EPC) STAGE TARIFF PETITION for Wo MW GULPUR HYDRO POWER PROJECT

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EPC) STAGE TARIFF PETITION for Wo MW GULPUR HYDRO POWER PROJECT ENGINEERING, PROCUREMENT AND CONSTRUCTION (EPC) STAGE TARIFF PETITION FOR wo MW GULPUR HYDRO POWER PROJECT BY NATIONAL TRANSMISSION AND DESPATCH COMPANY LIMITED 46 (NTDC) OFFICE OF GENERAL MANAGER (WPPO), 325 WAPDA HOUSE, LAHORE A. INTRODUCTION Approval of EPC Stage Tariff and Power Acquisition Contract /PPA under Rule 3 of NEPRA's Interim Power Procurement (Procedures and Standards) Regulations, 2005 in respect of Mira Power. Limited for its 100 MW Hydel Power facility at Kotli in Azad Jammu and Kashmir. Petitioner's Name and Address General Manager (WPPO) National Transmission Company Limited Tel No. +92 42 9920 2111 Fax No. +92 42 9920 2578 Transmission License Transmission License No. TL/o1/2002 Dated: December 31, 2002 Grounds Grounds forming the basis for power acquisition are elaborated in this . Tariff Petition. Decision Sought Approval of EPC Level Tariff Petition along with Reference Tariff Table Summary of Evidence A brief detail of technical and financial data, which forms the basis of in tariff, is given in the subsequent Paras. Attachments a. Board of Directors Resolution b. Company's Tariff Petition (Annex- .1) c. Reference EPC Tariff Table d. Initialed Power Acquisition Contract/PPA between the Pox. er Purchaser and the Power Seller. 100 MW Gulpur Hydropower Project - Negotiated EPC Stage Tariff Proposal by NTDC to NEPRA ioo MW GULPUR HYDROPOWER PROJECT APPROVAL OF EPC STAGE TARIFF UNDER NEPRA'S SPECIAL 3-STAGE TARIFF MECHANISM FOR HYDROPOWER PROJECTS This application is a request on behalf of NTDC for approval of the negotiated EPC stage tariff for the 100 MW Gulpur Hydropower project. Since the project is located in AJ&K, it falls in territory outside NEPRA's jurisdiction and issuance of generation license for the generating company by NEPRA is not applicable for the project. However, approval of tariff for the project is still required since the power generated by it would be imported for consumption in Pakistan. NEPRA's Special 3-Stage Tariff Mechanism allows a 3-Stage determination of Tariff for hydropower projects. This application constitutes a request for approval of the EPC • stage tariff, i.e., the negotiated EPC-level tariff for 100 MW Gulpur H PP. It is further clarified that this negotiated Tariff Petition being submitted to NEPRA reflects the lowest level of Tariff that the Company/Sponsors were willing to agree with NTDC. It is being recommended for approval because hydropower projects constitute the best alternate available for electricity generation in Pakistan being an indigenous source and a mature technology. NEPRA as the independent regulator is, however, free to make any changes it deems appropriate in the negotiated tariff and the final tariff for the project would be the one determined by NEPRA. 1. BACKGROUND 1.1 Project Location The 100-MW Gulpur Hydropower Project is located in Kotli district of Azad Jammu & Kashmir about 5 Km south of Kotli Town on Poonch River. The Project is 100 MW run- of-the-river hydroelectric power generation facility on Poonch River some 28 kms upstream of Mangla Dam and 167 Km from Islamabad. The Project is being developed in private sector under the Power Policy 2002 on a Build-Own-Operate-Transfer (BOOT) basis for a period of 3o years (from Commercial Operation Date) exclusive of 4 years of construction period. 1.2 Project Development History i. The Letter of Interest ("LOI") for the development of Project was issued on March 12, 2005 by the Private Power & Infrastructure Board ("PPIB"), Ministry of Water & Power, and Government of Pakistan to the Sponsors, M/s Mira Power Limited. (ANNEX-A). ii. The Sponsors engaged a consortium comprising of Associated Consulting Engineers (Pvt.) Limited ("ACE"), National Engineering Services Pakistan (Pvt.)Limited ("NESPAK"), Norconsultant International AS, Norway ("Norconsult") as consultants for carrying out the feasibility study of the project as per the terms of 1 100 MW Gulpizr Hydropozver Project - Negotiated EPC Stage Tariff Proposal by NTDC to NEPRA LOI and the 2002 Power Policy. The Feasibility Study was approved by PPIB appointed Panel of Experts (POE) on 27th, April, 2006 and PPIB further advised the Sponsors to approach NTDC/Power Purchaser for tariff negotiations (ANNEX-B). iii. The Feasibility Study envisages a Run-of-River scheme, consisting of 45 meter high dam on River Poonch, diversion of the river flows through a 3 km length and 8 m diameter tunnel and a underground type power house with 3 Francis Turbine units (3x34 MW). The power plant is expected to generate energy 465 GWh annually at a plant factor of 53% on the basis of average hydrological flows in River Poonch. iv. The Company submitted its Feasibility Level Tariff