Submitted to

Prof. B.K.Chadha

Submitted by

Nitika Takkar 09BS0001473

Rishabh Hingar 09BS0001902

Varun Shankardass 09BS0002654

Table of ContentsExecutive Summary................................................................................2

Opportunity Analysis.............................................................................5

Market & Demand Analysis................................................................10

Generation.............................................................................................12

Analysis..................................................................................................13S t r e n g t h s ........................................................................................................................................17

O p p o r t u n i t i e s ..............................................................................................................................17

T h r e a t s .............................................................................................................................................17

Technical Analysis................................................................................18

Environmental Analysis.......................................................................23

Social Cost Benefit Analysis.................................................................25

STRUCTURING OF THE PROJECT...............................................29

Financial Projection..............................................................................36

Executive Summary

Project Title: Setting up a Thermal Power Project.

DESCRIPTION OF THE PROJECT

This project aims to set up a Thermal Power Project. This is a coal based Thermal Power Plant. In the first Phase our production target will be 250 mw. We will supply the electricity for the house hold and Commercial use.

Location: - (Kerala)

Input

In thermal power plant Inputs are as coal, Water and labor.

Process

Thermal energy is derived from Boilers by burning Coal and the steam produced in Boilers is led to rotate Steam Turbines, which in turn act as the prime movers of Alternators for generating Electrical Power.

Output

As the Steam releases heat energy to turn the turbine, its temperature drops. To reuse water used in Generating Power, the Steam is condensed back into water. To condense the steam, it is discharged into a vacuum and passed over cooling water in tubes.

Outlay of the Project

Land – 111 crores Construction –181 crores Plant & Machinery-621crores Administration – 54 crores Working capital -35 crores Misc Expenses-68crores Total expenditure – 1070 crores

Funding

We will take Long Term as well as short term loan from Financial Institution. 100 crore will be self capital. We will introduce our IPO in Indian stock market.

Time Frame

The process of hiring the players will start by the end of year 2014. The Main factory will be ready by September-October 2017. The production will be started in the January, 2018.

Revenue Generation Model

Selling Electricity Commercial and industry. Selling Electricity to house hold. Selling Electricity to neighbor state.

The project implementation stages:

Phase I – This phase helps to evaluate, understand and identify the need to set up Thermal power project. It will take almost 6-8 month to develop a clear idea.

Phase II – In this phase a layout will be prepare to where form the funding will come for the project. And things have to be done for the project

Like,

Selection of location for Power Project- 6-8 month

Selection of lands - 8-12month.

Selection of vendor - 4-5 month

Phase III: according to the plan made in Phase II the thing will be implemented. In this phase important things have to done like,

Building the Administrative offices at the suitable location -8-12 months

Hiring of trained employee-4-5 months

Purchasing office equipments and fixed assets – 5-6 month.

Phase IV – In this phase it will be observed that any necessary changes will have to be done form the initial plan. Experts in this phase will focus on the progress of work, with the time and cost involve with it. There will be definite some changes in the macro-economic factors while implementing the project. For that the experts who are implementing the project will have to take corrective action to mitigate that kind of risk, which can have a significant effect on the project.

Some of them like,

Changes in govt/regulatory authority norms.

Cost of labor.

Cost of land.

The corrective measure will be implemented in this phase so that the company can starts its operation.

Opportunity Analysis

Introduction

Power is the most fundamental necessity of modern day life. Power Industry in India is one of the most important infrastructure heads that the government is set to focus on. Despite poor performance in last few years, the power sector provides a host of opportunities and power generation, distribution and equipment related companies are set to en-cash on the UPA government’s drive to ensure ‘power for all by 2012’.

Growth of the Industry

Electricity production in India had begun well before the independence. After the country achieved independence, the government took the reins of electricity generation in its hands in order to take the service to each household. Over the four decades following independence, power generation capacity in India has made huge progress.

However, as has been the case with most other government monopolies, power industry too has not been able to perform on metrics of efficiency, consistency and reliability. Despite large increase in capacity, overall supply remains below the demand. Large section of the population either remains without power or receives infrequent and unreliable service characterized by frequent power cuts and fluctuating voltages.

Power industry in India also experiences high transmission and distribution losses. Both technical and non-technical issues contribute to these losses. Decades of government monopoly over the sector has led to a number of inherent weaknesses in the system including poor metering, lack of investments in distribution networks resulting in overloaded feeders, ill-maintained substations and aging transformers. 

By the end of eighth decade of last century, the state controlled power units were struggling with mounting losses, depreciating capital equipment, lack of fresh investments and environmental concerns. Understanding the hardships being faced by the public units, and their inability to meet the socialist agenda of taking power to each house, the government embarked on power sector reforms during early 1990s, although at the wrong end of generation instead of distribution.

However, power sector remained one of the most underperforming sectors even during the post reform period. With the rapid industrialization, demand for electricity has been increasing at a fast pace and the supply has been far short of expectations. Successive governments have failed to meet targets set under the five-year plans. In the ongoing Eleventh Five Year Plan (FYP) the government set a target of adding 78,000 mw of power generation capacity, which has been brought down to 60,000 mw. However, even the revised target looks difficult to be achieved.

