Koyna Hydroelectric Project

IPWI1 WIRiR CiT D- RESTRICTED Report No. TO-325b Public Disclosure Authorized I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ This report was prepared for use within the Association. It may not be published nor may it be quoted as representing the Association's views. The Association accepts no responsibility for the accurocy or completeness of the contents of the L report,.. INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized APPRAISAL OF KOYNA HYDROELECTRIC PROJECT STAGE II TNTrTA Public Disclosure Authorized July 30, 1962 Public Disclosure Authorized Djepartment of0 Tech.nical Operations CURRENCY EQUIVALENTS USu,T$1 411d'' J -z.A. '76tIVU ±1LTndi4an Q L"RDupees I Runee or = Zi cents (US) 100 Naya Paisa US $1 Million = Rs. 4, 760, 000 Rs. 1 Million = US $210, 000 TABLE OF CONTENTS Paragraphs SUMARY i- ix I. INTRGDUCTION 1 - 5 II. THE BORROWIE 6- 9 The Maharashtra State Electricity Board 7 - 9 III. THE POCMER 1ARKET 10 16 Forecast of Demand and Energy Consumption 13 - 16 IV. THE KOYNA DEVELOPMENT 17 - 21 VI TME PROJECr 22 - 34 Cost of Project 24 - 26 Arrangements for Engineering and Construction 27 - 29 Operation after Completion 30 - 32 Construction Schedule 33 .EXpenditure Schedule 34 VI. FINANCIAL ASPECTS 35 - 8 Tariffs 35 - 37 FinanG-ia1 Plnn 38 -4 Estimated Future Earnings 44 - 45 De o I _ 1.7 -- t- Vw*ss VX L4 I Auditors 48 VII. CONCLUSIONS 49 - 5 A MMT TT__T__-- _ _- -' I = _ * _'m;- aA; _ ;{ | afiI.:r1 ~ fvH.l nyuvut tUt;V±.t Prouject - Therarzsv> Vw: Electricity Board A %TnT2 el2 ---- a ny-d-o c Proj,ect- Stage II - --- - ~I~I~I~L&~- flUcL nyurve-±eculi*±c ElQt:;'aUru V:=-tJ" Bombay-Poona Interconnected System; Per Capita ConsumptiLon of Eleectricity kannual kwh) ANNEK 3 - Peak Loads, System Capabilities and Installation Schedule of the Bomlbay-Poona-Koyna System (Chart) ANNEK l - Description of the Koyna Hydroelectric Development ANNEK > _ Detailed Description oI the Project ANNEI 6 - Tariffs Recommended for the Sale of Koyna Produced Power and Ene:rgy ANNEX 7 Forecast of Cash Flow ANNEX 8 _ Forecast of Income Statements ANNEK 9 - Financial Ratios 1962/63 - 1971/72 MAP - Koyna Hydroelectric Project, Stages I and II MAP - Bombay-Poona-Koyna Integrated System APFR-13SAL OF TIE KOYNA HYDROELECTRIC PROJECT STAGE II INDIA SUMMARY i The &-nk in April 1959 made loan 223-IN to the Government of India t* finance the foreigrL exchange cost of the first stage of the Koyna Hydroelectric Development. IIA has now been asked to consider a credit of 17,5 million to cover about; one-half the cost of the second stage, the total cost of which is estimated 1to be $35,.4 million, ii. The Borrower would be the Government of India and the proceeds of the proposed credit would be lent by the Central Government to the Maharashtra State Government along with the remainder of the funds required to carry out the project. iii. Additional generating capacity in the area is urgently required and continuation of the Koyna development is the quickest and most economic means of meeting this need, iv. The project would include raising the height of Koyna dam by 72.5 feet, a 40 IW power station at the base of the dam, the installation of 300 MW in the Koyna underground power station, the construction of which was initiated in Stage I, and the construction of 220 kv transmission facilities between Koyna and load ceniters. v. The incremental cost per kilowatt to be installed in Stage II would be only $104 per kf because the principal civil works were built in connection with Stage I. The cost per kt of combined Staees I and II is estimated to be $218. wiAtb.is reasonable. The civil works for Stage II would be constructed under an extension of the contract for the firm now constructing Stage :[. Power station equi-pment and transmission line materials not produced locally will be obtained for Stage TT through international comnetitive bidding,. The project is expected to be completed in the latter half of 1967. Arrangements for supervision of construction are satisfactory. vi. The dispatching of energv prodiined at Koyna will be handled tirough the use of Tata facilities and personnel until such time as the Board has the necessary facilitiess and qualified nerarnnnel to psrform t-his fmnction effi- ciently. vii. Initially, practically all of the output of the Koyna developnent -1 be supplied ton the Tata system. where th.ere is a ready market. It is estimated, however, that by the time Koyna Stage II has been completed only 30% of the Koyna energyr T.l1 1e avTala-1bl1e for Tata, the reai.der of Ko.