PROJECT BLUE desires to develop, procure, finance, construct, own, operate and maintain a gas based 1134 MW ISO (990 MW at site) combined cycle power plant at Bombay, India. The site for the power plant is presently being negotiated with the landowners (600 Acres). Power Purchase Agreement (PPA) is being negotiated with the Power Trading Corporation of India for the purchase of the electrical output of the plant for a period of Fifteen (15) years and Ten years (10) option. Initial rounds of negotiations have produced a draft PPA & Tariff. Final negotiations and finalizing the Tariff for fifteen years is scheduled for end of June 2009.
India (Beneficiary State: Bombay)
People Benefiting: Final Beneficiaries = 11,000 families
Amount Required:USD$ 996,000,000.00
PROJECT BLUE – EXECUTIVE SUMMARY
The plant will consist of 6 GE Frame 9 gas turbines operating in a combined cycle arrangement. A turnkey supply construction and commissioning contract will be negotiated and signed with BHEL or GEC Austhom.
Project Blue is currently in the market to bring into the Project to complete the arrangements for equity partners and term loan for the Project. The total project cost is expected to be U.S.$ 996 million ( two years interest during construction is included ) of which, 30% or U.S.$ 299 million will be in the form of an equity contribution from the project owners or equity partners or equity loan, 70% or US$ 697 million will be in the form of term loan from Indian financial institution.
The Project has to have the following agreements/documents. After initial rounds of negotiations with Power Trading Corporation of India, the principals have come to an understanding on the following agreements/documents:
• Power Purchase Agreement;
• Letter of credit
• Escrow Account
• Turnkey Construction Contract;
• Fuel supply Agreement with Gas Authority of India
• Operation and Maintenance Agreement
• Insurance Package;
• All regulator permits and governmental approvals.
An Irrevocable Revolving Letter of Credit backing the purchase obligations of the Power Trading Corporation will be finalized. The Letter of Credit will be issued by the State Bank of India either directly or through a Co-guarantee with a subsidiary of the State Bank of India. Revolving letter of credit is guaranteed by Escrow account.
Tax liability of the Company in respect of the income related to the operation of the Project would be passed on the buyer through supplementary bills.
Project Blue will form a special purpose company for the development, financing, construction and operation of the Project. Eric C Pottoore have managed and funded the development of the Project to date.
Mr. Jose Thomas, Chairman and Managing Director of Travancore Power Project Limited. Mr. Thomas developed a 107 MW Naphtha fueled Power Plant in Jodhpur, Rajasthan, India. The Rajasthan project obtained all the permits and signed all the Agreements including Joint Venture Partnership. Project is waiting for the Foreign Exchange coverage to be amended in the PPA. Mr. Thomas holds an MBA, Mechanical engineering and Basic electronics. He served as a Production Manager in California based Litton Industries for sixteen years and holds a membership in the American Society for Quality Control.
Eric C Pottoore
INDO CAL POWER VENTURES INC, NITA AMERICAN SERVICE LLC, NAS LLC, and POWERON ENERGY (P) LIMITED are managed and owned by Eric C Pottoore. He is heavily involved in the Timber related business. In the early 1990 he was the owner of several Gas Stations and from mid-1990 he was in financing business and has closed several projects. He is a commerce graduate (accounting) and now residing in Skokie, Illinois with his wife and three children.
India has adopted a five year plan for the development of a significant amount of new electric generating capacity. The plan calls for 148,000 megawatts of new generating capacity with a tripling of that amount over the following decade. The Central Government has decided to open the development of this capacity to the private sector as it believes it is the only viable way to get such a level of capacity financed and built over the period. Therefore, to begin this process, the government has made several policy decisions to foster its plans. Among other initiatives, the Central Government has removed the restriction on foreign majority control of Indian ventures and made the Rupee convertible. Furthermore, a number of incentives regarding rate of return, tariff and sale of power rates, higher rates of depreciation, exemption from income tax and others are being offered to select projects. The Projects developed by Indo Cal Power Ventures Inc is a beneficiary of all of these new incentives.
The Project will have a combined cycle generating facility consisting of 6 GE Frame 9 turbines, 3 heat recovery steam generators (“HRSG”), an BHEL Steam turbine and related balance of plant. The gas turbine will be supplied by BHEL.
The turbine packages will have all standard ancillary equipment for operating the turbines in a base load environment. The 3 HRSG’s will be supplied by BHEL (India) and will be based on designs built by BHEL and installed in power plant applications all over the world. The HRSG’s will be a BHEL design which consist of a vertical heat recovery steam generator with assisted (forced) circulation, laterally connected to the gas turbine exhaust and self-supporting its flue gas discharge stack. The steam turbine will be a TM2 Range Steam Turbine from BHEL. The TM2 families of steam turbines are multi-stage impulse axial flow design type, specifically designed for medium range power production. Also on-site will be a water based cooling tower system. Switchyard for interconnection to the national power grid, fire protection, fuel storage totaling approximately 150,000 gallons of on-site fuel storage and administration building.
