on above negotiations, EPC contract construction of infrastructure and civil work was signed on March 26, 2005 with M/s Larsen & Toubro Limited on a lump sum contract price of ` crore. Subsequently, scope of works of infrastructure works comprising approach roads, bridges, residential & non residential building etc. were removed from EPC contract of L&T and a separate EPC contract on lump sum price of ` 140 crore (amount reported to be considered by L&T in their quote) infrastructure works was signed with Navyuga H D01 00 Final Review Report 35 of Jul-13

55 Engineering Company limited (NEC) in December After significant completion of construction of approach road under infrastructure contract, the balance portion of EPC contract of L&T was also awarded to Navyuga Engineering Company Limited after L&T reportedly didn t agree to work on the previously agreed contract price and theree a separate contract was signed with Navyuga Engineering Company Limited in January 2007 on Lump sum price of ` crore. However, vide first amendment of contract main works in March 2007, it was agreed by both parties that EPPL shall procure and supply all construction materials to the Contractor (NEC) and accordingly an amount of ` crore has been deducted from the contract amount and thus the contract price of main civil works remain only ` crore as per project component wise break up given below in Table No. 6.19A. Table No.6.19A: Contract Price Main Civil Works after deducting Cost of Materials Sl. No. Project Component Contract Value I II III 1 Dam, Intake & related HM works Diversion Tunnel and related HM works Desilting Basin and related HM works Head Race Tunnel Main Access Tunnel & TRT Surge Shaft Pressure Shaft, Penstock, Butterfly Valve Chamber and Draft Tube Gate 8 Under ground Power House Total Due to change in design based on Model study, the proposal of desilting basin was removed and accordingly the contract cost remained is ` crore. However, the completed cost reported by the generating company is ` crore which includes contract cost of ` crore, ` crore geological surprises, ` crore the rectification works damaged after synchronisation of the units and provisional cost of ` 1.76 crore purchase of trash rack cleaning machine. The geological surprises have occurred in dam, HRT, pressure shaft and power house complex and the additional cost incurred on them are ` crore, ` crore, ` 2.07 crore and ` 3.41 crore respectively. Though geological surprises could H D01 00 Final Review Report 36 of Jul-13

56 have been reduced by conducting additional investigations, there may not have been much impact on the cost as the EPC cost would have been accordingly higher and thus the Consultant is of the view that the cost incurred on account of the geological surprises should be allowed in the capital cost. However, being an EPC contract, there were no rates in the contract additional quantities of various items. The rates working out the cost of additional items were derived from the EPC cost and then prevailing market rates. The consultant has reviewed the cost considered the variation. The cost of ` crore in HRT include cost of ` 6.86 crore change in methodology which is not justified as EPC contract cost is deemed to include cost of construction methodology to address different rock classifications. Thus out of ` crore geological surprises, ` crore is reasonable. Similarly, out of ` crore rectification of damaged works after synchronisation of units, ` crore rectification of damaged works in dam, pressure shaft, surge shaft and power house is on account of reasons attributable to generating company and hence the same has not been considered reasonable. Provision made of ` 1.76 crore TRCM is required cleaning of floating debris, this may be deferred to reduce tariff of initial years. The cost incurred on materials is ` crore against ` crore set aside in contract and is reasonable. Thus out of total cost of ` crore excluding escalation of ` crore) main civil works, ` crore (excluding escalation of ` crore) seems reasonable against contract cost of ` crore (after removing contract cost of ` 6.36 crore desilting basin). Details of cost of main civil works envisaged in the DPR, contract cost and completed cost is given below in Table No Sl No. Table No.6.20: Comparison of Cost of Civil works in DPR, Contract, Completed and Recommended by Consultant Description DPR Contract Completed Cost cost Cost (` crore) H D01 00 Final Review Report 37 of Jul-13 Cost as per Consultant I II III IV V VI I Dam, Intake & Desilting Chamber (40.98 (excluding desilting chamber) (Contract cost (40.98) +Material (23.16) + Geological Surprises (22.12)+Rectification (3.64)+Provision (1.76)) ( )

57 Sl No. II III IV Description HRT, TRT, Surge Shaft & Pressure Shaft Power Plant Civil works Other Civil Works (Contingencies & Miscellaneous) DPR cost (` crore) Contract Cost (material)) ( (material)) ( (material)) Completed Cost (Contract cost (47.64) + Material (31.44) +Change in construction methodology (6.86) + Geological surprises (18.16) +Rectification HRT (11.08) + Rectification Surge shaft & Pressure Shaft (6.91) (Contract cost (15.59) + Material (10.03) +(Geological Surprises (3.06)+Rectification(3.32) Cost as per Consultant ( ) ( ) Total Source: As per details provided by generating company II Escalation on Infra and Major works The cost of escalation infrastructure and main civil & hydro-mechanical works was estimated as ` crore in DPR. Total escalation reported by generating company on infrastructure and main civil & HM works is ` crore, out of which ` 8.99 crore and ` crore are infrastructure and main civil & HM works respectively (Source: as per details provided by generating company). The escalations have been worked out based on the provisions in Schedule 9 to the Contract Agreement Contract Price & Payment Schedule which states that the price variation shall apply if the Commencement date is delayed beyond October 01, The Lump sum EPC contract construction of infrastructure and main civil works was signed in March 2005 with contract completion period of 3 years, the price should be firm upto at least schedule completion period of 3 years from the date of signing of agreement and theree escalation should be allowed only H D01 00 Final Review Report 38 of Jul-13

58 after March Cost incurred against escalation on infrastructure works and civil works are ` 7.26 crore and ` crore respectively. Further, payment of escalation cost of ` 1.73 crore is reported still to be made on balance infrastructure works. As the infrastructure works were completed bee March 2008, the escalation cost of ` 7.26 crore infrastructure works does not seem to be reasonable. Similarly, the escalation on main civil works bee March 2008 is also not justified and thus the escalation amount of ` crore out of total of ` crore seems to be reasonable. Further, the escalation amount of ` 1.73 crore balance infrastructure works is not allowed the reasons described above. Thus out of total escalation amount of ` crore, only ` crore seems to be reasonable. Details of escalation infrastructure and main civil & HM works envisaged in the DPR, contract cost and completed cost is given below in Table No Table No.6.21 Escalation of Civil & HM Cost as per DPR and Completed Cost Sl No. Description DPR cost Completed Cost Cost recommended by Consultant I II III IV V I Infrastructure II Main Civil & HM works (already paid) III Balance infrastructure works (yet to be paid) Total The summary of DPR cost, completed cost and cost recommended by the Consultant major civil & HM works is given below in Table No Table No.6.22: Summary of Major Civil & HM Cost as per DPR and Completed Cost Sl No. Description DPR cost Contract Cost Completed Cost Cost recommended by Consultant I II III IV V VI I Major Cvil & HM works H D01 00 Final Review Report 39 of Jul-13

59 Sl No. Description DPR cost Contract Cost Completed Cost Cost recommended by Consultant I II III IV V VI II Escalation on infra and major works Total (Difference is on account of rounding to two decimal places) Plant & equipment including initial spares In tariff petition m, cost of plant & equipment including initial spares have been grouped as under I II III IV V Generating Equipment Electrical Auxiliary equipment of Power house Mechanical Auxiliary equipment of Power house Transmission Line and Terminal Equipment Escalation on Plant & Equipments As the works of design, supply, erection, testing and commissioning of the plants and equipments including initial spares power house comprising items I to III above have not been covered under three separate EPC contracts, the same have been combined and discussed below. I Power Plant Electro-Mechanical System The provision made under this head includes the cost of design & engineering, testing, procurement, transportation, installation and commissioning of major electro-mechanical equipments (viz. Generating equipments, Electrical auxiliary & balance of plant equipment, Mechanical auxiliary & balance of plant equipment, Outdoor Switchyard & XLPE cables, PLCC equipment along with associated equipment & structures and related spares. The total Plant and Equipment including initial spares (E&M) cost was estimated as ` crore in the DPR. The contract H D01 00 Final Review Report 40 of Jul-13

60 cost of E&M works is ` crore against which completed cost reported by the generating company is ` ( ) crore. The difference in completed and contract cost of ` 2.21 crore is on account of payment to avail custom duty benefit against the advance licence taken by the contractor. The amount of ` 2.21 crore is tentative and shall be finalised based on the profitability at the time of closure of advance licence. Since, the contract has been completed about a year ago in July 2012 and advance licence has not been closed by the contractor till now, this provisional amount is not admitted. II Transmission Line and Terminal Equipment The provision made under this head includes the cost of design & engineering, testing, procurement, transportation, installation and commissioning transmission line & terminal equipments and related spares. Originally, the power from Malana II HEP was proposed to be evacuated to PGCIL s Panarsa Pooling Station which involved construction of 38 km long double circuit 220 kv transmission line. Accordingly, the cost of transmission line was estimated as ` crore in the DPR. However, in the meeting convened by Chairperson CEA on April 10, 2008, it was inmed that due to delay in the Parbati Project and consequently its associated evacuation system, the pooling station at Panarsa would not be materialized in the time frame of Malana II HEP and it was proposed to evacuate the power of Malana II HEP by LILO connection at Chhaur through 220 kv D/C line from AD Hydro-electric Project to Nalagarh sub station. This involved construction of 18km long 132 kv double circuit transmission line from Malana II HEP to Chhaur and construction of 128 (3x42.6) MVA, 132 kv/220 kv substation. Accordingly, contract construction of 18km long transmission line and 132 kv/ 220kV substation was awarded at a contract price of ` crore. The completed cost of the transmission line and substation reported by the generating company is ` crore, out of which ` crore is already incurred and ` crore is yet to be incurred. The completed cost of ` crore transmission line upto Chhaur including substation is reasonable. In the interim order of Hon ble Appellate Tribunal Electricity (APTEL) dated June 10, 2011, in a petition filed by Allain Duhangan Hydro Power Limited (ADHPL) H D01 00 Final Review Report 41 of Jul-13

61 where EPPL, CEA, Ministry of Power (Government of India), PGCIL, NRLDC, Ministry of Power (Government of Himachal Pradesh), Himachal Pradesh State Electricity Board (HPSEB), H.P. Power Transmission Corporation Limited, Department of Forest (Government of Himachal Pradesh) and Central Electricity Regulatory Commission were the respondents, it was directed to pay transmission charge to ADHPL wheeling the Malana II injected energy / power on the basis of Audited Capital Cost and CERC regulation till final order. Accordingly, the wheeling charge of ` 2.27 crore per month has been worked out by AD Hydro Private Limited (ADHPL) which is significantly higher value. APTEL has since issued final order on January 02, 2013 and directed CERC to carry out prudency check of the ADHPL Capital Cost and determine the tariff as per CERC regulation within 45 days. ADHPL then filed an appeal in Hon ble Supreme Court who has stayed the proceedings bee CERC. Standing Committee on Power Planning System (NR) has approved reversion of power evacuation arrangement of Malana II HEP to original arrangement. It has been decided that the HPTCL will build Chhaur-Banala 220 kv D/C line evacuation of Malana II and other small hydro projects of 190 MW capacity. The HPTCL will also acquire 132 kv D/C line from Malana II HEP to Chhaur including sub station at Chhaur. However, this is likely to be completed after year In consideration of above, the Consultant is of the view that the completed cost of transmission line from Malana II HEP to Chhaur substation including cost of sub station should be considered in the capital cost of Malana II HEP till the start of operation of HPTCL line from Malana II HEP to Banala pooling station. Further, wheeling charge of ADHPL line as per Hon ble APTEL s interim order dated June 10, 2011 should be payable to EPPL till finalisation of the matter by Hon ble Supreme Court, where after the transmission charges as rationalised by Hon ble Supreme Court shall be payable, as the change in transmission line system is as per CEA s instructions. III Escalation on Plant & Equipments The cost of escalation on Plant & Equipments was estimated as ` 5.93 crore in DPR. Total escalation reported by generating company on plant and equipments is ` H D01 00 Final Review Report 42 of Jul-13

