A PENNWELL PUBLICATION

MARCH/APRIL 1996

Power
Engineering
-Internatinal-

1996-03 Bigger, Better Dabhol Facility is Back on Track

Mr. Vishvjeet Kanwarpal CEO GIS-ACG Global InfraSys - Asia Consulting Group
Published: March/April 1996 by
Power Engineering International
Upgrading to
improve power
plant efficiency
and availability

Special 2-part
feature:
P a r t1
Buoyant market
for gas turbine
power plants
Part 2
Gas turbine
development
emphasizes
improved
efficiency

Ringhals retrofit
boosts output by
more than 40 MW

Decentralized
renewable energy
systems are
supplying the
needs in rural
areas of Africa

Bigger, better
Dabhol facility is
back on track

Paka Power
Station comes on
line in record time

On the Cover
Electricity Generating Authority
of Thailand's Bang Pakong
thermal power plant. Photograph
courtesy of Black & Veatch, USA.
49 Reader Request Card
56 Calendar o f Events
59 A dvertisers’ Index
60 N ew Products
POWER
Volume
ENGINEERING Number
-INTERNATIONAL- March/April
1996
F E A T U R E S
19 Efficiency, reliability and control of pollution enhanced during plant upgrade
Improving a power plant’
s efficiency and availability adds capacity and reduces emissions
26 Part 1; The market for gas turbine power plants is buoyant
More than 900 GW of new gas turbine capacity will be added worldwide by 2010
29 Part 2: Gas turbine development emphasizes improved efficiency
Recent moves toward larger and more efficient gas turbines, coupled with lower emissions,
have led to feverish activity from manufacturers
33 Ringhals retrofit boosts output by more than 40 MW
Westinghouse and Vattenfall AB team up for steam path modernization
37 Decentralized renewable energy systems are supplying
the needs in rural areas of Africa
While a centralized grid electrification is the long-term goal,
a decentralized system is the short-term answer
41 Bigger, better Dabhol facility is back on track
Enron’ s massive Dabhol project has been watched as a ‘ test case’
for Indian power privatization, and it looks like passing marks are coming
44 Paka Power Station comes on line in record time
Standardized design may be the beginning of a new era in plant construction,
with modular pieces snapping into place at accelerating rates
OPINION
3 The Western Cliff’ s Notes approach to business is contrary to the Eastern way o f doing
business. It is, to some extent, a symptom of the root cause that Western businesses are
sometimes unwelcome in the East.
7 International Energy Outlook
•Nuclear generation is primary, but diversification is answer
in Korea’ s long-term power development program
•Japan tops survey o f electricity prices
53 Global Roundup
•Rolls-Royce Trent program on schedule
•Railroad electric plant powers Deutsche Bahn
Bigger, better Dabhol
facility is back on track
Enron’ s massive Dabhol project has been watched as a ‘ test case’
for Indian power privatization, and it looks like passing marks are coming

