9/7/2014 Brief note on Stranded Gas Based

Brief Note on Stranded Gas Based Plant (June 2014)

The present status of gas availability is as follows-

in MMSCMD

Sector Gas Requirement Gas Allocation Gas Supply to Power Sector in March Gas Shortage
for 70/75% PLF 2014

Existing New APM/ PMT/ KG Long Total APM/ KG Long Spot Total
Non-APM D6 Term PMT/Non- D6 Term RLNG
RLNG APM RLNG

Power 71.73 28.24* 51.56 32.74 5.38 89.68 25.21 0 1.17 0.01 26.39 73.58 (45.34 for
existing +28.24 for
Total 99.97 new)

*No gas allocation

(Source: MoPNG)

In this regard the Ministry of Power has deliberated on pooling of domestic gas with the imported gas/RLNG. Accordingly, following approaches were
attempted during last one year:

A. CCEA Note of October 2013

Initially, a CCEA note was circulated in October 2013 which aimed at giving relief to Gas grid connected power plants with installed capacity of 24149
MW (2340 MW capacity power plants getting gas from isolated fields and running at 60% PLF are not considered). The main features and subsidy
calculation of this CCEA Note is summarized at Annexure I. Since the financial implication of subsidy involved was to the tune of INR 28,216 Crore
the Ministry of Finance did not support the same. This note now stands withdrawn. In this scheme, the projected Subsidy w.e.f. August 2014 till
March 2016 is INR 20,000 Crore at an average PLF of approximately 30%.

B. CCEA Note February 2014:

In view of above, after another round of deliberations, a fresh CCEA note was circulated in February, 2014. This scheme has two components i.e.,
Subsidy component and financial package. In this scheme, effort was made to lower the subsidy while offering relief for the stranded gas based
plants through financial package.

1. The Power Plants covered in the subsidy scheme are the Gas based generation dependent primarily on APM Gas with installed capacity of
10,382 MW. Government of India will allocate subsidy for reimbursements to State DISCOMs. Subsidy is worked out on the basis of the
difference in actual tariff and INR 5.0/unit for 2014-15 and INR 5.50 for 2015-16. The indicative Subsidy to be borne by Government would be
about INR 3621 Crore in 2014-15 and INR 2056 Crore in 2015-16 to support APM Gas based plants. Total Subsidy for the year 2014-16 is
works out to INR 5,677 Crore
2. The power plants covered in the scheme for financial package are:
i. Abovementioned Gas based generation dependent primarily on APM Gas: 10,382 MW
ii. For projects mainly dependent on KG D6 Gas: 6996.5 MW
iii. For projects with no Gas allocation: 1797.5 MW
3. For projects mainly dependent on KG D6 Gas, it is proposed to allocate all additional NELP gas that becomes available to the Power sector
to these plants only. For 2014-15 it is proposed to be allocated to RGPPL.
4. For projects with no Gas allocation, till sufficient domestic gas is made available to these projects, it is proposed that these power producers
may procure RLNG and generate power for direct sale to customers. (Note- In cases, where the generator has entered into contracts for
supply of RLNG and PPAs with consumers, further loan facility would be available from PFC on its normal terms and conditions)
5. The financial restructuring package mainly consists of the relaxations in ECB/Trade Credit like extension in COD, additional 3 years
moratorium and waiver of interest (for low PLF projects), & capitalization of interest.
C. Recently, an exercise was carried out to calculate the financial implications of giving subsidy after pooling of domestic gas with imported RLNG for
making the gas based plants run at 50% PLF. The subsidy component from August 2014 till March 2016 at a tariff of INR 5.50/- works out to the tune
of INR 56,000 Crore (approximately). The main features and subsidy calculation of this CCEA Note is summarized at Annexure-II. In view of the
aforesaid facts it is concluded that same is unviable and it would be better to focus on the CCEA note circulated in February 2014.

Explanatory Note: The difference in the subsidy calculations in the CCEA note of October 2013 and recent exercise done is a result of two
factors:

1. Change in the proposed PLF of the stranded plants whereas, the CCEA note of October 2013 has been worked out at an average PLF of
approximately 30%, the current calculations are based on average PLF of 50%. In the CCEA note of October 2013 emphasis was on making the
stranded grid gas connected plant just viable so as to prevent them from becoming NPAs. The current calculations focus more increasing the
generation while making these plants viable. The PLF figures are included in Annexure I & II, enclosed with the note.
2. Change in the proposed tariff- In the CCEA note of October 2013 the subsidy was worked out on the proposed tariff of INR 7/unit for FY 2014-15 and
INR 7.5/unit for FY 2015-16. On the other hand the current subsidy estimates are based on the tariff figures of INR 5.5/unit for both the FY 2014-15 &
2015-16. The tariff figures are included in the Annexure-I & II.