PROJECT STAFFING, MAINTENANCE AND OPERATION
The Operation of the Project will be managed by the Project owners. The day to day operations will be accomplished by the Project hiring the operating staff directly or through an Operations and Maintenance Contract similar to those in place in many U.S. based Independent Power Plants. Such a contract would be with a qualified operations and Maintenance Company which had international experience in placing qualified operating personnel is such projects. If an operations and maintenance organization were used, its scope would cover the plant manager position and all positions subordinate to the plant manager. In either case, there are expected to be approximately 175 positions filled to handle the day to day operations of the power plant. Administrative and management functions will be provided by the ownership group of the Project. These positions would be in addition to those noted for the day to day operations. Expenses have been allocated for foreign ownership and management of the Project and for that of the Project Blue management team. Costs associated for forced and scheduled maintenance of the turbines and HRSG’s have been included in the pro forma economics. The scheduled maintenance cycle has been assumed to be every 5 years for partial and full overhaul procedures in accordance with the manufacturers’ recommendations and latest Technical Information Letters on the ABB machine.
The cost information on such procedures have been based in part on maintenance costs provided by BHEL for actually performing the work and supplying the spare parts for the scheduled and forced outages as well as information from other similar operating power plants. It should be noted that BHEL has provided a proposal for providing spares and maintenance labor for covering all forced and scheduled outages over the first six year cycle. There are other means to covering these needs of the Project and it is Project Blue’s view that the most prudent and cost effective program will ultimately be adopted.
Project Blue will execute a Power Purchase Agreement with the Power Trading Corporation in June 2009. The PPA has a term of 15 years and has several features which protect and insures the integrity of Project economics. The purchase price for power is Indian Rupees 2.50/kwh as of January 2008. The price is divided into two components; a fixed and variable components. The fixed component is set in US Dollar, Indian Rupees 1.77/ kWh. The fix cost will cover the principal payment, interest payment, operation and maintenance cost and 14% return on equity. The variable component will change in proportion to changes in delivered fuel pricing on a month to month basis where the base price is the price of fuel in January of 2008. The variable component base price is Indian Rupees .73 /kWh.
The PPA also obligates the Power Trading Corporation to provide an Irrevocable Letter of Credit and escrow account supporting its purchase obligations from the project under the PPA.
TURNKEY SUPPLY, CONSTRUCT AND COMMISSION CONTRACT.
Project Blue will negotiate and sign a contract with BHEL. The contract is a fixed price arrangement with standard guarantees for date of completion and performance of the combined cycle plant for power output and plant efficiency. Liquidated damages are stipulated in the event the contractor fails to meet the guaranteed performance conditions.
Project Blue will soon obtain the significant permits and regulatory approvals necessary for construction of the Project.
FUEL SUPPLY AGREEMENTS
Fuel supply arrangements have been negotiated with The Gas authority of India. It is anticipated that the Project will ultimately sign a contract with The Gas authority of India for the supply of the Project’s fuel. A key reason for this is because the Gas Authority of India will provide for delivery of fuel to the Project site.
The Power Trading Corporation guarantees the minimum off take at 80% PLF as per the Power Purchase Agreement for 15 years. However Project Blue will supply and the Power Trading Corporation will purchase the entire electricity generated by the project for the new ventures and industry development. Thus, due to the heavy demand Project Blue will not face any problem in the distribution of the electricity generated. Further this agreement has a clause saying about the renewal for such additional period on such terms and conditions as may be mutually agreed upon between the Company and Power Trading Corporation.
The Company will be processing its papers for obtaining term loan for purchase of Plant and Machinery from the Indian financial institutions, which amount to USD $ 697 million at an interest rate of maximum 11% per annum on reducing balance. The loan will be paid in 10 years with the first installment starts 24 months after funding.
We have registered a company in India (under the company’s Act and which will go public after we commission the plant). Eric C Pottoore is the Managing Director, Jose Thomas is the Project Director, Rex Uthup is the Accountant and Tom Thorson is our lawyer. We have an office in Bombay, India (see our Bombay address in our web site).
We have got the commitment for the raw-materials. After we finish the detailed project report then we will sign the power purchase agreement with the Govt. of India. In order to finish the Detailed Project Report we should get all permits and clearances, land purchase contract, Construction Contract, Operation and Maintenance contract etc.
If you check about power sector in India then you will understand how short the power there is. We have verbal agreements for buying the power with Power Trading Corporation of India (Govt. body) for 15 years. That means the product is pre-sold.
We have spent over $3Million now. This is an infrastructure project and we have to develop this from the beginning. We have a group of experts, contacts, lobbing people etc to bring this project to conclude.
If anybody has any other question, then please send us an email or call me, we are happy to reply them.
NOTES AND ASSUMPTIONS:
• The installed capacity of the plant is 990 MW. The plant will function continuously without any interruption.
• The plant generation is calculated at 7008 hours (80%) of the plant load factor.
• The requirement of the raw material is calculated as per the technical data provided by BHEL.
• Operation and Maintenance cost is calculated as per the industrial norms.
OUR LEGAL COUNSELORS:
Mathai & Thorson P.C
3601 n. Ashland, chicago, IL. 60613.
PH.773 327 1100 FAX 773 327 5552.
Eric C Pottoore - President