By Ann Chambers, Assistant Editor

After lon g months o f negotiations, the Fast-track projects and delays

Dabhol project in India seems to be com ­
ing back on track, and with it there is a Original Revised Approximate
resurgence of faith in foreign investments Project MW 1st PPA startup date startup date delay (years)
there. A variety o f cost-cutting measures
Dabhol 2,450 Dec. 8, 1993 1997 January 1999 1.5
have been applied to the project, allowing
all participants to save face while rescuing Mangalore 1,000 N/A 1998 June 1999 1.0
the desperately needed electricity genera­ Vizag 1,000 Nov. 16, 1993 January 1997 March 2000 3.0
tion project.
Enron Corp. announced a w orking Paguthan 650 March 3, 1994 1998 January 1999 0.5
agreement with the state government o f lb Valley 420 May 9, 1993 1997 January 2000 2.5
Maharashtra to revive the (US)$2 billion
Jegurupadu 235 June 17, 1993 1996 June 1998 2.0
project in early January. The Houston,
Texas, USA-based energy company said it Neyveli 210 Nov. 4, 1993 1997 June 1999 2.0
will charge a lower price for the electricity
Kakinada 208 June 20, 1993 1996 June 1998 2.0
and by cutting (US)$365 million in capital
costs. Also, a planned regasification facili­ Bhadrawati 1,084 Negotiations Under way June 2000 2.0
ty expected to cost more than (US)$400
Source: Asia Consulting Group
million is being split o ff into a separate
venture, a major part of cuts to reduce the Table 1
capital budget from (US)$2.8 billion to a
flat (US)$2 billion. The regasification
facility will heat liquefied natural gas, about (US)$7 billion during the 20-year The Dabhol project, sited approximately
transforming it into a gaseous state and PPA. The rates are tied to the value of the 100-miles south o f Bombay, is still expect­
will likely be built using other investors, US dollar, which was valued at approxi­ ed to earn a top return for Enron, as the
accordin g to R eb ecca P. Mark, Enron mately 32 rupees at this writing. The company has repeatedly assured investors
Development Corp. chairman and CEO. actual electricity expense could therefore that it would not enter an international
The original agreements for the Dabhol vary from projections. investment without assuring a minimum
project have been criticized for a number of Technology changes were also agreed expected return, according to Carole Coale,
reasons, including: no primary local part­ upon that are expected to boost the plant’ s Prudential Securities o f Houston senior
ners, no competitive bidding for equipment, capacity to 2,450 MW. natural gas analyst. “Investors expect a 20-
no transparency in the PPA, high electricity The first phase of the project will run on percen t return on international
rates, fuel management agreement, not fol­ locally produced naphtha or distillate. investments,”Coale said. “Perhaps in a
lowing the two-part tariff system, and for Naphtha is produced during the oil refining country like India that is not as progressive
cultural and political reasons, according to process. The second phase o f the project, as other countries, approaching a project
“The Future o f Project D evelopm ent in including the regasification facility, will be on such a large scale is a lot more risky
India in the Aftermath of Dabhol,”present­ fu eled by liq u efied natural gas which than other fast-track projects.”
ed at POW ER -G EN A m ericas™ in Enron plans to bring in from Qatar. A 30-percent stake has been offered to
December 1995 by Vishvjeet Kanwarpal, Enron speculated at the time o f the new the MSEB, although at the time o f writ­
Asia Consulting Group. agreement that construction would resume ing, the official documentation had not
U nder the new agreem ent, the within 90 days. been completed. Originally Enron held an
M aharashtra State E le ctricity B oard 80 p ercen t stake in the p r o je c t with
(MSEB) will pay approximately (US)5.28 Test case Bechtel and General Electric each picking
cents per kWh for electricity, down from A positive conclusion to the negotiations up 10 percent. Bechtel and G E ’ s stakes
the (US)6.81 cents per kWh stipulated for held as much weight for the state govern­ are ex p ected to be u n affected by the
the first year under the original power pur­ ment as it did for the consortium building MSEB offer.
chase agreement (PPA). Manohar Joshi, the facility, as the project has been por­ A nother adjustm ent to the origin al
the state’ s chief minister, estimated that trayed as a test case for India’s quest for D abhol setup is the in clu sion o f more
the reduced rate would save custom ers international investment. Indian business, as the foreign exchange

