* Without IDC
-
For Basochhu I, Austria provided EURO 13.081 m as grant and EURO 17.150 m as interest free loan. For Basochhu II, soft loan of EURO 31.249 m from Austrian Official Export Promotion Scheme was obtained. The status of Austrian loan as of 31st December 2006 is as presented in Table 7.3:
Table 7.3: Status of Austrian Loans (EURO million)
-
Project
|
Loan Committed
|
Principal Repayment
|
Interest Paid
|
Outstanding Loan
|
Basochhu
|
48.395
|
0.857
|
3.212
|
47.539
|
Total
|
48.395
|
0.857
|
3.212
|
47.539
|
-
Electricity Contribution to Domestic Revenues
-
Electricity sector is the major contributor to the domestic revenue. In the financial year 2005-06, electricity sector contributed 32 % (Nu. 2.2 billion) to the total revenue, second only to the trade sector (Nu. 2.3 billion). Among the top ten revenue agencies, Chhukha was ranked number one and Basochhu seventh. With the commissioning of Tala, domestic revenues are expected to grow by about 43%. In financial year 2006-07, electricity sector is expected to contribute approximately Nu. 4.3 billion, about 23 % of the national budget and 43 % of the total revenue.
-
Cost Considerations for Accelerated Projects
-
To harness additional 10,000 MW by 2028, twelve hydroelectric projects have been identified. The construction of these projects over the next 20 years would increase the installed capacity by 10,000 MW and is projected to cost approximately Nu. 468 billion.
-
The costs for Dagachhu and Punatsangchhu I are based on the Detailed Feasibility and Project Reports (DPR). For Sunkosh, the cost is based on the 1995 DPR of Power component and inflated by 300% to account for cost escalations. For other projects for which DPR is yet to be prepared a thumb rule cost estimate figure of Nu. 50 million per MW is assumed.
-
The transmission cost is not included in projects where the costing is based on Nu. 50 million per MW. Hence a wheeling charge of Nu. 0.125 per unit is taken to account for transmission cost except for Sunkosh where the project is going to be located near the Bhutan-India border.
-
The costs are based on 2006 prices with annual cost escalation of 10-15 % (in the case of Tala, cost escalations were about 300% over a ten year period). The actual cost of completion of hydroelectric projects, however, will be largely site specific.
Table 7.4: Cost of Accelerated Projects
-
Sl. No.
|
Project Name
|
Cost (Nu. millions)
|
Installed Capacity (MW)
|
Mean Annual Generation (MU)
|
1
|
Dagachhu
|
8,208
|
114
|
500
|
2
|
Punatsangchhu I
|
49,894
|
1,095
|
5,377
|
3
|
Sunkosh HEP
|
168,546
|
4,060
|
8,961
|
4
|
Mangdechhu
|
33,600
|
672
|
2,909
|
5
|
Punatsangchhu II
|
49,600
|
992
|
4,667
|
6
|
Kholongchhu
|
24,250
|
486
|
2,209
|
7
|
Rotpashong
|
20,050
|
400
|
1,883
|
8
|
Chamkharchhu I - Digala
|
33,500
|
670
|
3,207
|
9
|
Nikachhu (Tangsibji)
|
10,400
|
208
|
1,042
|
10
|
Khomachhu
|
16,300
|
326
|
1,507
|
11
|
Chamkharchhu II- Kheng Shingkhar
|
28,500
|
570
|
2,713
|
12
|
Amochhu I (Yangtsegang)
|
25,000
|
500
|
2,210
|
|
GRAND TOTAL
|
467,848
|
10,093
|
37,185
|
-
Proposed Financing Options
-
It is not possible for all the proposed projects to be financed under existing financing modalities particularly if development of hydroelectric is to be accelerated. GoI has reversed the ratio of grant and loan element to 40:60 for Punatsangchhu I and Austria has already indicated that financing along Basochhu modalities would not be possible in the future.
-
Further, preliminary estimates for harnessing additional 10,000 MW by 2028 at a cost of about Nu. 468 billion (covering four FYP periods) as per the planned investment schedule indicate huge requirement of Nu. 179 billion, Nu. 227 billion, Nu. 40 billion and Nu. 18 billion during 10th, 11th, 12th and 13th FYPs respectively. It is also to be noted that the average fund requirement for the next four FYPs would be more than Nu. 117 billion per plan period which is 60 % more than the whole national 9th FYP budget allocation. Therefore, we need to explore other financing options through bilateral, JV and IPP and other means (e.g. Carbon financing and CDM).
-
Justification for the different Financing Options
-
While RGoB’s financing preference for all the proposed projects would still be bilateral funding from GoI, alternate financing options are being proposed mainly in view of the following:
-
Past GoI trends of financing mega projects – Till date GoI has been financing one mega project per plan. It is likely that this trend would continue in spite of RGoB’s desire to accelerate hydropower development. Therefore, other financing options are being proposed, to avoid delays in achievement of RGoB’s vision for harnessing additional 10,000 MW by 2028.
