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ZA/S C VV- / Document of The World Bank FOR OFFICIAL USE ONLY MICRTuETCHE CO-)FXY Public Disclosure Authorized l.pcirt. No. :11240-TN TType: (SAR) Report?No. 11240-IIN ' i tle: RENEWABLERESOtUPCES DEVELOPMEN Author: MAGWDA,ENAMANZO Ext. :81466 r Oom:G-2051 Dept.: AS2EG STAFF APPRAISAL REPORT Public Disclosure Authorized INDIA RENEWBLERESOURCES DEVELOPMENT PROJECT NOVIER 30, 1992 Public Disclosure Authorized Energy Operations Division India Country Department Public Disclosure Authorized South Asia Region This document has a reicted distribuon and may be used by redpients only in the perfonnanceof their offic:id duties. Its contents may ot otherwise be disclosed without World Bsnk adhorization. CURRENCYEQUIVALENTS (as of July, 1992) Currency Unit - Rupees (Rs) Rs 1.00 = Paise 100 Rs 1,000,000 = US$38,462 US$1.00 = Rs 26 MEASURES AND EQUIVALENTS 1 Meter tm) = 39.37 inches (in) 1 Cubic Meter (m8 ) = 1.31 cubic yard (cu yd) = 35.35 cu. ft. 1 Ton (t) = 1,000 kilograms (kg) = 2,200 lbs 1 Kilovolt (kV) = 1,000 volts (V) 1 Kilovolt-ampere(kVA) = 1,000 volts-amperes(VA) 1 Megawatt (MW) = 1,000 kilowatts (kW) = l million watts 1 Kilowatt-hour (kWh) = 1,000 watt-hours 1 Megawatt-hour (MWh) = 1,000 kilowatts-hours 1 Gigawatt-hour(GWh) = 1,000,000kilowatt-hours ABBREVIATIONSAND ACRONYMS DANIDA Danish InternationalDevelopment Agency DEA Departmentof Economic Affairs SIA EnvironmentalImpact Assessment EIRR Economic Internal Rate of Return EMP EnvironmentalManagement Plan ESMAP Energy Sector Management Assistance Program GEF Global EnvironmentFacility GET Global EnvironmentTrust Fund GOI Government of India GOTN Government of Tamil Nadu IBRD InternationalBank for Reconstructionand Development IDA InternationalDevelopment Association IDBI IndustrialDevelopment Bank of India ICB InternationalCompetitive Bidding IREDA Indian Renewable Energy DevelopmentAgency Limited LCB Local CompetitiveBidding LICB Limited InternationalCompetitive Bidding MNES Ministry of Non-ConventionalEnergy Sources MIS Management InformationSystem NCE Non-conventionalenergy NGOs Non-governmentalorganizations OPS OperationalPolicy Statement SEB State ElectricitvBoard SCF Standard Conversion Factor SDC Swiss DevelopmentCooperation SGC State GeneratingCorporation SPV Solar Photovoltaic The Act ElectricitySupply Act of 1948 TNPL Tamil Nadu Newsprint and Papers Limited FISCAL YEAR April 1 - March 31 FOR OFCIA USEONLY RENEWABLE RESOURCES DEVELOPMENTPROJEcT STAFF APPRAISAL REPORT Table of Contents Pase No. CreditlLoan and Project Sunmary.... .............. .... ,iv I. SECTORAL CONTEXT.............. Introduction............................. India's Primary EnergyResources ....................... ..1 Organizationof the Mon-ConventionalEnergy Sub-Sector..3 GOS's Sub-sector Strategy............................... 3 Key SectoralIssues . ................................4 Efforts at Reform. ................................ 4 India's Newsprint and Paper Industry.................... 6 Role of the Bank................... ..............7 Past Bank Group-Support ..... ............... .. .......... a Global EnvironmentalFacility (GEP) Funding... ... 8 11 L ENEPI ARIES.. .. ...... .......... 8 Indian RenewableEnergy DevelopmentAgency (IREDA). 8 Tamil Nadu Newsprint and Papers Limited (TNPL)......... 12 tIII. THE PROJECT............................................... 13 Project Objectives ... 13 ProjectDescription ....... 13 Status of Project Engineeringand Project Pipeline..... 16 ProjectImplementation Arrangemets ....................17 implementationof the TNPL PapermillExpansion . ....18 ImplementationSchedule ................. .0 ....... ..19 Environmentalantd Resettlement Aspects ................. I1 Project Costs . .... .... .................... 20 ProjectFinancing ...... .1.......... On-LendingArrangements .... 22 Procurementunder the Line of Credit................... 23 Procurementby TNPL .. ........ 24 SecurityArrangements ......... 24 Disbursement.. .. .. .. ..... ...... 25 Monitoringand Evaluation................... .......... .26 This report vas prepared by Mrs. Magdalena Manzo (Energy Specialist), Messrs. Alfonso Mejia (Principal Pinancial Analyst), Raymond Chalk (Sr. Pulp and Paper Engineer), John Irving (Power Engineer), Anll Cabraal (Consultant, Alternate Energy). The report has been reviewed by Messrs. Ernest Terrado (Principal Energy Planner, ESMOD), Karl Jechoutek (Principal Economist, EMSIE), and Jamil Sopher (Sr. Financial Analyst, EAlIE). The report has been endorsed by Mr. eiipz Vergin, Director (India Country Department) and Mr. Jean-Francois Bauer, Chief (Energy Operations Division, India Country Department). This document has a restricteddistribution and mya be used by recipientsonly in the perorman-e of their officialduties Its contents may not otherwisebe disclosd wthout WorldBank au horizai on. - ii.