POWER ENGINEERING INTERNATIONAL— MARCH/APRIL 1996 41


“ Unless infrastructure is expanded
substantially and soon, its absence w ill
throttle the strong and promising start
that the liberalized Indian economy
has made.”
US ambassador to India.
percentage has been reduced from 95 per­
cent to 70 percent during renegotiations.
Enron is to invite tenders for equipment in
the second phase, with any savings from
those tenders to be passed on to the tariff
rate. Enron w ill also purchase Indian
equipment for the second phase when pos­
sible. Enron is to source the naphtha for the
first phase from Indian companies and will
consult with the MSEB when purchasing
LNG for the second phase.
Negotiations for this project began in
1992 when the Congress Party requested
negotiated deals. Enron stepped up to bat
with big ideas and a big purse. Lack of
com petitive bidding in the process was
originally intended to speed the process
along, but eventually became the largest
bone o f contention as the state government
changed hands in an election, and the new
government chose to cancel the project.
Construction of the first phase was in full
swing, with approximately 2,200 people
employed and more than (US)$300 million
invested, when the cancellation occurred.
The can cellation ch illed other foreign
investment in India. Other disputes continue
as PepsiCo’ s Kentucky Fried Chicken chain
is under legal challenge from the groups that
opposed Enron, and Coca-Cola and CNN
have been reporting opposition.
India suffered under the cancellation as
well, as banks began increasing risk premi­
ums for other construction projects. Other
multinational companies and outside gov­
ernments, including Japan, where contracts
are taken very seriously, closely watched
the proceedings.
Careful, quiet negotiations allowed all
parties to save face, as Enron, after several
p u b lic ize d p o litica l g a ffe s early on,
solemnly insisted that it had legal recourse
and offered no other comments.
“ The Enron case is extremely unfortunate.
But things do go wrong in democracies when
parties change power,”said Frank Wisner,
USA ambassador to India. “I believe the
Enron project is good for India, and good for
Maharashtra. There is a strong, broad con­
sensus that India needs power, urgently.”
Background
India began opening its economy to out­
42
on-line as quickly as possible. Several pro-­
jects were approved, with Dabhol the first
and largest. Although there has been con­
siderably m ore m edia cov era ge o f the
floundering D abhol project, the others
have also hit unforeseen roadblocks that
have caused delays (Table 1).
The Dabhol facility and the 420-MW lb
Valley coal-fueled plant planned by AES
TransPower, USA, are considered ifae two
most advanced o f the fast-track protects,
—Frank Wisner, h old in g secu red fin an cin g and PPA s
backed by government guarantees. The
AES PPA has a guaranteed 16-percent
return on investment up to a plain lead fac­
tor o f 68.5 percent with additional profit
for additional generation.
side investment in 1991, pursuing multina­ In January, the Maharashtra government
tional firm s to negotiate the fast-track also approved Mittal’ s coal-fuekd 1,082
electricity generation projects in an attempt MW Bhadrawati project in Chandrapur
to get some of the much-needed electricity s gas-fu eled 410 MW
and R e lia n c e ’
Fast-trackproject highlights
Project and company Description
Dabhol Project was to be completed in two phases (Phase 1:695MW with
Maharashtra Distillate Oil, Phase II: LNG
Enron Power Enron, 80%; GE, equipment supplier; Betchtel, EPCcontracts
Debt-equity ratio 70-to-30
Mangalore TPS Project received clearance in May 1993
Karnataka Project MWincreased from 500to 1,000
Cogentrix Phase 1:334MWwith financing secured early
Vishakapatnam Project received clearance in January 1993
Andhra Pradesh Mission Energy original co-promoter, later replaced by
AshokLeyland National Power, UK. Completion expected by January 1997
Paguthan Co-promoted by Torrent Pharmaceuticals, 25%; Torrent
Gujarat Gujarat Biotech and Gujarat Power Corp., 26%;
Gujarat Torrent Siemens, 12%, financial and technical collaborator
Operational by January 1997. Debt-equity ratio is 5-to-2
lb Valley Shortlisted two consortia led by Raytheon Engineers & Constructors
Orissa and Tarmac Black & Veatch as EPC contractors
AES TransPower Operation expected in 1997
AES TransPower, 55%, Orissa Power Gen. Corp., 15-20%
Jegurupadu ABB: EPC and O&Mcontractor
Andhra Pradesh ABBproject execution target 28 months
GVKIndustries Debt-equity ratio 70-to-30 with GVK20%, CMS 18.75%
APSES 10%, ABB10%, ADB15%, balance is public
Neyveli-Zero Unit Originally to be set up by Neyveli Lignite Corp. but
Tamil Nadu was privatized due to financial considerations
Spectrum Technology & Central government decided to counter-guarantee against
CMS Generation timelypayment of dues from SEB
Kakinada (Godawari) Bambino Group, India, is co-promoter
Andrah Pradesh NTPC was original promoter, but could not set up the project
Spectrum Technology due to fund constraints
Bhadrawati Ispat Alloys Limited (Nippon Denro)
Maharashtra Electricite de France, GECof USA is equipment supplier
Nippon Denro Financing invol vement: ECGDof UK
Source: Asia Consulting Group
Table 2
POWER ENGINEERING INTERNATIONAL— MARCH/APRIL 1996
authorized the MSEB to sign PPAs for
both projects.
Enron Developm ent Corp. negotiated
the PPA on the D abhol p r o je ct in 18
months, a government guarantee in six
months and com pleted financing seven
months later. Delay caused by the tempo­
rary cancellation has pushed the startup
date back to early 1999. It had originally
been slated to enter operation in mid-1997.
India projections
India appears to have reached a crossroads,
as leaders struggle to realize the potential
of the economy, which has been touted as
capable of becoming the world’ s largest in
20 to 30 years. Skeptics claim India will
lag behind other, more dynamic East Asian