62 17.08 crore, out of which ` 1.94 crore, ` crore and ` 2.40 crore are generating equipments, electrical auxiliary equipments and mechanical auxiliary equipments of power house respectively. The above escalations have been worked out as per contract provisions (refer Appendix 2, Volume 1 of 2 nd and 3 rd Contracts) and are reasonable. Details of escalation plant and equipments envisaged in the DPR, contract cost and cost actually incurred is given below in Table No Table No.6.23: Escalation of E&M Cost as per DPR and Completed Cost Description DPR cost Completed Cost Sl No. Cost recommended by Consultant I II III IV V I Generating equipments II Electrical auxiliary equipments III Mechanical auxiliary equipments IV Transmission Line Total The summary of DPR cost, actual completion cost and cost recommended by the Consultant plant and equipments including spares is given below in Table No Table No.6.24: Summary of E&M Cost as per DPR and Completed Cost Description DPR cost Sl No. Contract Cost Completed Cost Cost recommended by Consultant I II III IV V VI I Electromechanical Equipments II III Transmission Line and Terminal Equipments Escalation on plants and ( (provision)) H D01 00 Final Review Report 43 of Jul

63 Sl No. Description DPR cost Contract Cost Completed Cost Cost recommended by Consultant equipments Total (Difference is on account of rounding to two decimal places) Overheads In tariff petition m, cost of overheads have been grouped as under I II III IV V VI Establishment Design & Engineering Audits & Accounts Contingency Rehabilitation & Resettlement LADA I Establishment As per CEA guidelines, establishment cost during construction of Hydroelectric projects having concentrated works and gestation period not more than 6 years, may be considered as 8% of the cost of Civil works and is estimated as ` crore. The cost establishment was estimated as ` crore in the DPR. Actual cost incurred on establishment is reported to be ` crore. The significant increase in cost of establishment is on account of following reasons (a) some of the cost of the other heads has been considered under establishment (b) additional trial run expenses and wheeling charges of ADHPL transmission line The consultant has reviewed the incurred cost under the establishment and the cost recommended by the consultant along with DPR cost and cost incurred by the generating company is given below in Table No H D01 00 Final Review Report 44 of Jul-13

64 Sl No. Table No.6.25: Details of Actual cost incurred on Establishment Description DPR Cost Completed Cost as per Remarks Cost Consultant I II III IV V VI A Employee Benefits Salaries, Allowances and Benefits to Employees Contribution to Provident and Other Funds 3 Staff Welfare Expenses B Other Expenses 1 Rent Rates and Taxes Insurance Repairs and Maintenance Travelling and Conveyance Communication Expenses Advertisement Expenses Printing and Stationery Audit Fee Internal Auditors Project Development Expenses Administration Expenses Security Charges Electricity Charges Miscellaneous Expenses Donations Loss on Sale of Fixed Assets Consultancy and Professional Charges Survey, Investigation and other Charges Directors' Shifted to miscellaneous Covered under EPC contract and hence not allowed Amount reduced to ` 1.25 crore and Shifted to miscellaneous Shifted to miscellaneous Shifted to Preliminary cost Shifted to Audit & Account Shifted to miscellaneous Not allowed as cost not justified Shifted to miscellaneous Shifted to Loss on Stock Shifted to Preliminary cost H D01 00 Final Review Report 45 of Jul-13

65 Sl No Description Remuneration Audit - External Fees and out of Pocket Expenses Trial run expenses (After netting of income from sale of power through UI) DPR Cost Completed Cost Cost as per Consultant Preliminary Expenses Fringe Benefit Tax Other Finance Charges (Interest/LC/bank Charges) 25 Current Tax Depreciation on Write-off Assets Sub-Total Less : 1 Interest Income (Gross) & Other Income 2 Foreign Exchange Fluctuation Gain / (Loss) - (net) Net Amount Remarks Shifted to Audit & Account Transmission wheeling charge of ` crore + ` crore point of connection charge (PGCIL)+ ` crore of NRLDC fees + ` crore NRLDC trial expenses ` crore of UI Charge revised as per latest NRLDC charge Shifted to Preliminary cost Thus after prudence check cost of establishment has been worked out as ` crore against ` crore reported by generating company, which is comparable with cost of ` crore establishment as per CEA guideline. II Design & Engineering Cost of design & engineering is included in Preliminary works H D01 00 Final Review Report 46 of Jul-13

66 III Audit & Accounts Provision of ` 5.09 crore was made in the DPR towards Audit & Account services. The cost incurred towards Audit & Accounts services is ` 0.43 ( ) crore which is included by the generating company in the head "Establishment. However, the same has been recommended by the Consultant under the head Audit & Accounts. IV Contingency Neither provision was made in the DPR contingency in the overhead nor the same has been included in the completed cost of the project. V Rehabilitation & Resettlement No cost Rehabilitation & Resettlement has been incurred on the project. VI LADA No cost LADA was included in the DPR. However, provision of ` crore (1.5% of completed cost) has been made in the completed project cost in view of provisions in Hydropower Policy, 2006 of Government of Himachal Pradesh. PPA & PSA the entire capacity of the project were executed prior to this policy. Retrospective application of this LADA component by Government of Himachal Pradesh does not appear to be legally sustainable and theree may not be allowed to be included in the Project Cost. The summary of DPR cost, actual completion cost and cost recommended by the Consultant Overhead is given below in Table No Sl No. Table No.6.26: Summary of Overheads Cost as per DPR and Completed Cost Description DPR cost Completed Cost CEA Guideline Cost recommended by Consultant I II III IV V VI I Establishment II Design & Engineering III Audit & Accounts IV V Contingency Rehabilitation & Resettlement H D01 00 Final Review Report 47 of Jul-13

67 Sl No. Description DPR cost CEA Guideline Completed Cost Cost recommended by Consultant VI LADA Total IDC, FC, FERV & Hedging Cost I Interest During Construction (IDC) Project Company started paying Interest during Construction from 3 rd quarter of 2006 at specified interest rates to different banks. Detail of IDC paid quarterly is attached at Annexure IV. Total IDC paid from 3rd quarter of 2006 to September 5, 2009 (originally planned COD), September 30, 2011 (initial trial run of units) and 2 nd quarter of 2012 (Actual COD) are ` crore, ` crore and ` crore respectively. The Consultant has vetted the details of drawdown and interest paid during construction. The draw downs are generally consistent with the project progress requirements. Originally, the project was scheduled to be completed on September 05, 2009 which got delayed upto July 11, In time over run analysis, it was observed that delay of project execution upto July, 2011 is mainly on account of inclement weather and geological surprises which are beyond control of the generating company. In August and September 2011, trial run tests were conducted on the units and in the beginning of October, 2011 damages in some components of the project were observed during trial run tests and accordingly the project commissioning delayed upto July 11, The delay of project completion from October 02, 2011 to July 11, 2012 is on account of geological surprises in HRT and inadequate safety margin considered in design of pressure shaft and dam slope protection works. As the repair works of HRT consumed most of the repair period from September, 2011 to July, 2012, the delay in project commissioning during above period may be mostly attributable to geological issues. While it is difficult to establish beyond reasonable doubt that the delay in project completion the period under consideration is not on account of the generating company in any manner, it is not possible to assign the extent of responsibility to the generating company particularly considering the fact that H D01 00 Final Review Report 48 of Jul-13

68 the generating company itself would be badly impacted financially any delay in project commissioning. Under the circumstances it may be suggested that the generating company may bear upto half of the cost of time overrun, particularly IDC, during above period. Accordingly, half of the IDC during above period (October 2011 to July 11, 2012) has been considered to be capitalized and the revised IDC has been worked out as ` crore. II Financing Charge (FC) Financing charges are usually paid to banks to cover the financial commitment/servicing fees. Since the financing Institutions are four in number in this case, different financing charges have to be paid to different financing institutions. The total financing charges of all the Lenders paid by Project Company from 1 st Quarter of 2005 to 3 rd Quarter of 2012 is ` 5.86 crore. After accounting half of financing charges during October 2011 to July 2012, revised financing charge has been worked out as ` 5.76 crore. III Foreign Exchange Rate Variation (FERV) Foreign Exchange Rate Variation is the change or variation in project cost due to fluctuations in exchange rate of eign currency involved in the project. It is not applicable in this project as all the loan amount has been lended from Indian banks. IV Hedging Cost No hedging cost is applicable in the project. The summary of DPR cost, completed cost and cost recommended by the Consultant IDC, FC, FERV and Hedging Cost is given below in Table No Table No.6.27: IDC & FC as per DPR, Generating Company and Recommended by Consultant Sl No. Description DPR cost Completed Cost Cost recommended by Consultant I II III IV V I IDC II FC III FERV IV Hedging Cost Total H D01 00 Final Review Report 49 of Jul-13

69 6.5 Summary of Completed Project Cost Total completed project capital cost recommended by Consultant is ` crore (excluding provisions of ` crore which has been deferred to reduce tariff of initial years) which includes hard cost of ` crore and soft cost of ` crore. The summary of completed cost as per DPR, reported by generating company and cost recommended by the Consultant is given below in Table No The generating company has inmed that neither insurance claim nor liquidated damage has been claimed from the contractor in view of damages attributable to geological surprises. Copy of Affidavit given by the company to this effect is attached at Annexure VA. The generating company has also submitted an affidavit stating that any customs or other duty exemptions/drawbacks/benefits, insurance / other claims etc. receivable/ to be received, have been/ would be reduced from the Capital Cost of the project. The same is attached at Annexure VB H D01 00 Final Review Report 50 of Jul-13

70 Table No.6.28: Total Completed Cost as per DPR, Generating Company and Recommended by Consultant S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII 1.0 Infrastructure Works 1.1 Preliminary including Development 2%of Preliminary I-works cost As per actual ( Expenses expenditure Survey, Investigation and 89.63) As , other Charges cost of Consultancy and receipt and Professional recoveries is Charges accounted in As per actual expenditure, Publication of the cost of ( ) infrastructure As per actual shifted from Establishment Reports 5.00 (7.1) below Computers & works, the drafting stationary expenditure Training same has - - Engineers and been added - Technicians to work out Advertisement included in cost of I As per actual expenditure, Expenses works shifted from Establishment (7.1) below Sub-Total 1 2, (2,136.08) Consultant's recommended , cost is more on account of shifting of some of expenses from Establishment (7.1) below 1.2 Land Private Land required all project components Acquisition of Private Land Towers Compensation of private land transmission line As per , Actual As per actual expenditure H D01 00 Final Review Report 51 of Jul DPR amount is low compared to amount as per CEA guideline Actual expenditure is matching with the amount as per CEA guideline Other charges Provision of `