Proposal to NTDC in 2009 under the provisions of 2002 Power Policy and Mechanism for Determination of Tariffs for Hydropower Projects ("NEPRA Hydro Mechanism") by the National Electric Power Regulatory Authority ("NEPRA") to the Power Purchaser for negotiations. v. The Power Purchaser (NTDC) negotiated the tariff with the sponsors and forwarded the proposal to NEPRA for an approval of the proposed Feasibility Level Tariff. NEPRA issued its approval of the Feasibility Level Tariff of US 4 5.4158/kWh at reference exchange rate of PKR 79 per US dollar on February loth, 2009, at a Project Cost of US$ 1, 8 million. vi. PPIB issued Letter of Support ("LOS") to the Company on April 27, 2010 to achieve the Financial Closing of the Project (ANNEX-C). vii. The company could not achieve the Financial Close in the stipulated period; the validity of the LOS was extended till April 29th, 2012 by PPIB. viii. Even though sponsors submitted the EPC Level Tariff to NTDC, but the project remained inactive for a long time. Eventually, a South Korean Consortium comprising of Korea South East Power Company, Sambu Construction Company ("Sambu"), Lotte Engineering & Construction ("Lotte") and STX Construction Company ("STX") (collectively called "Sponsors") expressed their desire to acquire Mira Power Company and approached PPIB for such acquisition. ix. PPIB also issued the "No Objection Letter" to the New Sponsors to acquire the Project with certain conditions including the satisfaction of pre-qualification criterion on December 19, 2012. x. The formal Share Purchase Agreement (the "SPA") was signed with the previous sponsors, acquisition process was completed and 100% shareholding in Mira Power (Pvt) Limited was transferred to the Sponsors (KOSEP). xi. In the meantime PPIB on the request of Sponsors again extended the validity of LOS till December 31. 2014. The Amended and Restated LOS issued by PPIB is attached as (ANNEX-D). 2 100 MW Gu1pur Hydropower Project - Negotiated EPC Stage Tariff Proposal by NTDC to NEPRA COMPETITIVE BIDDING PROCESS a) To start the process of filing of EPC stage tariff, company initiated the "competitive bidding process" through previous sponsors and issued Request for Proposal (the "RFP") to the three (3) leading construction companies of South Korea on 16 May 2012. As Korean EXIM Bank is the main lender of the project, the competitive bidding process was limited to Korean companies as per one of the bank's conditions for lending. b) Project sponsors appointed Saman Engineering as a consultant, Korea to carry out the bid evaluation process and prepare a "Bid Evaluation Report". The Consultant, carried out the technical and financial evaluation of the bids, the result of which are as follows:- Technical 1) SAMBU-LOTTE-STX JV Rank Number 1 2) DEALIM Rank Number 2 3) DAEWOO Rank Number 3 Financial SAMBU-LOTTE-STX JV US$ 263,374,569 (lowest) 2) DEALIM US$ 276,500,000 (2nd lowest) 3) DAEWOO US$ 289,117,458 (highest) The Company on the basis of bids receivedt, submitted an EPC Level Tariff to the Power Purchaser on October, 25 2013. 2. 1st EPC STAGE TARIFF PROPOSAL BY SPONSORS TO NTDC The Company proposed an EPC Level Tariff to the Power Purchaser / NTDC, on October 25, 2013 with a levelized tariff of US c 1o.4577/kWh equivalent to Rs: 11.5035/kWh for a 3o year agreement term at a reference exchange rate of PKR 110 per US dollar (ANNEX-E). The Tariff Proposal was based on the total project cost of US $ 335.22 million, debt equity ratio of 75:25, debt term of 16 years including a grace period of 4 years, 12 years repayment period, interest rate of LIBOR (0.350%) plus 500 basis points for debt and Return on Equity (I RR based) of 17%. 3.1 Project Features For t,t EPC Level Tariff based on Original Feasibility Study The Design based on feasibility study envisaged the following features /parameters for Gulpur Hydropower Project. iSambu has later withdrawn from the consortium due to its financial troubles & has been replaced by Daelim as the EPC contractor and negotiated the bid price to US$ 240.9 million 100 MW Gulpur Hydropower Project - Negotiated EPC Stage Tariff Proposal by NTDC to NEPRA Salient Features Description Details Installed Capacity 100 MW Net Plant Capacity (99.9 MW Av. Annual Net Generation 465 GWh Plant Factor 5339% Water Source/River Poonch Location Kotli, AJ&K Weir Type Concrete Gravity Weir Length 237 m • Weir Height 45 m Spillways Gated, 11.5 m x 26 m x 8 Headrace Tunnels One (1), Circular Length, Diameter 3.043 km, 8.o m Tailrace Tunnel One Open Channel Tailrace Tunnel Length, Diameter L=6o.o m, W= 36.o m Power House Type Indoor Power House Dimensions 8o x 42.3 x 59.55 m • Number of Units Three Vertical Francis Interconnection Voltage 132 kV Switchgear Type GIS(Interior), Breaker & Half , 100 MW Galpur Hydropower Project - Negotiated EPC Stage Tariff Proposal
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