neighbors. A key factor for India is infra­
structure, including ports, power and roads.
“Unless infrastructure is expanded sub­
stantially and soon, its absence will throttle
the strong and promising start that the lib­
era lized Indian eco n o m y has m ade,”
Wisner said.
Industry estimates project investments of
(US)$30 billion will be required in the next
decade in India’ s pow er sector alone.
Resources of the state-owned public sector
are limited, and the growing gap between
supply and demand will only be bridged by
private-sector investments. The fast-track
projects initiated by the governmental call for
participation in 1991 and 1992 are a large
step in the right direction, with the nine main
projects representing more than 7,000 MW
of added capacity by the turn of the century.
The main projects are Dabhol from Enron,
Mangalore from Cogentrix, Vishakapatnam
from Ashok Leyland, Paguthan from Gujrat
Torrent, lb Valley from AES TransPower,
legurupadu from GVK Industries, Neyveli-
Zero Unit from CMS Generation, Kakinada
from Spectrum Technology and Bhadrawati
from Nippon Denro (Table 2).
India’ s per capita consumption rests at
270-kWh annually. Demand has, however,
been rising at 9-percent annually, approxi­
mately double the rate o f India’ s economic
Proposed and available IPP
projects by technology (MW)
Diesel - Others
3% 1%
Gas
22% Coal
47%
Hydro
27%
Source: Asia Consulting Group
Figure 1
POWER ENGINEERING INTERNATIONAL— MARCH/APRIL 1996
India has a per capita consumption
of 270-kWh annually. Demand has,
however, been rising at 9 percent
annually, approximately double the
rate of economic growth.
growth. “Lack of access to financial mar­
kets for the power sector, arising from the
poor finances of the state electricity boards
(SEB), their weak track-record o f meeting
payment obligations and the lack of credit
rating for international financial markets,
are creating obstacles for private invest­
ment in power generation,”according to
the US D epartm ent o f C o m m e r c e ’ s the ch em ica l and p r o ce ss industries.
National Trade Data Bank.
India’ s current installed capacity o f
more than 80,000 MW needs to double in
the next 10 to 15 years to accommodate
rising demand, estimated to be growing by
9 percent annually. Installed capacity
already falls 20 to 30 percent short o f peak
demand. Demand is projected to escalate
past 90,000 MW by 2000. Approximately
85 percent o f India’ s estimated 579,000
villages are electrified, with agricultural
and residential users subsidized.
Diversification
Coal is the predominant fuel in India,
accounting for more than 70 percent o f the
generating capacity. However, shortages,
transportation delays, and low thermal
quality of coal supplies can disrupt genera­
tion and reduce average plant load factors.
Average plant load factor for thermal
plants in 1994 was 61 percent.
As new capacity is added, there is a
drive to diversify the tech n ologies and
fuels involved with proposed projects esti­
m ated at 47 percen t coal, 27 percent
hydroelectric, 22 percent gas, 3 percent
diesel and 1 percent all others (Figure 1).
Transmission and distribution losses are
high, at 20 to 23 percent. SEBs generate
and distribute power, set tariffs and collect
revenues. Private investors often have
reservations because they cannot control
output prices, nor distribution and revenue
collection. The SEBs are known to suffer
from chronic financial problems stemming
from rising generation costs, subsidies for
agricultural electricity use, and nonpay­
ment o f electric bills.
One aspect o f the answer to the chronic
electricity shortage includes increases in
use o f energy efficient devices, especially
in the steel, chemical and process indus­
tries, which are the largest electricity
consumers. The potential to conserve gen­
erated pow er is estim ated at 20 to 30
percent of total energy consumption, about
5,000-MW annually.
A US National Trade Data Bank report
projects a strong market for energy effi­
cient furnaces for the steel industry and for
efficient pumps and electrical resistors for
Energy efficient lighting devices and ener­
gy demand management techniques are
also thought to have a strong market. “ The
market potential for distribution transform­
ers, capacitors and other energy-saving
devices to minimize losses is excellent,”
the Data Bank report stated. Most promis­
ing sub-sectors in 1996 and their associated
estimated expenditures are listed as: power
transmission equipment, (US)$418 million;
energy efficien t pumps, $375 m illion;
capacitors, $350 million; and incandescent
bulbs, $150 million.
The erratic power supply has affected
industrial growth throughout the country as
manufacturers and large service companies
are forced to install back-up diesel generat­
ing units and voltage regulators to protect
sensitive electron ic equipment. Indian
industrial output is expected to grow 10
percent in the fiscal year ending March 31,
1996, a jump from 8 percent in the previ­
ous fiscal year.
The economic reforms, instituted under
Prime Minister Narasimha Rao, have made
impressive advances, with exports growing
by 27-percent annually, industrial output
up m ore than 8 percent, and inflation
reduced to single digits. After mortgaging
its gold in 1991 to evade bankruptcy, India
now has foreign currency reserves exceed­
ing (US)$20 billion.
India’
s struggle to meet the electricity and
other infrastructure demands of its populace
seems to be back on-line as the kinks are
coming out of the fast-track electricity-gener­
ating facility agreements. The much-needed
infrastructure to support the industrialization
of the nation is beginning to come together as
the multinational companies and the various
state governments learn to communicate with
each other and to understand that the needs of
business and the needs o f society can be
mutually beneficial. END
Email: ceo.gis.acg@gmail.com
Website: www.gis-acg.com 43