Cross-Border Trade in Power

A Presentation by Shri S.K. Dube, Director (Operations) CII –PTC Conference 15/10/2003

This map illustrates the differences of access to modern energy. The comparison of intensity of the lights with the regional populations would make the difference even more striking with US, Canada, Europe and Japan having hardly more than 10% of the world population.

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Regional Power Trade

Vast potential for regional energy cooperation More promising among the contiguous countries – Bangladesh, Bhutan, Nepal, India and Sri Lanka Opportunities in the area of region wide utilization of resources efficient use of energy This would improve The utilization of existing resources Development of future energy resources Regional energy security All the countries could benefit by developing their generation capacities in an integrated manner 3

Potential & Prospects Bhutan and Nepal have large hydro power potential

Potential harnessed low (1% - 2%) Domestic demand will remain limited Development of large hydro projects will depend on export market May offer India competitive hydro power

Bhutan hydro potential estimated 16000 MW Nepal hydro potential estimated 83000 MW

43000 MW economically feasible Feasibility studies carried out for 22000 MW

India potential market for power

Northern Region –Deficit/Geographical Proximity 4

Potential & Prospects (Contd.) Bangladesh has large natural gas resources

Reported estimates suggest 40 – 50 Trillion Cubic Feet of natural gas reserve Sufficient to meet future demand with surplus for export Bangladesh can offer gas to India or supply gas based power to India

Sri Lanka power system is hydro based and face shortages

India may be a supply option for them Pre-feasibility studies carried out for HVDC submarine cable link

India has large untapped hydro potential (85%) and large coal reserves

India can supply base load power to the neighbouring countries who can conserve their generation from renewable sources for export during peak 5

Cooperation between India and Nepal

Power exchange commenced in year 1971 - 5 MW in initial years Nepal net importer of power 50 MW FY 2001-226 MUs (126 MUs) FY 2002-238 MUs (133 MUs) FY 2003-150 MUs (186 MUs) Nepal having seasonal surplus (100-150 MW) from May 2002 onwards PTC is the Nodal Agency for Indo-Nepal power exchange His Majesty’s Govt. of Nepal hydro policy initiatives No. of IPPs are engaged in development of hydro resources for meeting domestic demand / export of power 6

New Interconnections

As recommended by Sub-committee of Indo-Nepal Power Exchange (May 1999) 132 kV D/C Butwal (N)-Anandnagar (I) 75 Km (45 Km) 132 kV D/C Parwanipur (N)-Motihari (I) 70 Km (45 Km) 132 kV D/C Dhalkebar (N)-Sitamarhi (I) 65 Km (40 Km) Line at (1) is better suited for importing Nepal power to the potential load centers in Northern Region.

The lines at (2) and (3) could connect the Nepal system with Bihar.

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7th Power Exchange Committee meeting

Both sides agreed in the meeting about the category of exchange

(I) Exchange of power on bilateral basis at the border (II) Trading of saleable power (III) Supply of power under treaty

PTC will continue to act as nodal agency for category (I) and (II)

• Take over of category (I) planned after finalization of tariff by GoI and HMGN (Billing and revenue collection only) • Opportunities to be explored for trading of saleable power (Category –II)

Long Term Commitment (15 years or more) Formation of a Technical Committee

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Status of New Interconnection

Construction of 132 kV Anandnagar-Butwal line is critical Agreement between PTC & POWERGRID, the first of its kind

POWERGRID to construct Indian portion of 132 kV D/C Butwal (N)-Anandnagar (I) - 51 Km LILO at Maharajgunj -25 Km Cost estimate as per 4 th Quarter of 2002 : Rs. 20.17 Crores Completion: 18 Months from the date of award Transmission tariff as per CERC PTC to pay monthly transmission charges Indicative Monthly fixed charges Rs. 40 lakhs Likely tariff = 10-15 paise /kWh 9

West Seti H.E.P

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750 MW (5 X 150 MW) HEP on the West Seti river in Western Nepal with reservoir of about one months energy generation, being developed by M/s Snowy Mountain Engineering Corporation (SMEC) MOU already signed with the developer in Sept 2002 Salient Features

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Peaking capacity of 7-8 hours per day round the year

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Design energy 2998 MUs and Average Energy 3335 MUs (111.2% of DE)

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Point of delivery at Indo Nepal border near Bareilly Most clearances with Nepal Authorities are already in place Anticipated commissioning June 2009 Period of supply 25 years Expected beneficiaries are the constituents of the Northern Region

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India – Bhutan

Chukha Project (336 MW) About 270 MW surplus power is being supplied to India Average 1300-1400 MUs of energy is supplied per annum PTC is handling the assignment of purchase and sale of surplus power from October 2002 Traded 332 MUs in FY 2002-03 and 1009MUs in 2003-04(up to Sep 2003) Kurichhu Hydro Project (60 MW) Annual energy generation (90% dependable flow) - 400 MUs per annum PTC is handling the assignment of purchase and sale of surplus power from October 2002 Traded 82 MUs in FY 2002-03 and 143 MUs in 2003-04 (up to Sep 2003) 11

Tala H.E Project Capacity Source Discharge

6x170 MW (1020MW) Wangechu River (Run of the River) 171 Cumecs

Head Likely completion Cost

860 M (Gross) Rs. 37,250 Million (without IDC)

Financial Pattern

Grant component 60% (by GOI) Loan component 40% [with interest @ 9% per annum]

Energy

4865 Million Units ---- Average year 3692 Million Units ---- 90% Dependable year Under Construction/scheduled commissioning 2005-06 Sale of surplus power would be assigned to PTC 12

Issues & Way Ahead …

There is a need for integrated development of power resources in the region Existing interconnection capacity inadequate Interconnections to be strengthened/built up SAARC grid would develop in the long term Operational issues Security standards/operational protocols Grid codes, reserve requirements Quality and reliability Adequate load dispatch and communication facilities Bilateral arrangements on commercial basis to be put in place and strengthened before looking for multilateral grid interconnection 13

Issues & Way Ahead … (Contd.)

Identification and mitigation of legal and contractual barriers to trade Techno-economic appraisal and funding of projects Fulfillment of lender’s requirement Fair allocation and management of risks Project execution risks viz.

• Geological/hydrological /seismological risks Project’s payment risks Political risks/ Change of laws Foreign Exchange rate variations Take or pay liabilities 14

Issues & Way Ahead … (Contd.)

PPA and EPC contracts are getting increasingly complex: Lawyers are drafting/ Reading between the lines/ Small prints/ win lose situation Need for simplicity/ clarity Letter and spirit To work on positives to ensure contracts operate Win-Win Dispute Resolution Mechanism Adequacy of existing legal and regulatory system/desirability for amendment or new laws and regulations for enhancing trade Tariff to be based on commercial principles Transparency in sharing of information Cost of delivered power to be competitive 15

Conclusion

It is expected that energy markets in the region will develop gradually with the Suitable Govt. policy initiatives / legislation Strengthening of transmission system / interconnection with neighbouring countries Tariff based on commercial principles Integrated development of energy resources Setting up of institutional mechanism for regional trade in energy Bilateral arrangements on commercial basis to be put in place and strengthened before looking for multilateral grid interconnection Need for development of a long term Policy Complementing each others’ position Consistency Minimizing Risk perception/ Uncertainty Building mutual trust Transparency and sharing of information The experience and practices of advanced countries may help in catalyzing the process 16

“While the perception of opposed interests promotes conflicts, the perception of shared interests pacifies it.” - M.K.Gandhi

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Thank you...

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