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THE Louis Berger Group, rc

2300 N Sksn. N W Wohngeo. DC 20037 USA

The Lou& Berger Group, Inc

Contract No. 386-C-00-00-00058-

Sandeep Tandon, CTO

CUN 3: Projed Developmant and Financing

Task 3.C: ldentlfication of GHG reduction projects

A focal activity under USA1D:lndia.s Greenhouse Gas Pollution h a t i o n Reject (GEP) Climate Change Supplement (CCS) is development of GtlG rniIigaling projects in key sectors of industry. power and urban transport The Louis Bcrger Group, Inc. and Development Alternatives have worked jointly to compkcc this activity under GEP-CCS. l b e cooperation beween LBG and DA has worl;ed in two

ways: (a) in building capacity of DA as a working Climate Change Center and (b) in

probiding inputs to DA on the GIjG mitigation projects developed by h.DA staff

received on-the-job-mining while working with the pmjecls lhat they identified LBG

facilitated the process by providing technical assistance +a in-house tinurc elrpan

and by facilitating interactions with US project development consultanls. 9s a resuh DA was able to offer technical assistance to five project developers. To illusbale chc project development efforts by CCC at DA, five of the projects d e v e w by D. have been included in this deliverable.

The Louis &rger Group. Inc. GEP team has been actively pursuing projects in India

that would help mitigate the climate change impact of industry, energy genedm and

usage and urban development pmjects. Over the last 1 !4 years since the i d of

GEP-CCS LBG has conducted several activities and programs and has in- uith numerous organizations and individuals to de-elop a pipeline of such projects This

note d e ~ ~ the n overalli stratem, selection criteria, approach and methodo@- of

pmject development. philosophy of shon listing the f i t ten projech uoder this 'activity and describes possible next steps.

Project Development Strategy

GEP-CCS staaed with the project comepts dewloped under tbe Climate Clung

Outreach & Awareness (CCOA) program of USAlMndia. These project ideas identified by climate change centers (CCC) at Confederation of l d i hdusq (Cll) and Development Alternatives (DA) were a preliminary stage. when the intaracd

indumies had envisaged developing GHG reduction projects. Whik D. 4 has

continued to be a partner in the GEPCCS project especially in thir activiry. Cfl considered it wt of their policy foeus to cornmuate on micro actikiry such as pojm

development. GEPCCS expanded the pmject dekrlopment avenues by ccmucting

other important stakeholders like the renewable de~dcpment d agencies in selected proactive sates. f i n c i a l institutions like ICICI. IDFC. SIDBI, IRED.% k q

minis& like hRIES, MOEF, MOP and many engineering and f-ial comultanq

f i. GEP-CCS staff held one on one m&p. policy round taMer puticipted in

numerous conferences, organized focused intnacti\r mXh in cmpmIim -MI DA

and IClCI in order to propagate tbe m p of technical assistarvc being off&.

GEPCCS developed a list of criteria for short-listing of projects (See Box I ) h t mainly categorized projects depending on thew use of - abk rrsoutces. conservation potential. size and credit rating of the prvmotm. These crivria helped in

CLIN 3: Project Developmenl and Financing

Task 3C: Identification u f T m Projecls and Preparation of Documents

weeding out projects that are not sustainable envimnmentalty and techno economically. Since most of the GHG emissions result from u s of e w groented

by burning fossil fuels rich in carbon content, the choice of projects includes mainly.

non-fossil fuel based renewable energy sources, technobes reducing e n q ~

consumption through process and end-use efiiiiency impro-t md pmjects

capturing/reducing GHG emissions from urban activities like solid waste m a m p m n t

and transportation. These projects can bmadly be classifid as Ckan Energy Projects.

At the outset it was decided to diversify the portfolio of projects so as lo cover as

many sectors and types of projects as possible. Given the time conmaints unda GEP-

CCS, other facets chat were considered imponant were: adbanced sege of development. projects hat meet fast hacking critexia being developed u n k che

climate negotiations, the clarity in deciding the origin of the GHG abate men^ and

least risk to the investors. It was decided h a t the projects in che mmpon seaor shall

be identified and short listed after the demo project under that actitity is fuuiized.

Interactions with Fund Manegers

GEPCCS is interacting very closely with several financial institutions in India un&r

the capacity building activities. These cot-n providing training to the FI onici.15 for

analyzing clean energy pmjects and also reviewing the portfolios of major Indian Fls.

In addition, GEPCCS staff has been interacting closely with some of the Fls. whiih

have been financing energy efficiency and renewable energy projects. In particular.