71 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII including solatium charges, legal charges, establishment charges and labour & material charges etc. 1.3 Buildings Moblisation Charges lakh deferred to reduce tariff in initial years Sub-Total , , , , , Construction of residential buildings at damsite Construction of permanent residential colony Construction of temporary residential colony Construction of Non residential buildings Sub-Total Township Maintenance (a)tools & Plants (b)special Tools & Plants 1.7 Communications Approach Road & Tunnel , , As per market Rate (rounded off to ) H D01 00 Final Review Report 52 of Jul , (1%of C,J&K- Buildings) Token Provision Token Provision As per market Rate 6, , , Amount recommended is as per actual expenditures made as per EPC Contract (Provision of ` lakh deferred to reduce tariff in initial years). Though the contract value of building works is higher than the market rate, overall amount of EPC contract is reasonable and hence allowed As per actual expenditure and amount - - less than the DPR's (238.00) provision. - - (257.51) (384.50) , Amount recommended after deducting ` lakh against geological surprises. Provision of

72 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII ` lakh deferred to reduce tariff in initial years Bridges Amount allowed as per , , contract values Ropeways - Provisional amount not , , , allowed Sub-Total 4 3, , , , , , Recommended amount is higher than the market rates on account of higher EPC contract value infrastructure works 1.8 Environment & - - Ecology Muck Retaining Structures 1, , , , As per EPC Contract Provision of `13.00 lakh As per (757.31) not allowed. 2, Actual Catchment Area As per actual Treatment Plant Others 1, Sub-Total 5 2, , , , (757.31) 2, Recommended value is less than DPR value 1.9 Losses on stock (0.25%of - (92.00) As per actual. Shifted C,J&K- - - from Establishment Buildings) head (7.1) below 1.10 Receipt & - 15% of - - Amount of `89.63 lakh Recoveries Temp. - - (89.63) recommended to be Buildings deducted as per CEA Miscellaneous , %of I- works cost (787.94) 1, H D01 00 Final Review Report 53 of Jul-13 guideline Amount recommended is more than the actual expenditure on account of shifting of relevant expenditures from Establishment head (7.1) below. Provision of

73 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII LADA - Included in Environment & Ecology Cost 1.11 Total (Infrastructure works) Major Civil & Hydro Mechanical Works Dam, Intake & desilting Chambers HRT, TRT, Surge Shaft & Pressure Shaft Power Plant Civil Works Other Civil Works (Contigencies & Miscellaneous H D01 00 Final Review Report 54 of Jul-13 `23.75 lakh deferred to reduce tariff in initial years. 11, , , , , , , , , Recommended amount is higher than the actual expenditure on account of shifting of relevant 9, , As per Market Rate ( (material)) 8, , As per Market Rate 2, , , , As per Market Rate ( (material)) ( (material)) As per Market Rate expenditures from Establishment head 8, , Amount against dam 8, rectification (` lakh) not allowed and provision of ` lakh deferred to reduce tariff in initial years. 12, , , , Amount against pressure shaft & surge shaft rectifications (` lakh) and cost against change in construction methodology of HRT (` lakh) not allowed 3, Amount against 3, , rectification works (` lakh) not allowed - - (1,016.55)

74 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII 2.5 works) Escalation on Infra and Major Works 1, As per Market Rate , , , , Escalation amount of ` lakh bee March 2008 and provision of ` lakh not allowed Total (Major Civil & HM Works) 22, , , , , , , , Hydro Mechanical equipments Included in item 2.0 Included in civil works cost Included in item Plant & Equipment including Initial spares. 4.1 Generating Equipment Electrical Auxiliary equipment of power house Mechanical Auxiliary Equipment of the Power House As per Market Rate As per Market Rate As per Market Rate , (2,674.65) 5, , (276.10) 6, , , Amount recommended is actual expenditures made as per provisions of EPC contract. Provision of ` lakh not allowed H D01 00 Final Review Report 55 of Jul-13

75 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII 4.4 Transmission Line and Terminal Equipment Escalation on Plant & Equipments As per Market Rate As per Market Rate , , Provision of `8.83 lakh deferred to reduce tariff in initial years , , , Total (Plant & Equipment) (883.81) Taxes and Duties Custom Duty Included in the above Included in E & M cost Included in the above Other taxes & Duties Included in E & M cost Total Taxes & Duties Construction & Precommissioning expenses Already included in the above cost H D01 00 Final Review Report 56 of Jul-13

76 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII 6.1 Erection, testing & commissioning Included in item 4.0 Included in E & M cost Included in item Construction Insurance 6.3 Site supervision 6.4 Total (Const. & Precommissioning) Included in Establishmen t Cost Included in Preliminary works cost Overheads Establishment 7.2 Design & Engineering 7.3 Audit & Accounts 7.4 Contingency 1, , % of I- works cost excluding Land Cost Included in Preliminary works cost % of I- works cost - - Included in Civil, HM & E & M Cost - 7, , , , As per actual expenditure after deducting ` lakh and shifting some of items to preliminary & miscellaneous As per actual (509.04) expenditure after shifting ` lakh from Establishment (7.1) above H D01 00 Final Review Report 57 of Jul-13

77 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII 7.5 Rehabilitation & Resettlement 7.6 LADA - Included in Land and Enviornment & Ecology Cost - Included in Enviornment & Ecology Cost - 1, , , Total (Overheads) 1, , , , , , , Retrospective application of LADA amount ` not allowed Capital Cost without IDC, FC, FERV & Hedging Cost 56, , , , , , , IDC, FC, FERV & Hedging Cost Interest During Construction (IDC) Financing Charges (FC) Foreign Exchange Rate Variation (FERV) 9.4 Hedging Cost 6, , As actually Paid As actually Paid , , , , % of amount allowed after September 2011 (Deducted amount is ` lakh) H D01 00 Final Review Report 58 of Jul-13

78 S.No. Head of works DPR Cost (` Lakh) CEA Guidelines/ Market Rates (` Lakh) EPC Cost (` Lakh) Lender's Appraised Cost in 2006 (` Lakh) Cost already incurred Completed Cost (` Lakh) Provision Total Cost as on COD including Provisions Cost Overrun (` Lakh) Consultant's Recommendations Cost (` Lakh) Reasons I II III IV V VI VII VIII IX=VII+VIII X=IX-III XI XII 9.5 Total of IDC, FC, FERV & Hedging Cost 6, , , , , , Capital cost including IDC, FC, FERV & Hedging Cost 63, , , , * 98, , , * * - Project Capital Cost of `87, Lakh recommended by the Consultant is excluding provisions. Out of total provisions of `1, Lakh, `406 Lakh ( ) has not been allowed. Remaining provisions of `1, Lakh have been deferred to reduce tariff in initial years H D01 00 Final Review Report 59 of Jul-13

79 7.0 Vetting of various components of tariff 7.1 General Review and vetting of tariff components along with it s calculations Malana-II Hydro-electric project has been done as per the Terms and Conditions of Tariff Regulations, 2009 published as Notification No.L-7/145(160)/2008-CERC issued by Central Electricity Regulatory Commission (CERC) in January As per Chapter 1 Clause no.2, these regulations shall come into ce on , and unless reviewed earlier or extended by the Commission, shall remain in ce a period of 5 years from the date of commencement (i.e. January 19, 2009). Terms and Conditions of Tariff Regulations, 2009 contains a total of 44 regulations in 6 number of chapters Coal-based/Lignite-fired thermal generating stations, Opencycle Gas Turbine/Combined Cycle thermal generating stations and hydropower generating stations. CERC has also prescribed Tariff Filing Forms (from 1 to 16B) Hydropower projects in this regulation. The petitioner has submitted the requisite inmation in the prescribed Forms 1 to 16B Useful Life of Project As per CERC Tariff Regulations, 2009 Chapter-1_Clause no.3 definition-42(d), useful life of hydropower plant should be considered as 35 years from COD. As per Project Company, useful life of hydropower project has been considered as 40 year as per the Implementation Agreement signed between Project Company and Government of Himachal Pradesh. As per Consultant, useful life of project may be considered as 40 years as per Implementation Agreement Construction Period Planned Construction Period CERC doesn t provide any norm planning of construction period as it vary with location and size of project H D01 00 Final Review Report 60 of Jul-13

80 Project Company has considered a planned construction period of 48 months the construction of infrastructure works and main project components in the DPR. But it is considered as 36 months as per EPC contract Infrastructure, Civil and HM Works, effective one week after financial closure of the project. Actual Construction Period Actual construction period of the project is 78 months. Construction of infrastructure works had started in January 2006 and completed in March Construction of main project components had started in May 2007 and completed by August Both the units got synchronized in the month of August 2011 and ran successfully till October 01, However, due to sudden increase in leakages from HRT, Pressure Shaft and Surge Shaft, the plant was shut down repair works. The rectification works and re-testing were carried out from October 03, 2011 to July 11, Finally both the units started operating commercially from July 12, Consultant has already explained the reasons delay in construction period in this report in section no Capital Cost As per CERC Tariff Regulations, 2009 Chapter-2 Clause no.7, Capital cost a project shall include: (a) The expenditure incurred or projected to be incurred, including interest during construction and financing charges, any gain or loss on account of eign exchange risk variation during construction on the loan - (i) being equal to 70% of the funds deployed, in the event of the actual equity in excess of 30% of the funds deployed, by treating the excess equity as normative loan, or (ii) being equal to the actual amount of loan in the event of the actual equity less than 30% of the funds deployed, - up to the date of commercial operation of the project, as admitted by the Commission, after prudence check; (b) Capitalised initial spares subject to the ceiling rates specified in regulation 8; and H D01 00 Final Review Report 61 of Jul-13

81 (c) Additional capital expenditure determined under regulation 9: Provided that the assets ming part of the project, but not in use shall be taken out of the capital cost. As per Project Company, capital cost of the project is ` crore which includes debt of ` crore, equity of ` crore, undischarged liabilities of ` crore and provisions of ` crore. Interest during construction and financing charges are given as ` crore and ` 5.85 crore respectively. The given cost figures are from Tariff Forms Part-II Form 6 and Appendix-1 to m 9. As per consultant, capital cost of the project is ` crore excluding provisions of ` crore. The provisions have been deferred in order to reduce tariff of initial years and not taken into account. Interest during construction and financing charges has works out to be ` crore and ` 5.76 crore respectively. 7.3 Initial Spares As per CERC Tariff Regulations, 2009 Chapter-2 Clause no.8, Initial spares shall be capitalised as a percentage of the original project cost, subject to a ceiling norms of 1.5% hydro-generating stations. The cost of initial spares is already included in contract cost of electro-mechanical equipments and is not specified separately. 7.4 Additional Capitalization As per CERC Tariff Regulations, 2009 Chapter-2 Clause no.8, (1), the capital expenditure incurred or projected to be incurred, on the following counts within the original scope of work, after the date of commercial operation and up to the cut-off date may be admitted by the Commission, subject to prudence check: I. Un-discharged liabilities; II. Works deferred execution: III. Procurement of initial capital spares within the original scope of work, subject to the provisions of regulation 8; H D01 00 Final Review Report 62 of Jul-13