-Ina production would be absorbed by the prior requirements of the new transmission nebt.3ork to be constructed by the State Board, and an aluwinin. factory to be constructed at Jaigad at a site about 45 miles from the Koyna powerhouse. viii. Tariffs to be charged for the sale of energy from Koyna are those recomrmended 'by the Koyna Tariff Committee. Tnese tariffs will provide revenues - -i X. suffi.cient to earn a return on net fixed assets of Koyna, including worlk in prosgress, - not Is than 7% afte StageIisin fulloperation. Debt service and interest coverages would be satisfactory, after Stage I is in f.u.LJl orat iLon millionIUJ~I.IT project under%A ±Qs cons"t uUsULaL tems fL such.1r cr_-_TA ^,nrej+ of a hbout $17. -_5 mill-Lon equivalent., under the usual terms for such creditsi T TTTT M r,nTTPrrT(1\T o Trhe Gover-nment of India has requested IDA to consider a credit 4the of-J.L 61,754P.JLI .) r,il Ck.L.AfIeLJU,Vc" r11U4n 4quvdenIA .L±L1U0I1I.= LUli-Ia..L.Ln-hal1 jj 4-4-'u'L.iLAU- est4.adco1W.u.iMauted- 0-t".~' of approximately $35 million equivalent for Stage II of the Koyna hydro-- elUcUric UevU±o-pznent, sout-esst of onunLay iln the Duuuue Uo ±WiMih±z-asht The Borrower would be the Government of India which would relend the proceeds to the Maharashtra State Government. * ne Central Government wouldl also provide the remainder of the funds required to carry out the project. 2, In April 1959 a Bank loan (223-IN) of $25 million was made to help finance tin first stage of the Koyna development. Tnis consistied of a dlam with a 240 Hi underground power station, with four generating unilts, and transmission lines to load centers. In addition, Koyna Stage I in- cluded excavations and hydraulic works to permit the installation of four additional units under Stage II. 3. The Koyna Stage I work is nearing completion. Because of the urgent need of additional generating capacity in the area steps have been taken to proceed with Koyna Stage II under one continuous construction pro- gram. 4. The Stage II project, to be financed with the aid of the requested creadit, would provide for increasing the height of the Koyna daia, the addition of 340 NW of generating capacity in two power stations and the extension of the transmission system. The project is scheduled to be completed by October 1967. 5. This report is based on information supplied by the Koyna Control Board and the Maharashtra State Electricity Board to IDA missionls which visited India during July and August 1961 and again in March 1962. II. THE BORROWER 6~. The B'nrrrwPr wroxldi be the frnvrPrrimAnt. of Tndiia whinh has under- taken to provide all the local and foreign currency requirements for the Koyna proiRnt- Prnneeds of the proposed credit would be lent by the Central Government to the Maharashtra State Government along with the re- mqindpr of t-he funds required to cnrry out the projects As in +he case of the Bank loan for Stage I of Koyna, a Project Agreement would be enSteredC Sat be. .lID' an4.d't'. .heState of Maharahtra. 17. Up-or completion cosrcino hepoetis 44f nager,ent and operation will be the responsibility of the Maharashtra State Elec- U -icitoY DUdLUBoa Uri O(ba BAdUUJ whichWLL() was esCablis,lhed .51- 1960' ±U4-JoWnJg, the reorganization of the states. The State Board, like its predecessor -2- thne Iformer MOTIDay eTaTe Eiectricity Boarct, nas responsibiii-.y for plsl- ning and fostering the development of the supply of electricity within the iMiaharashtra State which includes the city of Bombay. It grants licenses for generating plants and for distribution systems and fixes tariffs. rTne Board may also purchase the rights of an undertaking upon expiration or revocation of its license. A more detailed description of the State Board and its functions is given in Annex 1. 8. Besides Koyna, the State Board now owns and operates about 136t NW of generating plant capacity in 42 power stations. IMost of these are small systems in various parts of the State, the largest of their operations being an interconmected grid serving the northeastern portion of the State and comprising generating capacity of about 100 MW. It was recognized at the time of the earlier Bank loan in 1959 that the Board would have to obtain a marnagement and operating staff for Koyna and the Bank was assured by the Board that it would obtain qualified supervisory assistance for as long as would be required. 9. 'TMe Project Agreement in connection with Loan 223-IN (Stage I) between the Bank and the State of Bombay provided that the proiect construction and operation accounts would be kept separate so that the fi-- nancial position of Kovna might be ascertained at any time. This agree-- ment also provided that accounting, operation and maintenance be in ac- cordance with sound publie utilIty nrantiee.

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