-
RGoB’s National Debt Situation - The national debt outstanding as of December 2006 is Nu. 31 billion (US$ 679 million). Based on the preliminary 10th FYP debt assessment of DADM, by the end of the 10th FYP (FY 2012-2013) debt stock is projected to be around Nu. 104 billion or about 105% of GDP. Of the total debt, 66% would be Indian Rupee contracted for construction of hydro power projects and 34% in convertible currency contracted mainly for financing other development needs. Debt servicing during 10th FYP would average around Nu. 4 billion per annum. The debt service ratio is projected to average around 15%, with a high of 17.1% in FY 2008-09 and a low of 12.6% in FY 2012-13. Rupee debt servicing would constitute around 13% and 2% would be on account of convertible currency. Given the high level of public debt stock accumulated till date and also as Bhutan has been classified as “highly indebted country”, government’s capacity to borrow for hydroelectric projects would be limited. If the government continues to borrow for hydroelectric projects, it would deteriorate the government’s debt ratios and thereby limit access to borrowing for other sectors. In view of this, private investments and other options should be promoted.
Table 7.5: Debt Situation (Nu. million)
-
|
2006-07
|
2012-2013
|
Total__8,208__114__500'>Total Debt Stock
|
37,783
|
104,372
|
GoI (hydropower)
|
18,750
|
68,222
|
Austria (hydropower)
|
2,700
|
5,324
|
Debt to GDP (%)
|
70.8
|
105.3
|
Debt Services (% of export G& S)
|
2.3
|
12.6
|
Nominal GDP
|
46,728
|
99,109
|
Exports of Goods & Services
|
19,741
|
40,120
|
-
Financing Options
-
RGoB Financing
-
Dagachhu is scheduled to be taken up by the RGoB in 2007 on debt equity ratio of 75:25. Possibilities of BTEFC financing are being explored and should this be considered, it is proposed that the project be dedicated for environmental conservation and management.
Table 7.6: RGoB Financed Projects
-
Sl. No
|
Project Name
|
Cost (Nu. millions)
|
Capacity (MW)
|
Generation (MU)
|
Financing
|
Status
|
1
|
Dagachhu
|
8,208
|
114
|
500
|
75:25 debt equity
|
2007-2011
|
|
Total
|
8,208
|
114
|
500
|
|
|
-
Bilateral Financing
-
Punatsangchhu I and Sunkosh are proposed as bilateral projects to be funded by GoI. Discussion on implementation modality for Punatsangchhu I on 40% grant and 60% loan is in advanced stage and draft agreement for construction of the project is being finalized with GoI. For Sunkosh, it is proposed that GoI be requested to finance the project on 80% grant and 20% loan since it is a multipurpose project with irrigation and other downstream benefits to India. However, the financial analysis is carried out on 60% grant and 40% loan basis to be on the conservative side.
Table 7.7: Bilateral Financed Projects
-
Project Name
|
Cost (Nu. millions)
|
Capacity (MW)
|
Generation (MU)
|
Financing
|
Status
|
Puna I
|
49,894
|
1,095
|
5,377
|
60% Loan 40% Grant
|
2007-2014
|
Sunkosh
|
168,546
|
4,060
|
8,961
|
80% Grant 20% Loan
|
2009-2018
|
Total
|
218,440
|
5,155
|
14,338
|
|
|
-
Financing from other bilateral donors may be difficult for construction of hydropower projects, however grant assistance from other donors would be sought mainly for technical assistance and human resource development.
-
Joint Venture Financing
-
Punatsangchhu II and Mangdechhu are proposed under joint venture financing mechanism with Indian Public Sector Undertaking (PSU) on 70:30 debt equity ratio. Indian PSUs such as NPHC could form a JV undertaking with RGoB’s Druk Green Power Corporation (DGPC) on 50:50 equity ratio (this would however depend on negotiation with Indian PSU and RGoB’s capacity to raise its equity contribution). The JV with Indian PSU would facilitate raising capital financing from the Indian financial market. Therefore, Indian PSU should be encouraged to raise the debt portion along with fifty percent of the equity contribution. DGPC’s financial contribution will be limited to financing the other fifty percent of equity contribution. It is being noted that 50 % of equity contribution for Punatsangchhu II and Mangdechhu would be around Nu. 12 billion as shown in Table 7.8.
Table 7.8: RGoB’s Equity Contribution Implications for Joint Venture Projects (Nu. Billion)
-
Project Name
|
Cost
|
Debt (70%)
|
Equity (30%)
|
RGoB’s 50% on Equity
|
Punatsangchhu II
|
50
|
35
|
15
|
7
|
Mangdechhu
|
34
|
24
|
10
|
5
|
Total
|
84
|
59
|
25
|
12
|
-
For the proposed two joint venture projects, RGoB equity contribution of 50% would amount to approximately Nu. 12 billion over eight year construction period if upfront equity is not available. As per the proposed investment schedule, the RGoB’s equity contribution could be as given in Table 7.9:
Table 7.9: RGoB’s Equity Contribution Schedule for Joint Venture Projects (Nu. million)
-
Project Name
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
Punatsangchhu II
|
372
|
595
|
744
|
893
|
1,116
|
1,860
|
1,488
|
372
|
Mangdechhu
|
252
|
403
|
505
|
605
|
756
|
260
|
1,008
|
252
|
Total
|
624
|
998
|
1,248
|
1,498
|
1,872
|
3,120
|
2,496
|
624
|
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