82 IV. Liabilities to meet award of arbitration or compliance of the order or decree of a court; and V. Change in law: Provided that the details of works included in the original scope of work along with estimates of expenditure, undischarged liabilities and the works deferred execution shall be submitted along with the application determination of tariff. As per Project Company, capital cost of ` crore has been spent on the project as on COD (July 12, 2012). Net additional capital of ` crore and ` crore has been proposed the financial year and respectively on account of un-discharged liabilities & provisions. Cost figures mentioned above are taken from Form 9 and Annexure to Form 1 of the tariff petition. As per consultant, capital cost of the project is ` crore as on COD (July 12, 2012) excluding provisions of ` crore which has been deferred to reduce the tariff initial years. As the actual expenditure (` crore) on the project by the project company is more than the project capital cost worked out by the Consultant (` crore), no un-discharge liability has been considered additional capitalisation. 7.5 Sale of Infirm Power As per CERC Tariff Regulations, 2009 Chapter-2 Clause no.11, Supply of infirm power shall be accounted as Unscheduled Interchange (UI) and paid from the regional or State UI pool account at the applicable frequency-linked UI rate: Provided that any revenue earned by the generating company from sale of infirm power after accounting the fuel expenses shall be applied reduction in capital cost: As per Project Company, First and Second Unit of Malana-II HEP had been synchronized on August 03, 2011 and August 12, 2011 respectively. These two units ran almost on full load till October 01, Power generation had to be stopped due to occurrence of major problems in different project components on H D01 00 Final Review Report 63 of Jul-13

83 October 02, A total of kwh (after deducting 12% free power) of infirm power has been generated from August 2011 to October 2011 and revenue of ` crore has been earned by the generating company. But the expenses generation of infirm power are more than the income. Total trial run expenses are ` crore which includes transmission wheeling charges, point of connection charges, NRLDC fees & charges and NRLDC trial run unscheduled expenses. After deducting the expenses from income, trial run expenses works out to be ` 2.35 crore and the same has been considered the project capital cost. Detail of income from sale of Infirm Power is shown in Table No H D01 00 Final Review Report 64 of Jul-13

84 Table No. 7.0: Details of Infirm Power Sale H D01 00 Final Review Report 65 of Jul-13

85 7.6 Debt-Equity Ratio As per CERC Tariff Regulations, 2009 Chapter-2 Clause no.12, a Debt: Equity ratio of 2.33: 1(70:30) of total capital project cost should be considered determination of the tariff. For a project declared under commercial operation on or after , if the equity actually deployed is more than 30% of the capital cost, equity in excess of 30% shall be treated as normative loan: Provided that where equity actually deployed is less than 30% of the capital cost, the actual equity shall be considered determination of tariff: As per Project Company, the same ratio (70:30) has been kept tariff determination. As on COD (July 12, 2012) actual total cost of ` crore (obtained by deducting un-discharged liabilities of ` crore (source: Tariff Application Part II, Form 6) and provisional cost of ` crore (source: Tariff Application Part II, Appendix 1 to Form 9) from total completed cost of ` crore) is shared by 70% debt. of ` crore and 30% equity of ` crore. Actual equity in this case is ` crore but tariff determination, excess of 30% has been considered as normative loan. There are four financial Institutions namely Rural Electrification Corporation (REC), Punjab National Bank (PNB), State Bank of Patiala (SBoP) and Indian Renewable Energy Development Agency Limited (IREDA) who are funding the debt. Among all, REC is the main lender and is providing 66% of total debt. Details of Debt sharing have been given below in Table No. 7.1.which is as per Tariff Form Part-II Form 6. Table No. 7.1: Details of Debt Sharing S. No. Particulars Amount of Debt % of Contribution I II III IV A Long Term Loans 1 REC PNB -I 3 PNB -II State Bank of Patiala Indian Renewable Energy Development Authority H D01 00 Final Review Report 66 of Jul-13

86 S. No. Particulars Amount of Debt % of Contribution S. No. I II III IV B Secured Short Term Loans Sub-total Punjab National Bank State Bank of Patiala Normative Loan Sub-total Total Equity the project has been arranged from four shareholders namely A. Sitarama Raju, Asian Genco Private Limited, Athena Infra projects Private Limited and Investor s Trust (FZC). Among all, Athena Infra projects Private Limited is the main shareholder with 62.32% of share. Details of Equity sharing have been given below in Table No.7.2. Name of Shareholders Table No.7.2 Details of Equity Sharing Share Capital Share Application Money pending allotment Total % of Share Capital I II III IV V VI 1 A Sitarama Raju Asian Genco Pvt. Ltd Athena Infraprojects Pvt. Ltd Investor s Trust (FZC) Sub - total Add: Reserves & Surplus (Forfeited Shares) Total Equity Share Capital Equity as per CERC (30% of ` crore) H D01 00 Final Review Report 67 of Jul-13

87 As per project company, the total equity share capital is ` crore and the equity used the determination of tariff is ` crore (30% of ` crore). The difference of both the amounts has been treated as normative loan which should be ` crore, but it is coming as ` crore which is given in Table No Table No. 7.3 Details of Equity Sharing as per Tariff Forms & Balance Sheet S.No Particulars As per audited Balance Sheet as on COD As per Tariff Forms filed by EPPL 1 Debt Long Term Borrowings (Item 3(a) Pg 1) Short Term Borrowings (Item 4 (a) Pg 1) Other Current Liabilities - Current maturities of long term debt (Note 9 Pg 7) As per Form 6 (Excluding Normative Loan) Sub - total (Debt) Equity Share capital (Item 1 (a) Pg 1) Share application money pending allotment (Item 2 Pg 1) Forfeited Shares (Note 4 Pg 4) 0.43 Equity as per Form Normative loan as per Form Sub - total (Equity) Total Debt + Equity Debt : Equity Ratio 66:34 67: H D01 00 Final Review Report 68 of Jul-13

88 Reason above variation: 1. The audited balance sheet reflects the position of account as on COD. 2. Subsequently, REC approved restructuring of the loan on October 10, 2012 whereby principal repayment installments paid by EPPL to REC September 2011 and December 2011 were adjusted by REC against the outstanding overdue interest and the principal amount of loan was increased by the same amount. 3. The balance sheet as on COD had already been approved bee the said date and the impact of restructuring is not reflected in the balance sheet. 4. However, the impact of restructuring is reflected in the Tariff Petition filed by EPPL and the said fact is also disclosed by the way of note in Form No. 7 & It may be stated that that above has no effect on the tariff claimed by EPPL as the equity in both cases is more than 30% of the capital cost and the excess equity has to be treated as normative loan only as per CERC Tariff Regulations, Balance sheet has been attached as Annexure-VI with this report. A copy of letter of restructuring of loan vide letter no.rec/gen./hydro/malana-ii/ ,dated is attached as Annexure-VII. As per consultant, amounts of debt and equity tariff calculation has been worked out as ` crore and ` crore respectively due to reduction in project cost from ` crore to ` crore. 7.7 Components of Tariff As per CERC Tariff Regulations, 2009 Chapter-3 Clause no.13, the tariff supply of electricity from a hydro generating station shall comprise capacity charge and energy charge to be derived in the manner specified in regulation 22, recovery of annual fixed cost through the two charges. As per CERC Tariff Regulations, 2009 Chapter-3 Clause no.22, The fixed cost of a hydro generating station shall be computed on annual basis, based on norms specified under these regulations, and recovered on monthly basis under capacity charge (inclusive of incentive) and energy charge, which shall be payable by the H D01 00 Final Review Report 69 of Jul-13

89 beneficiaries in proportion to their respective allocation in the saleable capacity of the generating station, that is to say, in the capacity excluding the free power to the home State: Provided that during the period between the date of commercial operation of the first unit of the generating station and the generating station, the annual fixed AFC = NAPAF = NDM = NDY = PAFM = date of commercial operation of the cost shall provisionally be worked out based on the latest estimate of the completion cost the generating station, the purpose of determining the capacity charge and energy charge payment during such period. The capacity charge (inclusive of incentive) payable to a hydro generating station a calendar month shall be AFC x 0.5 x NDM / NDY x (PAFM / NAPAF) (in Rupees) Where, Annual fixed cost specified the year, in Rupees. Normative plant availability factor in percentage Number of days in the month Number of days in the year Plant availability factor achieved during the month, in percentage (3) The PAFM shall be computed in accordance with the following mula : PAFM = N x Σ DCi / { N x IC x ( AUX ) } % Where, AUX = DCi = Normative auxiliary energy consumption in percentage Declared capacity (in ex-bus MW) the i th day of the month which the station can deliver at least three (3) hours, as certified by the nodal load dispatch centre after the day IC = Installed capacity (in MW) of the complete generating station N = Number of days in the month H D01 00 Final Review Report 70 of Jul-13

90 The energy charge shall be payable by every beneficiary the total energy scheduled to be supplied to the beneficiary, excluding free energy, if any, during the calendar month, on ex power plant basis, at the computed energy charge rate. Total Energy charge payable to the generating company a month shall be: (Energy charge rate in Rs. / kwh) x {Scheduled energy (ex-bus) month in kwh} X (100-FEHS) /100. As per Project Company, the tariff submitted through tariff petition is indicative only and actual tariff which consists of the capacity charges and energy charges will be fixed up based on actual energy generation. As per consultant, the tariff which consists of capacity charges and energy charges has been given in Table no The capacity charges and energy charges have been considered as half of annual fixed cost in the calculation. Tariff submitted in this report is indicative only and actual tariff will be fixed up based on actual energy generation. 7.8 Annual Fixed Cost As per CERC Tariff Regulations, 2009 Chapter-3 Clause no.14, the annual fixed cost (AFC) of a hydro-generating station or a transmission system shall consist of the following components (a) (b) (c) (d) (e) Return on equity; Interest on loan capital; Depreciation; Interest on working capital; Operation and maintenance expenses; Return on Equity (ROE) As per Third Amendment to CERC Tariff Regulations, 2009 dated December 31, 2012 Clause no.15 (2) (effective from January 01, 2013), return on equity shall be computed on pre-tax basis at the base rate of 15.5% thermal generating stations, transmission system and run of the river generating station and 16.5% H D01 00 Final Review Report 71 of Jul-13

91 storage type generating stations including pumped storage hydro generating stations. Project Company has filed the Tariff Petition in November, 2012 and Third Amendment to CERC Tariff Regulations, 2009 has been published in December 31, Theree, their calculations are based on 15.5% return on equity which is prescribed in CERC Tariff Regulations, 2009 Chapter-3 Clause no.15. As per Project Company, the return on equity the year and has been worked out as ` crore and ` crore respectively as per Tariff Form-1 and Annexure to Form 1 part-ii. As per Consultant, Malana II HEP is a run-of-river project with four hour of pondage. Theree the return on equity should be considered as 16.5% as per Third Amendment to CERC Tariff Regulations, 2009 dated December 31, 2012 Clause no.7 (2) from January 01, 2013 onwards. Accordingly, the return on equity from COD (July 12, 2012) to December 31, 2012 has been calculated as ` crore adopting a rate of 15.5% and from January 01, 2013 to March 31, 2013 as ` crore adopting a rate of 16.5%. A total return on equity of ` crore has been worked out the year Return on equity the year has been computed as ` crore adopting a rate of 16.5%. Details of Return on Equity have been given in the following Table No.7.4. Table No.7.4 Details of Return on Equity S. Values as per Values as per Description Unit No. Developer Consultant I II III IV V 1 Pre-tax return on Equity (from COD (July 12, 2012) to % 15.5% 15.5% December 31, 2012 ) 2 Pre-tax return on Equity (January 01, 2013 to March 31, % 15.5% 16.5% 2013 ) 3 Pre-tax return on Equity (from April 01, 2013 to March 31, 2014) % 15.5% 16.5% 4 5 Minimum Alternate Tax ( year ) Corporate Tax ( year ) % 20.01% 20.01% H D01 00 Final Review Report 72 of Jul-13 % Not considered as tariff has 33.99% applicable after 10