GEPCCS has had several interactions with ICICI, IDFC, IREDA, SIDBI, I U F S and banks like State Bank of India. In cooperation with ICICI. GEPCCS organid a w,orksbop with key industrial clients of IClCl to pmbide them more information on climate change mitigation potential of C E h and about TA Lhat GEPCCS can offer

them. GEPCCS has also been proxiding guidance to Fls for underscanding crikal

aspects of CEPs while they appraise such projects.

GEPCCS has also established contacts with key international W i n g agencies hat

could be prospective sources of funding the identified projects. Tkis is crucial sinre.

GEPCCS project does not have an internal funding source to serd fuvorr me

selected pmjects. Beside the conventional banking finance bodies. these include

funds'olpanizations chat may be interested in en\iro-tally suminable in\pmmnc pmjects either as pure return yield or in the form of emission reductions.

Approach I Melhodology for Project Devdopment

The GEPCCS RFF' states that selected projects should be at an advanced arp of

development. where he promofem are most likely to be commitlrd to the pmjat. It w* therefore, decided to interact with promoters whose projects ha* reached stage of detailed project report (DPR) prepatation. GEPCCS technical as&ance

(TA) would concentrate on ideotihing the GHG reduction potenm and advising on

structuring of chc projects so as to s b e n g t l m Ihem for enhanced finanr potential

from domestic or international sources In consultation with L'SAID it was a p e d h a t

CLM 3: Project Development and Financing Task ?C- Identification of Ten Projecrs end Preparation of h u m e n a

BOXl: GEP-CCS CRmfU.4 FOR D E \ U O M \ T O F C L U Y ENERGYPROILCIS(CEP)

GEPCCS pm* Tcchntal h r t u r e to cl- pgru to ~ B n t f y rhnr GHG (i mhamx~ pambal and to ponhm thein to domahc'mtanunul lnveam GEPCCS pgctr druld b\r mci9mb nd clarly idenhfmble* GHG mnmaD rcduct~ma h l d l a d to a ~ a d v r corGHG enuwm h harld srp)o? a technology opom that a bntcr lh thc tunnus as uaul oplons In lsrm of GHG cmlmmr (I c m f r r anp conannplm) cmplo)ed in lnchr Bnnd mtma ofidmtifyng clan porcu am lllllspcd b c h

pown'steam fmm h @ s c a ahcr agn rcs~dues, Sd.r The& d i m temp-a~urrawlppltcatlom Sdu PY-mull ' d u r n nzc smnm. Wi b y J m - p c r gtnua~tm fmm mull dvnjna ofthcn\crrypc,

m E r r g - h t S W makac grncraum frun lamnillbnnchmam - bmcd b phu fa

pouagnmtlm a a h c r a p p l ~ ~ a l ~ a r ~l n h r m u l a M c t o p w r U r m u l ~ m o u E. n g E- lnpmuam ~uh-cs: Wmtc M m n y - W M R fmm mndmal llw gzus a u-rrtor?ta f a FU g c m - a m a lbsrnl applmtlarr. R w v a t b. a d i.odmiutb. (RBM) of h e d d pJun pn& KO* orpar cflicron. mhtsrml p ~ e s r effic~~lh-y nnprmrmnls ma~nl) m thc hcttlsry s)stan tuI a h m poccss in IIK k q GEP€CS pnaxaox ace1 n c Fucl &chins S\wtchmg fmn a GHG c m ~ u t m i n t a t r e hrl such a coal to a laser GHG ~cnau or lltc rmnl gas. rcplscmcnt of f m l bawd fuels w l m a b k hrls htc a l s fmn pluur

a ~ o f a c P ~

Srnll and hfcdium size i.c. nmutllily projecu (disXnbutcd gemsaim p c f d h d k b n l milem MIDI blrto i 25 MW. ba- bpvd cognmtim w i t h a m parurc > 65 h.The n u ~ m m - m --I a flu,&.[Howma. this is s u b m lo thc mcds of W i n g raata] A d d i t 1 4 sct d m t m a In dm tcspm16 thr snze defined fa ha track projects at h:

C T c c M ~ S o u r ~ Rcfcr US t c c h n d ~Houcwr. thcrc IS m resncnm lnnorol\r t c d d o p o f qprocho rc prRncd Hounrr, -vm techndwa warld n u be cms~dcrcddue to h ~ & a techdog\ nsk Cb N thc techndogy wondm w ~ d

Should have 4--m &taken (c.g pnvn pumbasm) a should have popr cremt ohnrcmcn b an al

pava gaIuating fa @d ruppiy. a P o u a Purchmr A & 7 U m c n I wh popcr nsk miugrrm opmr hadd k kn p l x c. t n ~ o f s u p p l y o f ~ w l s a n d a h c r v n x s p o p c r ~ l i kFSA hauldbcmpbrr.

