Implementation Schedule, Resource Requirement & Revenue Projections

1. 
   Implementation Schedule
   
   1. 
      The accelerated hydropower development would require the addition of 10,000 MW within the next 20 years (2028). This is an addition of 12 new projects or an average of about 1 project every 1.5 years. While this might seem a very ambitious implementation target, it is felt that the best way of accelerating the development would be to implement the projects simultaneously. Waiting for one project to finish to start the next one would take extremely long, given the long gestation period of hydropower projects. Moreover, if the IPP and the JV model takes off, then the implementation of all these projects simultaneously would be possible given that the security issues and other enabling environment issues are met.
      

Table 6.1: Implementation Schedule of Planned 10,093 MW Projects

Table 6.2: Standby Projects in case IPPS are interested for early implementation.

Standby Projects	10th Plan (2008-2013)	11th Plan (2013-2018)	12th Plan (2018-2023)	13th Plan (2023-28)
Gongri (485) /Kuri (450) IPP	Start 2011		Finish 2018
Amochhu Reservoir IPP	Start 2013		Finish 2020
Amochhu (Bend) IPP			Start 2021	Finish 2028

2. 
   Schedule for Implementation of Pre-conditions
   
   1. 
      As discussed in detail in the chapter on the enabling environment, the following pre-condition activities need to be implemented in order to facilitate the implementation of projects as per the above schedule. Most important are the adoption of the policies, legislations, rules and regulations enabling private sector investments in the power sector and the strengthening of the institutional structure of the power sector.
      

Table 6.3: Schedule of Policy, Guidelines and Institutional Strengthening

Activities	2007	2008
Hydropower Policy	June
IPP Policy		April
IPP Bidding Guidelines		April
IPP Tender		July
Establish Joint Group	July
Formation of DGPC	December
Autonomy of BEA		July

3. 
   Investment Projections
   
   1. 
      With the accelerated implementation schedule and the proposed model of financing, it is anticipated that the investment for most of the projects shall commence from the 10^th FYP. The investment of Nu. 468 billion over the next twenty years would be required as follows.
      

Table 6.4: Investment Projections (Nu. Billion)

2. 
   This ambitious investment plan with front loading during the 10^th and 11^th FYP is proposed as a strategy to keep up with regional competition and market demand and to attract the available investment at the earliest before other projects in the region. Accordingly, 87% of the investments would be required during the next two plan periods. The capital amount required from various sources are as follows:
   

Table 6.5: Financing Sources (Nu. Billion)

3. 
   The investment requirement for the 10^th FYP is Nu. 103 billion from bilateral, Nu. 42 billion under JV and Nu. 34 billion under IPP. This requirement against the backdrop of plan investment of equivalent Nu. 4,400 billion in India during the next five years makes the investment layout achievable provided we promote our projects faster. The annual investments are expected to peak in 2014 and 2015 where the requirement would be close to Nu. 70 billion a year. Therefore, its impact on the overall economy needs to be assessed.
   
4. 
   While the investment amount is substantial, the actual equity contribution under the proposed models (JV) is only Nu. 12.5 billion from RGoB which will need to be made available upfront during project construction. The IPP models will ensure that the projects will have no financial burden on the national exchequer. These projects are kept under the non-plan activities, as in the past.
   

4. 
   Revenue Projections
   
   1. 
      Preliminary revenue projection indicates a net annual revenue contribution of Nu 4.889 billion by the end of the 9^th FYP to Nu. 38.137 billion by 2028 after factoring interest and loan repayments.
      

Table 6.6: Revenue Projections (Nu. Billion)

10th Plan	11th Plan	12th Plan	13th Plan
30	42	120	147

2. 
   Revenue projections includes 30 % CIT and 100 % dividends from bilateral projects, 30 % CIT and 50 % dividends from JV projects and 30 % CIT and 15 % royalty (either in cash or energy) from IPPs. Revenue from the energy sales are both from domestic sales and export.
   
3. 
   The distribution of energy between domestic and export in million units is projected as follows. The revenue projections would change depending on energy distribution.
   

Table 6.7: Energy Distribution Schedule (Million Units)

	10th Plan	11th Plan	12th Plan	13th Plan
Domestic	11,454	17,501	28,602	36,994
Export	30,125	60,022	156,295	202,693
Total	41,579	77,523	184,897	239,687

2. 
   A provision of 20% retained earning on profit after tax is kept, out of which 10% would be generally retained by generating companies and 10% available for equity investments by DGPC/DHI. The projected retained earnings are as follows.
   

Table 6.8: Retained Earning Schedule (Nu. Billion)

10th Plan	11th Plan	12th Plan	13th Plan
5.00	6.00	16.00	17.00

4. 
   Financing Issues/Recommendations
   

1. 
   Foreign Exchange Reserves – Since earnings from export of hydroelectricity would be in Rupee, any investments in foreign currency (other than rupee) would have to be assessed in light of its impact on foreign exchange reserves. The major source of our foreign exchange reserves is from project-tied external grants and borrowings. Therefore, investments that would require repatriation in foreign currency should be minimized. For projects requiring foreign exchange during the construction phase, PPA should include provision for partial power tariff payment in foreign currency.
   
2. 
   National Debt Sustainability – To avoid excessive debt burdens on the government, private investments which will not form part of the government’s contingent liability should be considered through promotion of IPP projects and also JV projects financing.
   
3. 
   Revision of FDI Policy 2002 – The present FDI policy excludes foreign investments in “hydroelectric sector”, investment in “rupee” and limits maximum investment at 70 %. To attract investments from IPPs/JVs, particularly from India, the FDI Policy 2002 needs to be revised to include the above.
   

6. 
   Financing Options
   
   1. 
      Introduction
      
      1. 
         The financing options proposed under the various models will be key towards raising investment of Nu. 468 billion required for the accelerated hydropower development. Therefore the following sections are devoted to analysis of the various options.
         
      2. 
         Hydropower projects are capital intensive and have long gestation period. Their development requires huge financial resources. For accelerated hydropower development alternative financing modalities are proposed. Taking stock of the existing practices and to attract IPP and JV undertakings for hydropower development, certain assumptions are made and these assumptions are laid down separately under appropriate financing arrangements.
         

2. 
   Financing of Hydroelectric Projects in the Past
   
   1. 
      Till date, 1,488 MW has been developed at a cost of Nu. 55 billion financed through a mixture of grants and loans from the governments of India and Austria. Chhukha, Kurichhu and Tala Hydro electric projects were financed with 60 % grant and 40 % loan from the Government of India. The Government of Austria financed Basochhu Hydroelectric Project I through grant assistance and concessionary loans and Phase II through soft loan under Official Export Promotion Scheme.
      

Table 7.1: Project Profiles and Terms and Conditions of Existing Hydroelectricity Loans

2. 
   The loans availed by RGoB for the existing hydroelectricity projects amount to Nu. 23 billion (US$ 516 million). The total national outstanding debt as of 31^st December 2006 is Nu. 31 billion, out of which Nu. 21 billion is for hydroelectric projects (69% of the total loan outstanding). These loans are from GoI and Austria. The status of loans from GoI as of 31 December 2006 is as given in Table 7.2.
   

Table 7.2: Status of GoI Loans (Rs. million)

Project	Loan Disbursed	Principal Repayment	Interest Paid	Outstanding Loan
Chhukha	984	852	824	131
Kurichhu	2,240	467	504	1,773
Tala*	16,464			16,464
Total	19,688	1,319	1,328	18,368