92 S. Values as per Values as per Description Unit No. Developer Consultant I II III IV V been worked years of COD out initial 2 years only. 6 Return on Equity (from COD (July 12, 2012) to December 31, 2012 ) ` crore Not mentioned Separately Return on Equity (January 01, 2013 to March 31, 2013 ) Return on Equity the Year (from July 12, 2012 to March 31, 2013) Return on Equity the Year (from April 01, 2013 to March 31, 2014) Tax on Return of Equity ` crore Not mentioned Separately ` crore ` crore As per CERC Tariff Regulations, 2009 Chapter-3 Clause no.15(3&4), the rate of return on equity shall be computed by grossing up the base rate with the normal tax rate the year applicable to the concerned generating company or the transmission licensee, as the case may be: Provided that return on equity with respect to the actual tax rate applicable to the generating company or the transmission licensee, as the case may be, in line with the provisions of the relevant Finance Acts of the respective year during the tariff period shall be trued up separately each year of the tariff period along with the tariff petition filed the next tariff period. Rate of return on equity shall be rounded off to three decimal points and be computed as per the mula given below: Rate of pre-tax return on equity = Base rate / (1-t) Where t is the applicable tax rate in accordance with clause (3) of this regulation. Project Company has filed the tariff petition 2 years (i.e and ). They have adopted the Minimum Alternate Tax rate of 20.01% both the years as corporate tax is not applicable here H D01 00 Final Review Report 73 of Jul-13

93 Tax on Return on Equity has been considered as per Income Tax rates and by the Consultant. Minimum Alternate Tax has been considered as 20.01% (base rate as 18.5%, Surcharge as 5% and Educational Cess as 3%) first 10 years and Corporate Tax has been considered as 33.99% (base rate as 30%, Surcharge as 10% and Educational Cess as 3%) beyond 10 years Interest on Loan Capital S. No. As per CERC Tariff Regulations, 2009 Chapter-3 Clause no.16, the normative loan outstanding as on shall be worked out by deducting the cumulative repayment as admitted by the Commission up to from the gross normative loan. The rate of interest shall be the weighted average rate of interest calculated on the basis of the actual loan portfolio at the beginning of each year applicable to the project. Project Company has been charged varying interest rates in different years. The interest rates on outstanding loans repayment during and after the commission of project are as per interest charged by the different prevailing financing agencies. There are four financial Institutions namely Rural Electrification Corporation (REC), Punjab National Bank (PNB), State Bank of Patiala (SBoP) and Indian Renewable Energy Development Agency Limited (IREDA) which are funding debt to the project. Interest rates of different Banks from 2008 to 2013 as per Tariff Form part-ii Form- 13 have been given below in Table No.7.5. Table No.7.5 Details of Interest Rates of Different Banks Name of Banks (April 01 to July 11, 2012) (July 12, 2012 to March 31, 2013) I II III IV V VI VII VIII IX 1 2 Rural Electrification Corporation Limited Punjab National Bank % 12.25% 12.51% 13.31% 13.37% 12.96% 13.22% 10.50% 11.50% 14.75% 15.76% 15.42% 14.94% 14.98% 3 Punjab National Bank % 0.00% 14.17% 15.74% 15.21% 14.89% 14.91% H D01 00 Final Review Report 74 of Jul-13

94 S. No. Name of Banks (April 01 to July 11, 2012) (July 12, 2012 to March 31, 2013) I II III IV V VI VII VIII IX 4 5 State Bank of Patiala Indian Renewable Energy Development Agency Limited 10.50% 10.74% 11.39% 12.29% 15.31% 15.20% 15.24% 0.00% 0.00% 12.25% 12.39% 12.39% 12.39% 12.39% The interest amount on loan as per Project Company has been computed as ` crore the year and ` crore the year considering weighted average rate of interest as 13.74% and 13.55% respectively. Weighted average interest rates and interest amounts as per Tariff Forms part-ii Form 13 A has been shown in the following Table No Table No. 7.6: Weighted Average Rates and Interest Amount on Loan S. Values as per Values as per Description Unit No. Developer Consultant I II III IV V 1 Weighted Average Interest Rate year % 13.74% 13.74% 2 Weighted Average Interest Rate year % 13.55% 13.55% 3 Interest Amount on Loan the Year ` crore Interest Amount on Loan the Year ` crore Consultant has checked the calculations of weighted average interest rates and found to be in order. As per consultant, due to the change in project cost, interest amounts on loan works out to be ` crore the year and ` crore the year Repayment Period As per CERC Tariff Regulations, 2009 Chapter-3 Clause no.16(3&4), repayment the year of tariff period should deemed to be equal to the depreciation allowed that year. Notwithstanding any moratorium period availed by the generating company or the transmission licensee, as the case may be the H D01 00 Final Review Report 75 of Jul-13

95 repayment of loan shall be considered from the first year of commercial operation of the project and shall be equal to the annual depreciation allowed,. As per Project Company, there are five long term loans with Rural Electrification Corporation (REC), Punjab National Bank (PNB -2 nos. loans), State bank of Patiala (SBoP) and Indian Renewable Energy Development Agency Limited (IREDA) having repayment period varying from 10 to 15 years as mutually agreed between Project Company and financial institutions. Details of repayment period with status as per Tariff Forms part-ii Form 7 are given below in Table No S. No. Particulars Table No.7.7: Details of Repayment Period Loan Amount Sanctioned Repayment Period (years) Repayment Frequency Repayment Installments I II III IV V VI Long Term Loans 1 Rural Electrification Quarterly 50 Corporation 2 Punjab National Quarterly 40 Bank-1 3 Punjab National Quarterly 60 Bank-2 4 State Bank of Patiala Quarterly 40 5 Indian Renewable Energy Development Authority Secured Short Term Loans Quarterly 60 1 Punjab National Monthly 3 Bank 2 State Bank of Patiala Monthly 3 As per consultant, the amount repaid in the first year of COD (year ) shall be equal to depreciation amount that year which works out to be ` crore. The Repayment amount the next year ( ) with revised cost (` crores) comes out to be ` crores H D01 00 Final Review Report 76 of Jul-13

96 7.8.3 Depreciation As per CERC Tariff Regulation, 2009 Chapter-3 Clause no.17, total depreciation is allowed up to a maximum of 90% of the total capital cost of the project excluding the cost of land. Salvage value shall be considered as 10%. Depreciation shall be calculated annually based on Straight Line Method and at rates specified in Appendix-III to CERC regulations the assets of the generating station and transmission system: Provided that, the remaining depreciable value as on 31st March of the year closing after a period of 12 years from date of commercial operation shall be spread over the balance useful life of the assets. Project Company has calculated the depreciation annually based on straight line method and at rates specified by CERC depreciation rate schedule. Weighted average depreciation rate has been computed as 4.95% the full year and 3.56% months from July 12, 2012 to March 31, 2013 on pro-rata basis. The rate of depreciation from 13 th years onwards upto the 40 th year works out to be 1.093%. Rate of depreciation the assets as per Tariff Forms part-ii Form 11 has been given in the following Table No Table No.7.8: Rate of Depreciation Different Assets S. No. Item Description Depreciation Rates as per CERC Tariff Regulations ( ) I II III Infrastructure works 1 Roads 3.34% Construction of Bridge 3.34% Construction of Building - Temporary - Permanent 3.34% 2 CIVIL WORKS Dam 5.28% Drift 5.28% HRT 5.28% Power House 5.28% Trail Race Tunnel 5.28% Pressure Shaft 5.28% H D01 00 Final Review Report 77 of Jul-13

97 S. No. Item Description Depreciation Rates as per CERC Tariff Regulations ( ) I II III Surge Shaft 5.28% 3 ELECTRO MECHANICAL WORKS Turbine And Accessories 5.28% Generator And Accessories 5.28% Cooling Water System 5.28% Generating Transmers 5.28% Auxiliary Transmers 5.28% 11 Kv Bus Ducts & Terminal Equipment 5.28% 11Kv Switchgear 5.28% 132 kv Switchyard 5.28% Switchyard Structures 5.28% Ehv Grade Xlpe Cables 5.28% Ltac System 5.28% Dc Supply System 5.28% Protection System 5.28% Illumination 5.28% Power Control & Instrumentation Cables 5.28% Communication System 5.28% Earthing System 5.28% E.O.T Crane 5.28% Ventilation System Air Conditioning System 5.28% Elevator 5.28% Fire Fighting System 5.28% Dewatering & Drainage System 5.28% Dg Set 5.28% Dewatering & Drainage System 4 Transmission Line Transmission Equipment 5.28% Sub Station 5.28% 5 Freehold Land Lease hold Land 2.49% Tools 5.28% Office Equipment 6.33% Computers 15.00% Software 15.00% Furniture & Fixtures 6.33% H D01 00 Final Review Report 78 of Jul-13

98 S. No. Item Description Depreciation Rates as per CERC Tariff Regulations ( ) I II III Vehicles 9.50% Weighted Average Depreciation Rate(%) from July 12, 2012 to March 31, 2013 Weighted Average Depreciation Rate(%) from April 2013 to March % 4.95% Considering above weighted average of depreciation rates, the depreciation amounts year and have been worked out by the Project Company as ` crore and ` crore respectively. The average depreciation rates along with depreciation amount as per Tariff Forms part-ii Form 12 have been given below in the following Table No H D01 00 Final Review Report 79 of Jul-13

99 Sl No. Table No.7.9: Average Depreciation Rates and Depreciation Amount Values as Values as per Description Unit per Consultant Developer I II III IV V 1 Average Depreciation Rate year (from July 12, 2012 to March 31, 2013) % 3.56% 3.56% Average Depreciation Rate year (from April 01, 2013 to March 31, 2014) Depreciation Amount the Year (from July 12, 2012 to March 31, 2013) Depreciation Amount the Year (from April 01, 2013 to March 31, 2014) % 4.95% 4.95% ` crore ` crore Consultant has verified the calculations of depreciation which are annually based on straight line method and at rates specified by CERC depreciation rate schedule. Weighted average depreciation rate computed as 4.95% the full year and 3.56% months from July 12, 2012 to March 31, 2013 on pro-rata basis are found to be in order. The rate of depreciation from 13 th years onwards upto the 40 th year works (as 1.093%) is also found correct. However, the depreciation amount has been reduced due to the change in project cost (` crore ) to ` crore the year and ` crore the year Interest on Working Capital As per CERC Tariff Regulations, 2009 Chapter-3 Clause no.18 (1)-c, in case of hydro generating stations, the working capital shall cover receivables equivalent to two months of fixed cost, maintenance of operation & maintenance expenses and operation & maintenance expenses one month. Rate of interest on working capital shall be on normative basis and shall be equal to the short-term Prime Lending Rate of State Bank of India as on or on 1st April of the year in which the generating station or a unit thereof or the transmission system, as the case may be, is declared under commercial operation, whichever is later H D01 00 Final Review Report 80 of Jul-13