Annexure I
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Main Features of CCEA Note of October 2013

FY Category of Power Plants Amount of gas for pooling in Weighted Cost of Indicative Subsidy
MMSCMD price of generation Tariff (INR
gas ($ INR /Unit INR/Unit Crore)
Imported Domestic Long Sub- per
Term total MMBtu)
RLNG

2013- Plants with installed capacity of 5497.5 MW 8 0.05 0.86 8.91 14.15 12.42 5.50 2515
14 predominantly dependent on KG D6 & 1584.5
MW newly commissioned gas based (Total of
7082MW)

Total Subsidy for three months of 2013-14 is INR 2515 Crore with 8 MMSCMD of imported RLNG and Total Generation of 3636 MUs

(Long Term RLNG @ $12 and Imported RLNG @ $15)

2014- As above plus 3000 MW out of 7525 MW which 10 3.49 0.86 14.35 12.49 10.99 7.00 9413
15 are ready to BE commissioned.

APM based plants (9542 MW) 4 14.93 0.76 19.69 9.42 8.13 7.00 3579

Sub-total (19624 MW) 14 18.42 1.62 34.04 7.00 12992

Total Subsidy for FY 2014-15 is INR 12992 Crore with 14 MMSCMD of RLNG and Total Generation of 55,221 MU at average PLF of 32.5%

(Long Term RLNG @ $13.2 and Imported RLNG @ $14)

2015- Plants with installed capacity of 5497.5 MW 15 9.27 0.86 25.13 11.80 10.07 7.5 10412
16 predominantly dependent on KG D6 & 1584.5
MW newly commissioned gas based Plus
7525MW ready to be commissioned (Total
14607 MW)

APM based plants (9542 MW) 5 14.93 0.76 20.69 9.69 8.19 7.5 2297

Sub Total (24149 MW) 20 24.2 1.62 45.82 7.5 12709

Total Subsidy (2015-16) - INR 12,709 Crore (20 MMSCMD of RLNG and Total Generation of 73,780 MU at average PLF of
35.6%

(Long Term RLNG @ $14.52 and Imported RLNG @ $14)

Total financial implication of Subsidy comes out to be INR 28216 Crore

Annexure II

Latest Calculation For Subsidy (June 2014)

FY Category of Power Plants Amount of gas for pooling Weighted Cost of Indicative Subsidy
in MMSCMD price of Generation Tariff (INR
gas($ per INR /Unit INR/Unit Crore)
Imported Domestic Long Sub- MMBtu)
Term Total
RLNG

2014- Plants with installed capacity of 5497.5 MW 22.52 3.49 0.86 26.87 13.22 9.96 5.50 13124
15 predominantly dependent on KG D6 & 1584.5
MW newly commissioned gas based plus 3000
MW out of 7525 MW which are ready to be
commissioned.

APM based plants (9542 MW) 9.75 14.93 0.76 25.44 10.48 8.25 5.50 7649

Sub-total (19624 MW) 32.27 18.42 1.62 52.31 5.50 20773

Total Subsidy (August 2014-March 2015) - INR 20773 (31.51 MMSCMD of RLNG and Total Generation of 57230 MU at average PLF of 50%)

Imported RLNG as well as long term RLNG @ $14

2015- Plants with installed capacity of 5497.5 MW 28.8 9.27 0.86 38.93 12.19 9.32 5.50 24426
16 predominantly dependent on KG D6 & 1584.5
MW newly commissioned gas based Plus
7525MW ready to be commissioned (Total
14607 MW)

APM based plants (9542 MW) 9.75 14.93 0.76 25.44 10.27 8.12 5.50 10950

Sub Total (24149 MW) 38.55 24.2 1.62 64.37 5.50 35376
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Sub Total (24149 MW) 38.55 24.2 1.62 64.37 5.50 35376

Total Subsidy for 2015-16 - INR 35376 Crore (20 MMSCMD of RLNG and Total Generation of 1.05,728 MU at average PLF of 50%)

Imported RLNG as well as long term RLNG @ $14

Total financial implication of Subsidy comes out to be INR 56149 Crore

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