F. h t & g G E P C C S n n c a m d a p g c l t w ~ ~ - t o ~ r r a s ' t n l p x c h c c C r P p m c b o s ~ ~ ~ m m ~ e r r u v b a n r a n d ~ p n n a ~ ~ n i h e f m n o f l a u a ~ l ~ m o f & ~ m t h r d d t k pgn Thc pqms h i d bc bcylng &e pnf- t m i x s r n llLc I R R ~ b w t o c to msn cmwdennm b j lodmmtFwm

I

C L N 3 Project De\eloprnent and F w n c t n g^6 Task 3C ldenttficmron of Ten Pmjeca and Prrparat~on of Documents

(jmnhaac (hs Pdluttm R\m~cm Ro)m ClmaIc Chmgc SqqknaU .I 1:PllD imd,o h y c n imp4tmrurd h rhr Lwu &rgrr (;rwp hr

Selection of Projects

As a result of the promotional and outreach actidks undertaken by GEPCCS in the

firrt year of rbe project there is now a groming interesl among iadumS. and consuminp

firms in developing and suggesting pmjccts for possible capture of benefits 'om the

GHG reductions. IndusQ and consulting firms arc incerrstad in identifying addiIional sources of funding in order to improve the project economic feasibility. .4s discussed earlier, CII had developed about 20 and DA 19 project profiles in the CCOA phase. Many of Ihese proposals were taken up for implemenlation by ihc promoters during

the h e that elapsed after completion of CCOA program. GEPCCS and D.4 were

able to proceed uith few of Ihese ideas. GEPCCS has nceived o\rr 20 nu. enquiries

on projects for TAlfinancial assistance. Besides these DA bas identified o\er 25

additional project ideas thal have GHG reduction potenlial. Of these lomi 45 project

profiles, based on the initiative shoun by the promotm about I5 were selected for

more serious consideration and analysis. Of he 15 projan 10 w a e ultimately

identikd for development under CLIN 3 Subtask C of the GEPCCS contnct T h e

10 projects are listed below:

major hydel pmjects on he river Sharavaty

am on a BOOT basis for meeting the needs

of the sugar mill and

organic compost from treatment of MSW from L u c b u - city in Uttar Radesh cbrough biomethanation!

CLIN 3: Project Development and Financ~ng -

Task ?C: Identification of Ten Projects and heparation of Documents

At the outset, GEPCCS and DA conveyed the mcenainties and the limitations in

p m ~ i d i gTA to the developers of these and all the other projects under consideration

due to the uncertainties and changing Nles of market for carbon invesrmenn The

project developers expressed their plans lo cake up the projects imspecti\z of the

potential for obtaining carbon investments. The DPR worksheets and DPR documents

for these pmjects are enclosed. GEPCCS conducted basic GHG analyses of eight of

the abovementioned projects. More rigorous GHG analyvs were conducted for two projects. A note on the basis of GHG Analysis is p e n in Box 2.

Developments on Market Based Mechanisms Under UNFCCC

ARe have been mixed developments on the intematiml climate change rm.

While the successive meetings of C o n f m e of P& (COP) in Bonn and

Marrakech have resulted in a broad agreement over ~ k for s and operabbrulhh of

the marlret based mechanisms for qualifying and bading GHG emission &tkms,

due to the US decision not supporting Kyoto mechanisms and the allomanx of sinks

and pollution rights for the "hot air" from fonner Soviet Union countria. che povntial

market for and hence the value of emission reductions has been dnsrically redud.

Therefore, the invesbnent potential in GHG mitigation projects in &doping

countries has dropped significantly. In addition. as a project of USAID, GEPCCS is not m a position to offer TA for preparing projects for benefits under Kyoto

mechanisms. In view of this, the main avenue for funding for the projects could be

conventional domestic and international funds, and socially and enrironmenrally responsible investors.

Capacity Building

Apad From identification of projects and providig them technical askmnce. tbc

other major objective of GEP-CCS is lo build capacity of the climate change ccnvrs.

Guidance was proded to DA for this purpose. Cll has txprrsred that it is not

interested in participating in the project development component of GEPCCS. DA

being a non-governmental owanintion does not have project d e \ - e k p ~ ~ ~ ~

background. GEP-CCS provided vital inpuu to the stafi of DA to asses project

promoter capabilities, credit worthiiss and to analyze projects horn .a tec- fmancial feanbility stand point. Each of the projects idcntifd and developed by hem

has passed through three main gages including initial screening, pc-feasibility and

detailed pmjat review. Thus. DA as a climate change center is in a baM position ro

identify sustainable GHG mitigating projau. rate the project promotas' capabilik

and assess the GHG reduction pountial of such projects. The capacity building hs

helped DA build its project development capacity, which will be key to its long term sustainability.