100 Interest on working capital shall be payable on normative basis notwithstanding that the generating company or the transmission licensee has not taken loan working capital from any outside agency. As per Project Company, rate of interest on working capital has been considered as 13.5% both the years and Rate of interest on working capital is based on State Bank of India base rate plus 350 basis points as on April 01,2012. Interest on working capital has been calculated as ` 3.85 crore months from July 12, 2012 to March 31, 2013 and ` 5.45 crore 12 months from April 2013 to March 2014 respectively as per Tariff Forms part-ii Form 13B. Consultant has verified the interest rate of State Bank of India as on April 01, The copy of State Bank of India letter dated September 13, 2012 is attached as Annexure VIII. Based on State Bank of India base rate on April 01, 2012 of 10%+350 basis points, Interest on working capital has been calculated as ` 3.61 crore months from July 12, 2012 to March 31, 2013 and ` 4.98 crore 12 months from April 2013 to March 2014 respectively as per consultant with the reduced capital cost. Details of Interest on working capital are given below in Table No Table No Details of Interest on Working Capital S. Values as per Values as per Description Unit No. Developer Consultant I II III IV V 1 Total Capital Cost ` crore O & M Expenses % 2% of capital 2% of capital cost cost 3 Maintenance Spares % 15% of O&M 15% of O&M Expenses Expenses 4 Receivables months 2 months 2 months 5 Rate of Interest % 13.5% 13.5% 6 Interest on Working Capital the Year (from July 12, 2012 to March ` crore , 2013) 7 Interest on Working Capital the Year (from April 01, 2013 to March 31, 2014) ` crore H D01 00 Final Review Report 81 of Jul-13

101 7.8.5 Operation & Maintenance Expenses As per CERC Tariff Regulation, 2009 Chapter 3 Clause no.19 (f), in case of the hydro generating stations declared under commercial operation on or after , operation and maintenance expenses shall be fixed at 2% of the original project cost (excluding cost of rehabilitation & resettlement works) and shall be subject to annual escalation of 5.72% per annum the subsequent years. As per Project Company, O & M expenses the year and are ` crore and ` crore respectively as per Tariff Forms part-ii Form 15A. In this project, no cost has been assigned to Rehabilitation & resettlement works. Consultant has verified that the approach used to find out the Operation and maintenance expenses is found to be reasonable and is in accordance with CERC guidelines. With the decrease in project cost (` crore), O & M cost works out to be ` crore the year and ` crore the year Details of O & M cost has been given below in Table No Table No.7.11 Details of Operation and Maintenance Expenses S. Values as per Values as per Description Unit No. Developer Consultant I II III IV V 1 Total Capital Cost ` crore O & M Expenses % 2% of capital 2% of capital cost cost O & M Expenses the Year (from July 12, 2012 to ` crore March 31, 2013) 4 O & M Expenses the Year (from April 01, 2013 to March 31, 2014) ` crore Normative Annual Plant Availability Factor (NAPAF) As per CERC Tariff Regulations, 2009 Chapter-4 Clause no.27 (i), normative annual plant availability factor (NAPAF) hydro generating stations shall be determined by the Commission as per the following criteria: H D01 00 Final Review Report 82 of Jul-13

102 Storage and Pondage type plants with head variation between Full Reservoir Level (FRL) and Minimum Draw Down Level (MDDL) of up to 8%, and where plant availability is not affected by silt: 90%. As per Project Company, normative annual plant availability factor (NAPAF) has been considered as 90% in the tariff determination and it is given in Tariff Forms part-ii Form 2. Consultant has verified the normative annual plant availability factor (NAPAF) as 90% and is found to be in order. Malana-II HEP is a run of the river plant with 4 hours peaking and the head variation between FRL & MDDL is 2.49% which is less than 8%. As per salient feature, FRL is 2543 m, MDDL is 2528m and head is 603 m Design Energy As per CERC Tariff Regulations, 2009 Chapter-1 Clause no.3 definitions 15, design energy is the quantum of energy which can be generated in a 90% dependable year with 95% installed capacity of hydro-generating station. As per Project Company, annual design energy considered is MU in the DPR. Total saleable energy upto 12 years of operation is MU and after 12 years is MU after accounting Free Power to Home State and considering 1.20% of auxiliary consumption and 0.14% transmission losses as per DPR. As per Power Sale Agreement (PSA) signed between PTC India Ltd. (PTC) and Punjab State Electricity Board (PSEB) dated March 23, 2006, the annual design energy is MU at Delivery Point i.e. proposed Parbati Pooling Station at Panarasa. As inmed by the Developer, the above annual design energy value has been worked out from annual design energy value of MU of the DPR after accounting 1.20% auxiliary consumption and 2.40% transmission losses. Free Power to Home State shall also be provided at the above Delivery Point. As per Consultant, neither the DPR nor PSA has considered mandatory environmental release while working out annual design energy. Pollution Control Board of Government of Himachal Pradesh has prescribed 0.5 cumec as mandatory environmental release. Considering above value of mandatory environment release, H D01 00 Final Review Report 83 of Jul-13

103 annual design energy works out to MU against DPR value of MU. Values of 10-daily design energy worked out after accounting mandatory environment release has been given in Table No Table No.7.12 Calculations of Design Energy after deducting Environmental Release H D01 00 Final Review Report 84 of Jul-13

104 After accounting auxiliary consumption of 1.2%, transmission loss of 1.25% and free power to Home State, saleable design energy at Chhaur sub station works out to be MU first 12 years and MU beyond 12 years. Project has been commissioned on July 12, Accordingly, saleable design energy at Chhaur works out to be MU from July12, 2012 to March 31, 2013 and MU from April 01, 2013 to March 31, Working of saleable energy seems reasonable. Detailed calculations of saleable energy are given below in Table No S. No. Table No.7.13 Details of Design Energy and Saleable Energy Item Description Provision Adopted (in %) Energy Considered at Delivery Point (in MU) I II III IV A Design Energy as per DPR 1 Design Energy at generating station Less: Auxiliary Consumption 1.20% Less : Transmission Losses 0.14% 0.60 Design Energy at Pooling Station (Panarsa) Less : GOHP Royalty upto 12 years 12.00% Less : GOHP Royalty after 12 years 18.00% Saleable Design Energy upto 12 years Total Saleable Energy after 12 years B Design Energy as per PSA 1 Design Energy at generating station Less: Auxiliary Consumption 1.20% Less : Transmission Losses 2.40% Design Energy at Pooling Station (Panarsa) Less : GOHP Royalty upto 12 years 12.00% H D01 00 Final Review Report 85 of Jul-13

105 S. No. Item Description Provision Adopted (in %) Energy Considered at Delivery Point (in MU) I II III IV Less : GOHP Royalty after 12 years 18.00% Saleable Design Energy upto 12 years Saleable Design Energy after 12 years C Design Energy after COD 1 Design Energy at generating station Less : Mandatory Release (0.5 Cumec) Design Energy after Mandatory Release Less: Auxiliary Consumption 1.20% 4.84 Design Energy after accounting Auxiliary Consumption Less : Transmission Losses 1.25% Design Energy at Chhaur Station Less : GOHP Royalty upto 12 years 12.00% Less : GOHP Royalty after 12 years 18.00% Saleable Design Energy upto 12 years Saleable Design Energy after 12 years D E Saleable Design Energy Year (from July 12, 2012 to March 31, 2013) Saleable Design Energy Year (from April 01, 2013 to March 31, 2014) 7.11 Auxiliary Energy Consumption and Transmission Losses As per CERC Tariff Regulations ( ) Chapter 4 Clause no.27-5(ii), auxiliary energy consumption underground hydro-generating stations with static excitation system should be 1.2%. Accordingly, auxiliary energy consumption has been considered as 1.2% with static excitation system Malana II HEP. As H D01 00 Final Review Report 86 of Jul-13

106 mentioned in para (II), power transmission system Malana II HEP has been revised by CEA due to delay in Parbati Project and consequently it s evacuation system. Present power transmission system of Malana II HEP comprises of a double circuit 132 KV 18km long transmission line from power house to Chhaur with LILO connection in 220 KV D/C line of AD Hydro Private Limited from ADHEP to Nalagarh sub-station. Since the matter of transmission loss of ADHPL s line from Chhaur to Nalagarh is pending with Hon ble Supreme Court, transmission loss upto Chhaur sub-station has been considered tariff calculation. The transmission loss from power house of Malana II HEP to Chhaur sub-station has been worked out as 1.25% which is found to be in order. Detailed calculation of transmission loss is given in Annexure IX. Summary of auxiliary consumption and transmission losses adopted at DPR stage, at PSA stage and after COD is given below in Table No Table No.7.14 Auxiliary Energy Consumption and Transmission Losses S. No. Item Description Unit Adopted Provision in DPR Adopted Provision in PSA Adopted Provision after COD I II III IV V VI 1 Pooling Station Panarasa Panarasa Nalagarh 2 Transmission Line Length km Free Power Auxiliary Energy Consumption % Transmission Losses % Total Losses Considered % As per Power Purchase Agreement signed between PTC India Limited and Everest Power India Pvt. Ltd. dated 25 th July, 2005, Article 77 `Free Power means the quantum of power (in kw or multiples thereof) supplied free of cost by the Company at the Delivery Point, to Project State Government (or the Project State Utility). This shall be equal to 12% of the Power Output the twelve years from the Commercial Operations Date and 18% of the Power Output from the start of H D01 00 Final Review Report 87 of Jul-13

107 the thirteenth year till the end of the Terms of Agreement. As per Memorandum of Understanding (MOU) signed between Project Company and Government of Himachal Pradesh, free power of 12% &18% first 12 years and beyond 12 years after COD respectively, has to be provided to the Home State. However, Project Company has considered a total of 13% and 19% free power first 12 years and beyond 12 years respectively in view of amendment to Tariff Policy dated March 31, 2008 issued by Central Government. The said policy has been made applicable with retrospective effect. If the retrospective change is upheld, then the same being a change prompted under a Central Policy under the Act, will become pass through in Tariff. However, additional provision of free power of 1% has not been considered in present tariff calculation as the company is not tendering the said amount to the Government of Himachal Pradesh Interest during Construction (IDC) and Financing Charges (FC) Project Company started paying Interest during Construction from 3 rd quarter of and financing charges from 1 st quarter of Total interest during construction paid from 3 rd quarter of to 2 nd quarter of is ` crore. The total financing charges of all the Lenders paid by Project Company from 1 st Quarter of to 2 nd Quarter of is ` 5.86 crore. Details of year wise paid amount of IDC and FC as per Tariff Forms part-ii Form 14 have been given below in Table No H D01 00 Final Review Report 88 of Jul-13

108 Table No.7.15 Details of IDC as per Project Company Table No.7.15 (a) Details of FC as per Project Company As discussed in para of this report, Consultant has recommended revised IDC and FC of ` crore and ` 5.76 crore respectively tariff determination after considering half of the IDC and FC the repair and retesting period from October 02, 2011 to July 11, Amount of Interest during construction and financing charges considered in tariff computation have been given below in Table No H D01 00 Final Review Report 89 of Jul-13

109 Table No.7.16 Amount of Interest during Construction and Financing Charges as considered in Tariff Computation Cost as per Cost as per S. Description Developer Consultant No. I II III IV 1 Total Capital Cost Interest During Construction Financing Charges Foreign Exchange Rate Variation (FERV) and Hedging Cost 7.15 Tariff Foreign Exchange Rate Variation is the change or variation in project cost due to fluctuations in exchange rate of eign currency involved in the project. It is not applicable in this project as all the loan amount has been lended from Indian banks. no hedging cost is applicable here. Based on CERC Tariff Regulations, 2009 Project Company has worked out the tariff and as ` 7.08 and ` 6.23 per unit respectively. As per consultant, tariff and is ` 6.65 and ` 5.69 per unit respectively.40 years levelized tariff works out to be ` 5.05 per unit. Details of tariff calculations have been given below in Table No S. No. Table No.7.17 Details of Energy Charge Calculations Tariff as per Tariff as per Description Developer Consultant (`/Unit) (`/Unit) I II III IV Tariff the Year (from April 01, 2012 to March 31, ) 2 Tariff the Year (from July 12, 2012 to March 31, ) 3 Tariff the Year (from April 01, 2013 to March 31, 2014) H D01 00 Final Review Report 90 of Jul-13