- Pase No. IV* FINANCE................ .. ........................ 27 IndianRenewable Energy Development Agency ............ 27 Tamil Nadu Newsprintand PapersLimited ............... 31 V. BENEFITS AND RISK8....................................... 34 RenewableEnergy Investments......... #*.......#..... .34 TNPL PapermillProject ................................ 36 ProjectRlk Riks......................................... ... 36 IVI* AG9tMkNS ADRCMMED2083 Agreements Reached .3........ ....................... 3 Conditionsof Effectiveness 39 Receomendation 39............*...... 9 - iii - ANNEXES 1.1 All-IndiaBlectricity Deand and Supply 1.2 Proposed Power Generation from New and Renewable Sources of Energy (NILE) 1.3 hxamplesof StatePolicies Governing Private Investmaent In Irrigation-based Small Hydra aud Windfarm Schemes 1 4 Previous Loans and Credits to Indian Power Sector 2.1 IREDA- Current/Proposed Organizational Charts 2.2 Operational Policy Statement (OPS) 2.3 IMEDA- Cumulative Lending PY87 to FY92 2.4 TNPL - Organizational Chart 2.5 TNPLs Product Mix and Estimate of Sales Revenue 3 1 Pre-Identified Irrigation-Based Small Hydro Scheme In the Southern Region 3.2 Historical Performance of Sample Wind Farms 3.3 Potential Domestic and Comuerical Market for mall PV Systms 3.4 Solar PV Applications 3.5 IREDAsPlan for Implementing the Institutional Development Program 3.6A Terms of Reference for Management Service Consultants 3.6B Quality Assurance ConsultingServices to IUaA - Terms of Reference 3.6C General Terms of Reference for Consultants to assist IRSDA In Preparationof a Pipelineof Nw Minihydel Projects for further Developement 3.7 PreliminaryList of Proposalsfor Small-Hydroand VindfarmProjects 3.8 Small HydroComponent 3.9 PV Market Development Component: Project Implemeatation 3.10 Solar PV Market Development Components Sub-Project Eligibility Criteria 3.11 TNPL: Arrangement for Project Supervision and Management 3.1.2 IREDA:Environmental Assessment Summary 3.13 ItEDA'sEnvironmental Assessment Functions Proposed Scope of Work 3.1* TNPL2 EnvironmentalAssessment Sumnary 3.15 TNPL: Schedulefor ResettlementPlan 3.16 IuDAs ProjectCost Summary 3.17 IRSDAtEligible Procurement Items for CreditLine 3.18 TNPL PapermillExpansions Procurement Status 3.19 Scheduleof EstimatedDisbursemants 3.20 SupervisionPlan 4.1 IRUDAsHistorical and ProjectedFinancial Statements 4.2 TNPLsHistorical and ProjectedIncome Statements 4.3 Highlightsof TNPL's FutureOperating Performance 5.1 SmallHydro SchemessEconomic Analysis 5.2 GenericCriteria for GEM ProjectEligibility 5.3 IR3DAviudfarms Developmest Components BEconomicAnalysis 5.4 TNPLs FinancialRate of Return Analysis 6.1 Documentsin ProjectFile MAP IBRD 24281 - iv - INDIA RENEWABLERESOURCES DEVELOPMENT PROJECT CreditlLoan and Project Summary Borrower: India,acting by its President; Tamil Nadu Newsprint and PapersLimited (TNPL) Beneficiary: Indian Renewable Energy Development Agency (IREDA) Guarantor: IBRD Loans India, acting by its President. The Government of India (GOI) would charge TNPL a guarantee fee of 1? per annum on the principal amount of the IBRD loan withdrawn and outstanding. CreditAmount: SDR 81.6million (US$115 million equivalent) Loan Amount: US$75 million Termss The IBRD loan wouldhave a repayment period of twenty years, including five years' grace, at the Bank'sstandard variable interest rate. The IDA credit would be on standard terms with a 35 year maturity. Onlending Termss GOI will onlend the proceeds of the credit to IREDAat an interestcurrently set at 12.51per anum, with a repayment period of 12 years, including a grace period of 3 years. The Government would bear the foreign exchange risk. IRRDA will relend to its clientsinterest rates which now range from 102 to 15? and with repayment terms ranging from 5 to 10 years. according to the types of assets financed. The lending rates will be adjusted from time to time to reflect variationsin IREDA'scost of funds. Proiect Description: The proposed project comprises:(a) the financingthrough IREDAof private sector investments in renewable energy sub- projects,namely, irrigation-based aall hydros,wind farms, and solarphotovolataic systems; (b) expansionof TNPL's bagasse-basedpaper mill; and (c) technicalassistance for institutionaldevelopment of IREDAand promotion of renewableenergy technologies. Benefits: The main benefitsof the projectare: (a) demonstrationon a commercialscale of renewableresource systems that could lead to their replicationIn otherparts of India and the world; (b)mobilization of privateinvestments into the energysector and newsprintIndustry; (c) reducedreliance on fossilfuels and forestresources and thus help improve the environment;(d) increasedavailability