This capacity building activity included: Numerous one to one discussions with the DA slafT Wrinen technical comments on projects

CLM 3: Project Development and Financing Task 3C: Identification of Ten Projecls and Reparation of Documents

Grcmhunc Gas Pdlulan Pw'011im Rojm (Iinutc Ovnpr Suppkmcnt .4 ~Ci41DD:IndioPmjmr inplpmcnltd t?. rhr Lmis B e ~ e rGmup. IK

Use of international consultants to provide p i d a m e

Supporting the project developers' workhop organized by DA

Guiding in selected meetings w i t h the project d e v e l o p s

• Guidance in analysis of the company l i i n c i a k

Guidance in analysis of the cnrrial project agreements such as power purchise

agreements, fuel suppty agreemenu Guidance in the process of preparation of business plans Assistance using computational tools developed under GEPCCS

Assistance in identifzation of major data sources. web s i l a and GO

documents. Analysis and modcling of the GHG issesmwnt b a d on documents such as IPCC guide book: and

Training to DA staff at the Financial institutions mining pmgrm

Ned Steps

The project development activity has achieved a significanl mikston in tht it ins

been able to generate a wide spread intenst among the indum).. consulting

organizations, fmancial institutions and GO1 in promoting clean a r r g ~. projecn. T k

steady stream of enquiries that GEPCCS has bsm receiving off late is an indication

that the stakeholders in the process do see value in developing GHG emission

reduction projects. The need for funding these projects would keep incmsing. As the

availability of f a c i n g is becoming diffcult there would be need for additional

mechanisms for financing these projects. In vievi of this, GEPCCS shall:

Discuss the funding aspects with several Indian and US based institattiom iht

invest in clean e n e r a projects for pure I ~ I U I n S

Continue with TA to the project developers as inlrrface between them and the

funding institutions to facilitate finance Identify new funding sources as they emerge (inkrested in l n d i i projects) Follow up with GO1 instilutions (h-MES,hJOEF) to M e t project p a d d i o for visibility Document experiences in GHG mitiption project development pmn to

disseminate them to other d e v c l o p s for replication

Continue working with DA to help facilitate dri i n t a a c t h s with Fls and ~ ~ v W R Monitor international climate change regime devekpmcok

CLIN 3: Pmject Development and Financing Task 3C: Identification of Ten Projects and Preparation of Documents

Detailed Project Report (DPR) Worksheet

For GHG mitigamg pojaa rmdn

USAID'S Greenhome Gas Pohlicm h ' ~ ~ ) t i o oProjm - CLhinte Omgc S w k x z w ~

AmbmtbWa Power Private Limilrd,

MGHE Tailrace Hydra Scheme

Kamataka

(Project Finance)

4 r

TABLE OF CONTENTS

SECTIOXA: CLEAN ENERGYAND GHG M~GATIONEQUIP~ICYTF~ANC

1. Contact Information for the Prospective^ Bomwer

2. Availability of Financial information on Borrower ....................................................................... 3

3. Borrower's Financial History (last tbree Fiscal Year

4. Background information on all used and unused sho ...............................

5. Description of technologykenicc to be purchased

6. Description of the GHG mitigating potential of the technolog
7. About the Business Negotiations ...................................................................................................... 6
8. Contact Information on the Man 9. About the Trade Financing (For

SECCIOSB: PROJEO F~NANCEFOR CLEANENERGYAND GHG MITICATIOY......................................... 7

1. Executive ary: Project at a Glance 5. (a) Estimates of Profitability (For Generation at 113 MU) ........................................................ 10 5. ib). , Estimates of Profitabilitv (For Generation at 102.12~.. MU) ................................................. 11 6. (a) Projected Cash Flow (Eor Generation at 113 M
2. (b) Projecled Cash Flow (For Generation at 102.12)
3. Status of finance Negotiations ...............................