110 Calculations 40 years levelized tariff has been given below in the following Table No Table No.7.18: Calculations of 40 year Levelized Tariff 7.16 Summary Vetting of various tariff components have been summarized below in the following Table No H D01 00 Final Review Report 91 of Jul-13

111 S. No. Table No.7.19 Summary of Vetting of Various Tariff Components Tariff Tariff Parameters Basis used Item Parameters adopted by by Project Consultant's Remarks Description adopted by Project Company Consultant Company I II III IV V VII Useful Life of the project Debt. Contribution Equity Contribution Return on Equity (Pretax) Tax on Return on equity Maximum Depreciation limit Average depreciation applied Annual operation & maintenance expenses during the first year Escalation on operation and maintenance charges 40 Years As per Implementati on Agreement 40 Years 70% As per CERC 70% 30% As per CERC 30% 15.5% As per CERC 16.5% 20.01% 100% 4.95% per annum 2% of capital cost 5.72% per annum As per Income Tax Laws As per Project Company As per CERC As per CERC As per CERC 20.01% first 10 yrs. & 33.99% beyond 10 yrs. 90% 4.95% first 12 yrs. & 1.09% beyond 12 yrs. 2% of capital cost 5.72% per annum Useful Life of Project should be considered as 35 yrs. as per latest CERC Tariff Regulations, However, project life of 40 yrs. has been considered as per Implementation agreement. As per CERC Tariff Regulations, 2009 Chpater-2,Clause no.12 As per CERC Tariff Regulations, 2009 Chpater-2,Clause no.12 As per CERC Tariff Regulations, rd Amendment Clause no.15 (2) As per Income Tax Laws As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.17(2) As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.17(4) As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.19(f)-v As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.19(f)-v H D01 00 Final Review Report 92 of Jul-13

112 S. No. Item Description Tariff Parameters adopted by Project Company Basis used by Project Company Tariff Parameters adopted by Consultant Consultant's Remarks I II III IV V VII Maintenance spares as % of O&M charges Receivables (in terms of monthly billing) Operation & Maintanence Expenses Working Capital Free Power to State LADA Charges Total Free Power to State including LADA charges Auxiliary Consumption 15% per annum As per CERC 15% per annum 2 months As per CERC 2 months 1 month As per CERC 1 month 12% first 12 years 18% beyond 12 years 1% of Design Energy 13% first 12 years 19% beyond 12 years As per MOU with State Government As per MOU with State Government As per MOU with State Government 12% first 12 years 18% beyond 12 years nil 12% first 12 years 18% beyond 12 years 1.20% As per CERC 1.20% As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.18(1)-c As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.18(1)-c As per CERC Tariff Regulations, 2009 Chapter-3, Clause no.18(1)-c As per MOU with State Government Additional free power over and above 12% was the first time introduced through Amendment to the Tariff Policy dated of the Central Govt. This policy has been made applicable with retrospective effect. If retrospective change is upheld, then the same being a change prompted under a central policy under the Act, will become pass through in tariff. However, the same has not been accounted in present tariff calculation as the company is not tendering the said amount to the Government of Himachal Pradesh. As per CERC Tariff Regulations, 2009 Chapter-4, Clause no.27(ii)(b)(ii) H D01 00 Final Review Report 93 of Jul-13

113 S. No. Item Description Tariff Parameters adopted by Project Company Basis used by Project Company Tariff Parameters adopted by Consultant Consultant's Remarks I II III IV V VII 17 Transmission Losses from Switchyard to Chhaur 1.25% As per Project Company 1.25% Transmission Losses of 1.25% from Switchyard to Chhaur is found to be in order as per calculations given in Annexure-IX H D01 00 Final Review Report 94 of Jul-13

114 ANNEXURE I SALIENT FEATURES OF THE PROJECT

115 MALANA-II HYDRO ELECTRIC PROJECT (SALIENT FEATURES) 1 Location: S.No Description Particulars as per PPA & PSA Particulars as Constructed 1 Project site Location Diversion dam located in Malana Valley (3 Km upstream of Malana Village) at EL ± 2500 m and Power House on left bank of Malana Khad just upstream of Malana - I HEP diversion site at EL ± 1910 m. Latitude - Between N to N Longitude- Between E to E 2 State Himachal Pradesh Himachal Pradesh 3 District Kullu Kullu 4 Village Malana Village Malana Village 5 Nearby State/Nation Highway 6 Nearest railway station 2 Hydrology Diversion dam located in Malana Valley (3 Km upstream of Malana Village) at EL ± 2500 m and Power House on left bank of Malana Khad just upstream of Malana - I HEP diversion site at EL ± 1910 m. Latitude - Between N to N Longitude- Between E to E The Project site is approachable by road The Project site is approachable by road up to up to Barrage site of Malana-I HEP which Barrage site of Malana-I HEP which is located about is located about 5 km from Jari village on 9 km from Jari village on Bhunter Manikaran Road Bhunter Manikaran Road which is at a which is at a distance of 35 km from Bhuntar. distance of 22 km from Bhuntar. The Nearest Rail head is Kiratpursahib about 200 km from Malana- I HEP. S.No Description Particulars Particulars Source of Water Malana Nallah a tributary of the Parabati river which in turn flows into Beas River below Bhunter The Nearest Rail head is Kiratpursahib about 200 km from Malana- I HEP. Malana Nallah a tributary of the Parabati river which in turn flows into Beas River below Bhunter Total Catchment area at Dam site km km 3 Desing Flood Flow 650 m 3 /s 650 m 3 /s Desing Flow 19.4 m 3 /s 19.7 m 3 /s Flow Availability during the Year 3 x 10 6 average year 3 x 10 6 average year Hydrology Studied (No. of years) 23 years 23 years 3 Power & Energy Parameters S.No Description Particulars Particulars 1 Type of Poroject (RoR/Ror with Pondage/Storage Run of River with Pondage ( 4 Hours) Run of River with Pondage ( 4 Hours) 2 Maximum Continuous Rating of Unit (Gross*) 51.9 MW 51.9 MW 3 Maximum Capacity of Project (net) 100 MW 100 MW 4 Maximum Capacity of the Unit (Grss) MW MW 5 Maximum Capacity of the Project (net) 115 MW 115 MW 6 Energy Output correspondding to a 50% GWh/Annum (at restricted capacity of GWh/Annum Dependable Year (net) MW) 7 Design Energy Output (net) GWh/Annum GWh/Annum (at restricted capacity of 115 MW) 8 Peak Energy Output (Net) GWh/Annum 167.9GWh/Annum 9 Peak Capacity of Project (net) 115 MW 115 MW 10 Peaking Duration, Hours 4 hous normal 4 hous normal * In this table Gross means the capacity or the electricity metered at the generator terminals ** In this tabel net means net of Auxiliary Consumption, Transmissioin losses at the project Switchyard and transmissioin losses from the project switchyard till the Delivery Point. **** 4 Reservoir: S.No Description Particulars Particulars 1 Top of the Dam level m asl (top of Dam) m asl (top of Dam) 2 Full Reservoir Level (FRL) m asl m asl 3 Maximum Water Level m asl m asl 4 Minimum Operating Water level m asl m asl 5 Live Storage at FRL M m M m3 6 Maximum Head 626 m (gross) 624 m (gross) 7 Minimum Head 611 (gross) 603 (gross) 8 Pondage Capacuty in terms of Hours of operation at Contracted capacity peaking power 4 hours 4 hours

116 5 Dam/Weir S.No Description Particulars Particulars 1 Type (Earth/Rock fill/concrete) Concrete gravity dam Concrete gravity dam Crest Sill Level m asl m asl Height of Sluice 5.0 m (2 sluice gates of size 4x5 m are envisaged) 5.5 m (2 Radial gates of size 4x5.5 m are instaled) Lenfth of crest 4.0 m 4.0 m Front slope 1:0.05 1:0.05 Rate slope 1:0.75 1:0.75 Maximum flood discharge Capacity 650 m3/s 650 m3/s 6 Power Draft S.No Description Particulars Particulars 1 Rated Discharge/unit 9.7 m3/s 9.85 m3/s 2 rate power Draft 19.4 m3/s 19.7 m3/s 3 Maximum Units Discharge m3/s m3/s Minimum Power Draft, m3/s Not Applicable. As the projet is planned as a peaking station 7 Sluice Gate S.No Description Particulars Particulars 1 Design Dischage 650 m3/s 650 m3/s 2 Number of Vents Sill level m asl m asl 8 Approach Channel & Trash Racks S.No Description Particulars Particulars 1 Channel Length, KM No Applicable No Applicable 2 Full Supply depth m No Applicable No Applicable Not Applicable. As the projet is planned as a peaking station 3 Trash rach type Envisaged at the intake of diversion dam Envisaged at the intake of diversion dam 4 No of Bays Water Conductor System S.No Description Particulars 1 Intake No Applicable One number of 3m x 3m Bell mouth opening a Sill Level elevation, m asl El.2522m b Deck level elecation, m asl 2 Lower Pressure Head race tunel a Diameter 3x2.75 m D shaped tunnel 2.9mX2.9 m D shaped tunnel b Length 5170 m 4987 m c Maximum flow( All units operating) 19.4 m3/s 20 m3/s 3 High pressure headracce tunnel a Diameter 2.5 m 2.5 m b Length m m (vertical & Horizantal shaft) 4 Unit Tunnels Penstocks Penstocks a Number 2 2 b Diameter 1.8 m 1.8 m c Length m (Longest of the Two branch Penstock) 5 Tailrace Tunnel a Diameter 5x5 m D'shaped Unit-I TRT b Length 415 m Length of Unit-I TRT,31.787m Size of Unit-I TRT, 2.5m (W) x 4.5m (H), D- shaped Unit-II TRT Length of Unit-II TRT, m Size of Unit-II TRT, 5m (W) x 6m (H), D-shaped TRT cum Cable Tunnel Length of TRT cum Cable Tunnel, 365 m and TRT outlet 53 m Size of TRT cum Cable Tunnel,5m (W) x 6.75m (H), D- shaped Slope of TRT,1in1000 Starting level, EL m 10 Power House S.No Description Particulars Particulars 1 Type ((Surface/Underground) Underground Underground 2 Length m 3 Width 20.25m 17.5m Control cable tunnel,3 m (W) x 3.25 m (H), D-shaped 11 Turbine S.No Description Particulars Particulars 1 Type of Turbine Pelton Pelton 2 Number of Turbine Runner Diameter in meters 2.6 (Approx) 2.35 m( PCD),2.93m(OD) 4 Contunuous Rated Unit Capacity MW gross MW gross 5 Maximum Capacity MW gross MW gross (Only Trubine at 100% nozzle opening) 6 Rate Head 608 m 603 m 7 Rated Discharge 9.7 m3/s 9.46 m3/s at rate haed & rated output 8 Maximum Discharge m3/s m3/s at min head & 115% over load 9 Rated Speed rpm 500 rpm rpm 10 Turbine Efficiency % 11 Speed at which Vibration exceeds permissible limt 92% approx, (Weighted average) To be Confirmed on finalization of Construction Contracts based on manufactures' specifications/ To be cofirmed on finalization of the Construction Contracts % 120% of rated speed

117 12 Load at which cavitations occurs To be cofirmed on finalization of the Construction Contracts. No cavitation under all operating condtions 12 Generator S.No Description Particulars Particulars 1 Type Synchronous generator Synchronous generator 2 Continuous Rated Capacity MW gross at the generator terminals MW gross at the generator terminals Maximum Capacity MW gross at the generation terminals MW gross at the generation terminals Rated Power Factor Rated Voltage 11 kv 11 kv Rate Speed 500 RPM RPM Generator Efficiency 98.5% approx. (Weighted average) to be confirmed on dinalization of the construction contracts based on Manunacturers' specifications % (Weighted average) 13 Transmer S.No Description Particulars Particulars 3 Generator Transmer Unit Step up Transmer Unit Step up Transmer a Number 7 (seven) single Phase (including 1 spare) 2 Nos 3 phase b Capacity 22.2 MVA 63.9MVA c Volatage Ratio 11/220 Sqrt(3)kV 11/132 Sqrt(3)kV 2 Unit Auxiliary Transmer a Number Two Two b Capacity 500 kva 500 kva c Volatage Ratio 11 kv/415 V 11 kv/415 V 3 Station Auxiliary Transmer a Number One Two b Capacity 2 MVA 1 MVA c Volatage Ratio 11kV/415V 11kV/415V 14 Switch yard S.No Description Particulars Particulars 1 Transmission Voltage 220 kv 132 kv 2 Maximum Fault Level kv To be Confirmed on Execution of the Contract Agreement 31.5 ka 1 Second 3 Type of Circuit Breaker Scheme, 1 1/2 or Transfer bus Double bus Bars Single bus bar with sectionalizer Scheme 4 Number of Bays (with breakup) six- generator incoming-2 Transmission Line - 2 Step down Transmer - 1 Bus Cupler - 1 Five- generator incoming-2 Transmission Line - 2 Step down Transmer Tie Line S.No Description Particulars Particulars 1 Voltage of Trasmission line 220 kv 132 KV 2 Number of Circuits (Single or Double) Double Double 3 Length 50 Km 18 KM 4 Span About 350 m About 350 m 5 Number of Towers Conductor Zebra ACSR Penther 7 Terminal Point Location Panarsa Subsation of PGCIL Chhaur, 132/220 kv LILI sustation

118 ANNEXURE II PROJECT LAYOUT

119

120 ANNEXURE IIIA PROJECT CONSTRUCTION SCHEDULE AS PER DPR

121 BAR CHART SHOWING THE SCHEDULE OF CONSTRUCTION ACTIVITIES OF MALANA HYDROELECTRIC PROJECT STAGE-2 (CIVIL WORKS) YEAR - 1 YEAR - 2 YEAR - 3 YEAR - 4 YEAR - 5 QUARTER QUARTER QUARTER QUARTER QUARTER Qty. in S.No. Name of Activity Unit Construction of Coffer Dam/River Diversion 2 Setting of Concrete batching and mixing plant 3 Excavtion of Dam Seat Area a) Abutment Stripping b) River Bed Excavation Preparation of foundation & foundation 4 treatment 5 Concreting in River Bed blocks, no-overflow blocks 6 Grouting through foundation galleries 7 Installation of Gates & Hoists 8 Construction of road bridge 9 Excavation of foundation trench intake conduit and excavation Desilting Chambers 10 Concreting of Disilting Chambers, cut & cover conduit Installation of Control Gates/flushing valves, 11 etc. Construction of Head Race Tunnel, Tunnel 12 Portals & Adits (HRT) a) Tunnelling from Face 1/2/3/4/5/6 a) Concrete Lining from Face1/2/3/4/5/6 b) Grouting cleaning and plugging of adit 13 Construction of Trench Wier and a feeder tunnel at thuchaning Nala to divert the flows of Nala 14 Construction of Surge Shaft & adits a) Excavation from the Bottom adit b) Concrete Lining 15 Construction of Valve Chamber

122 BAR CHART SHOWING THE SCHEDULE OF CONSTRUCTION ACTIVITIES OF MALANA HYDROELECTRIC PROJECT STAGE-2 (CIVIL WORKS) YEAR - 1 YEAR - 2 YEAR - 3 YEAR - 4 YEAR - 5 QUARTER QUARTER QUARTER QUARTER QUARTER Qty. in S.No. Name of Activity Unit a) Excavation b) Concrete Lining c) Installation of Butterfly Valve 16 Construction of Pressure Shaft a) Approach Adits PS1 b) Approach Adits PS2 17 Excavation the Pressure Shaft a) Limb 1 by Rise Climber b) Limb 2 by Rise Climber Installation of Steel Liners including 18 concreting a) Limb 1 b) Limb 2 c) Bifurcation of Bottom Horizontal Reach 19 Contact grouting, Consolidation grouting of Pressure Shaft 20 Excavation of Access Tunnel to Service Bay 21 Excavation of construction adit from access tunnel to crown of PH Placement of penstock liners, bifurcation, 22 concreteing, grouting Excavation of central drift of powerhouse cavern including rock reincement & 23 shotcreteing including 24 Benching in stages including rock reincement & shotcreteing 25 Construction of columns & gantry breams in service bay 26 Installation of EOT crane in service bay 27 Construction of columns & gantry beams in the machine hall 28 Construction of floors transmer/ auxiliary equipment 29 Erection of Main Inlet Valve

123 BAR CHART SHOWING THE SCHEDULE OF CONSTRUCTION ACTIVITIES OF MALANA HYDROELECTRIC PROJECT STAGE-2 (CIVIL WORKS) YEAR - 1 YEAR - 2 YEAR - 3 YEAR - 4 YEAR - 5 QUARTER QUARTER QUARTER QUARTER QUARTER Qty. in S.No. Name of Activity Unit Erection of Turbine/Generators along with Civil works 31 Construction of control room 32 Construction of Tail Race Tunnel a) Construction of Portal & Tunneling b) Concreting 33 Testing & Commissioning

124 ANNEXURE IIIB PROJECT CONSTRUCTION SCHEDULE AS PER CIVIL CONTRACT

125 MALANA 2 x 50=100 MW STAGE-II HEP CONSTRUCTION SCHEDULE Duration in Months S.No Construction Activity River Diversion 2 Concrete Gravity Dam & 3 Desilting Basin 4 Access Tunnels to power 5 Under Ground Power Hosue & Civil work 6 Tail Race Tunnel 7 Head Race Tunnel 8 Pressure shaft 9 Surge shaft

126 ANNEXURE IIIC ACTUAL PROJECT CONSTRUCTION SCHEDULE

127 S No. Activity Malana II HEP (2 x 50) MW Hydro Electric Project- Actual Construction Schedule Jun Jul Jun Jul Jun Jul Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Aug Sep Oct Nov Dec Jan Feb Mar Apr May Aug Sep Oct Nov Dec Jan Feb Mar Apr May Aug Award of EPC contract Infra & Main works 2 Award of Forest Clearencce by the Govrnement 3 Reaward of Infastructrue Wokrs 4 Commence Of Infrastucture Works Roads ( Dam & Adits) Ropeways Temporary Buildings 5 Reaward of Main Civil & Hydro Mechnaical Wokrs 6 DAM & INTAKE Transportation of Equipment's via ropeway River Diversion Excavation in Right Bank Abutment Excavation in Left Bank Abutment Excavation in River Bed Blocks Excavation in buried channels in river bed blocks Concreting Drilling & Grouting Dam Foundation Hydro mechanical works Dam Ready Water filling Miscellaneous Works like Parapet, Lighting arrangement, Finishing etc. Left Bank Protection works 7 Drift & Key wall Excavation Concreting Due to non availability of rock on the left bank of dam axis, drift & key wall constructed 8 Head Race Tunnel Excavation Adit - 1 Adit - 2 Adit - 3 From Intake side Face 2 Face 3 Face 4 Face 5 Face 6 From Surge Shaft End Concrete Lining HRT Face 2 Face 3 Face 4 Face 4 Steel Lining Face 5 & Face 6 Face2, 5 & 6 Invert Concreting Face 3 & 4 Invert Concreting Grouting Encountered Extreme Poor Geology in Face 3 Encountered Extreme Poor Geology in Face 4 Excavation in face 3 & 4 hampered due to encounter of extreme poor geology. 9 Rectification Works 10 Surge shaft Surprises encounter in HRT Excavation Pilot excavation Enlargement Concrete lining Grouting 11 Additional Grouting & Rectification Inver Concreting damaged due to Geological Page1 of ]

128 S No. Activity 12 Pressure shaft Excavation Adit to Bifurcation at lower level (Adit 6) Malana II HEP (2 x 50) MW Hydro Electric Project- Actual Construction Schedule Jun Jul Jun Jul Jun Jul Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Aug Sep Oct Nov Dec Jan Feb Mar Apr May Aug Sep Oct Nov Dec Jan Feb Mar Apr May Aug Adit to Intermediate level (Adit 4) Penstock - Horizontal (Top & Bottom) Horizontal Steel lining Top limb (EL ) Pilot Hole Excavation Slashing/widening Steel Liner Erection Steel liner and concreting Bottom limb (EL ) Pilot Hole Excavation Slashing/widening No progress achieved more than three months as shear zone encounter in Bottom limb Steel Liner Erection Concreting of pressure Shaft 13 Rectification Works 14 Power House Access tunnel to PH Power Cavern Excavation Concrete works Concrete at service bay Concrete required during E&M erection Finishing works Tail Race Tunnel & Cable Tunnel Tunnel excavation - Heading Tunnel excavation - Benching Concrete Lining 15 Additional Drainage holes & grouting as a part of rectification 16 Electro Mechanical Works Award of E&M EPC contract Detail Design & Engineering Transportation Erection Dry Test both Units Testing kv D/C Transmissioin line & LILO Substation 18 Re Testing & Commissioning 19 Commercial Operation Date (COD) declared Page2 of ]

129 ANNEXURE IV QUARTERLY DETAILS OF IDC

130 DETAILS OF QUARTERLY IDC PAID in Lakh Rs. Sl No. Year Quarter REC PNB-1 PNB-2 SBoP IREDA PNB-STL SBoP-STL PNB- Bridge Loan PNB- Bridge Loan I II III IV V VI VII VIII IX X XI XII XIII Total IDC Paid 1 Quarter 1-2 Quarter 2-3 Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter , Quarter , Quarter , Quarter , Quarter , Quarter , Quarter 2 1, , Quarter 3 1, , Quarter 4 1, , Quarter 1 1, , Quarter 2 1, , Quarter 3 1, , Quarter 4 1, , Quarter 1 1, , Quarter Quarter Quarter 4 - Total

131 ANNEXURE VA AFFIDAVIT BY PROJECT COMPANY REGARDING INSURANCE CLAIM AND LIQUIDATED DAMAGE

132

133

134 ANNEXURE VB AFFIDAVIT BY PROJECT COMPANY REGARDING ADJUSTMENT FROM DUTY EXEMPTION/ DRAWBACKS/ BENEFITS/ OTHER CLAIMS

135