8. Project Promoter Contact Information ......................................................................................... 16

9. Project Management Team
10. Project Promoter Financial His
11. Project Promoter Relevant Exp
    12. Special Pu 13. Project Detail

14. Feasibility Details ........................ ..,........................................................................................... 18

15. Background on the Power Purchase Agreement (if Applicable) 18 16. Other Agreements (where applicable).. - ......... - .... 20
16. Quantify and Describe Risks 21

18. For risks identified in section 14, discuss MitigationlCoverage measures .............................. 22

SECTIOS C : CARBONCOMPONENT........................................................................................................... 24

1. GHG Mitigation Applicability Macro Checklist (all answers should be YES) .......................... 24

2. Emission Reduction Calculations. Monitorine and- Verificalion Checklist~~~ ~~~ ................................~ ~ 24

3. Carbon accounting details ............................................................................................................. 25

Credit Rating by Lead FIlBank

DepreciatiodAmoitization Expense Interest Expmse

Current maturity of LTD

4. Background information on all used and unused short and long-term debt

i Abont the Eqnipmca~cebnology: Larga clean energy or GHG mitigating projects

I

(Project Fi-) may involve more than one typc of cnvirwmartal squipnent

Complete sections A 5 throueh A 10 for each piece of relevant GHG mitigating

I equipment.

I 5. Description of technology/scrvice to be psrcbrred

i (^) 6. DMriptiom of the GEG mitigathg potemli8i.l of tbe tecL.d.(T

I

I

I

The project envisages setting up two sets of mini hykoclstric power plant of 10 M \ V

each. The technology used is primarily based on divesion of tailrace sheam of chc lvga

hydroelectric power plant -. As such it does not d t in -rod

i n w o n of rimstlaud. This fcahue bdps in genaating power in an cn~inmmentally

friendly marma. In India, a large proportion ofpowa is generated by tbamai plants

burning the coal available in cclltnl India The pmpoJed pmjat enables swiCcbing to

renewable energy source in a sustainable way.

SECTION B: P a o J ~ c rFINANCE FOR CLEAN ENERGYAND GHG ~I~TIcATIOPI

Rbject Name: Mahatma Gandhi HybElccbic Tail Race Scheme. Kam&ka

Project Promoter: Mls Suchindra Inv&ments Pvt. Limited

Spcciat Purpose Vehicle: Amburhirtha Power %vale Limited

1. Eree~tiveSummary: Project at a CIaece

A m b u W P o w Private limited popmcs lo c u m n n d opentc a mi^ b j d n 4 a U i c

power gcmsting plant of20 MW crpvily (2 - 10 MW d B ) U dr d o n u - s u m of th

I20 hIW M a I ~ m pCandbi H-Electric (MGHE) mtim d uprirrunof rk ubtmg 1035 MW Shamvatby Gcnmnng Strboo ISGS). I I Tk mcr-bed fall bnmo IIIC MGHE gcncntmg smmn a d SGS a 69 men Tk M G H B Tathcc Rojerr pqmrr to k located~bmwczlbae ~~.bom, d rould unlue ibc n v u W fall. tbr tailraw dischrac flow fmm ihr MGHE soboo d flow h, M uldcpcodclll

carchmnt 11 IS pmpm;d to commrt a &-wa d.m maglcx rn Ibc Slunntbv Lva.

w l a bcrrh .re" acrorr thc Thk8l.k Nak. a mkmry of rk Sbunnlhy I Tbc pqcct d l h v c lhrec pnrouy soulcer or nata:

P DISC-c h m the MGHE Po- H o w (a38-42 ~ \ t m ~ t f )

I 3 Calcbmcnt horn Tabhhk Nak

> R u w f f from udcpcodcat alchmrna of Sbmntlu Rmr bdox l m p d.

I I

1 r-ow up to J- Falls

lnfnmudurc Devckomcm F i n w Gmuan~ Ltd. (IDFCI is ibc Dlcampritc dcbc porida Ta

&is dviv. Under 16t rmvibk ba&&, rbc &jea & umdu.8 ar bbltday br kc fim 10

yMofiitopcnliW Ap0vnPurchac8grrrrndrimIbcK.rcP~Ucr&nbovdh.r

2. Project Costs

Plant &Machinery 2,755.00^ 25.

4 Land & Building 85.00^ 0.

4 Civil, detailed Eng. 5,365.00 49.

4 Evacuation of Power 139.00^ 1.

4 Preliminary & Preoperative 700.00 6. Expenses pp 4 : Working Capital Margin -! 1 I: 4 Escalation during Construction --

I 4 ( Contingencies 400.00^ 3. I 4 Interest during Construction 1204.00 11.18 i

4 Finance Charges i^ 121.00^ 1.

4 Total Project Cost 10769.00 1

3. Proposed Means of Financing

4 Total Equity Portion 3,231 30%

4 Total Project Cost 10.

4. Committed Financing (if any)

a. Committed Debt Providers

Canara Bank (^) 15% in negotiations

HUDCO 15% in negotiations I I I I IDBI 1 15% I in negotiations