Opportunities For Private Players

With government’s focus on ensuring ‘power for all’ by 2012, both the private as well public investment in the sector is set to get a boost. Power industry is already witnessing a record investment with projects worth about Rs 10 lakh crore are under implementation by end-October 2009 compared with nearly Rs 6 lakh crore of projects a year ago.

To meet the soaring power deficit in the country the government has changed its strategy and have announced 14 coal-based ultra-mega power projects (UMPPs), with a capacity of 4,000mw each. As of now, the government has allotted four projects — three to Reliance Power and one to Tata Power. Three other power projects are coming up for bidding in two months.

With the completion of civil nuclear deal with the US, investment is likely to pick up even more in coming 1-2 years with a lot of money going into nuclear power plant construction and other equipment manufacturing.

Current Scenario

Indian economy has recovered rapidly from the aftermaths of global economic crisis that surfaced in the second half of 2008. The newly elected UPA government has put a great emphasis on infrastructure development to take the economy back to the high growth trajectory witnessed in the pre-crisis period. To achieve this, infrastructure is being given top priority in the policy-making and along with roads and highways, power generation is one of the key areas where government is committed to substantially improve its performance. As a result, the

government has taken a number of policy initiatives aimed at attracting greater private investment and things are looking to move into the right direction.

Market & Demand Analysis

Indian Power Sector Outlook

Power sector has been an underperformer in terms of capacity addition over last few years. Compared with an average growth of GDP by over 9% in last four years, electricity generation has increased by 4% only. However, in order to maintain a healthy growth rate of economy, the pace of power generation will have to be increased in the country.

As such, the UPA government has given high priority to the power sector and has started an ambitious plan of taking power to all areas of country by 2012. Although the capacity addition target of 78,000mw over the 11th Five Year Plan looks unachievable now, with renewed emphasis on the sector, the government may still be able to achieve close to 60,000 mw of new capacity, which will generate tremendous opportunities for power generation as well as transmission companies.

There are also vast opportunities in the nuclear power segment. Even as the operation of nuclear energy plants remain in the hands of government for now, private companies have a big role to play in construction of power plans as well as supply of many components there of. Overall, the power sector provides huge opportunities in near term.

Incentive to green energy

The government on recently unveiled new norms aimed at making the renewable power more profitable investment. The Central Electricity Regulatory Commission, (CERC) apex body regulating power tariffs in the country, has notified the tariff regulations for electricity generated from renewable energy sources which aim at providing more return to such projects.

As per the new tariff plan, companies investing in the renewable energy projects will get 19% pre-tax return on investments for the first 10 years of operation while during rest of lifetime of project 23% return would be guaranteed. This is significantly higher than maximum return of 18.4% that thermal power units can fetch.

Timely implementations of power projects

The government has recently announced in the Parliament a number of steps aimed at ensuring time implementation of power projects. These include:

• Monitoring mechanism has been strengthened to achieve targets by designating a nodal officer in the Central Electricity Authority for each project. The bottlenecks if any are identified and solutions thereof are decided in consultation with project authorities and executing agencies.

• Review of progress of project is now done at the highest level i.e. Secretary (Power),

Chairperson, CEA.

• The ministry of power has constituted Power Project Monitoring Panel (PPMP) having consultants to monitor projects for effective monitoring of projects. • An advisory group of retired Secretaries (Power) has been constituted and is functioning to advise MOP on the major issues of concern coming in the way of timely completion of Projects.

Latest Developments

Growth of power generation improves in 2009-10

After going down sharply in the last fiscal, the growth of capacity generation has improved swiftly over the current fiscal so far. In the last fiscal, total power generation grew by a meagre 2.7% to 421,092 million units (mu). However, in the first eight months of the current fiscal, electricity generation has registered a growth of 6.4% to touch 448,416 mu compared with 421,092 mu of electricity produced over the same period last year.

Capacity generation however continues to remain lacklustre. In the fiscal 2008-09, the government had a target of adding 11061 mw of new capacity against which it could manage only 3453 mw of capacity addition, a shortfall of whooping 68.7%. In the present fiscal, capacity addition target till the month of October was set at 14507 mw, of which only 5767 mw has been achieved, reflecting an achievement of nearly 40% only.

The government has said recently that the continuous delays in power projects was primarily due to poor domestic capacity of producing electrical components which forced the project directors to depend on large imports marred with chronic delays. The Ministry of power has started a program to double the capacity of electrical components manufacturing in the country which should help improve the degree of target achievement going forward.

Demand-supply deficit declines

Average deficit in electricity demand and supply that has been increasing over the last few fiscals has started to come in the current fiscal. During 2008-09, average power deficit rose to 11.1% from 9.61% in the previous fiscal However, the performance has improved in the current fiscal with average deficit coming down to 9.5% in the first eight months of FY10.

Peak deficit has already been declining over last few fiscals owing to improved management

and increased inter-regional power exchange. During the FY 2007-08, about 43,000 mega units of inter-regional energy transfer was facilitated--an increase of about 13% compared to the previous year (about 38,000 mu).

Recent Policy Initiatives

Modifications to Mega Power Plant Policy

The Union Cabinet on October 1, 2009 approved modifications in the existing Mega Power Policy that was introduced in 1995 for providing impetus to development of large size power projects in the country. As per the modifications:

(i) The existing condition of privatization of distribution by power purchasing states to be replaced by the condition that power purchasing states shall undertake to carry out distribution reforms as laid down by the Ministry of Power.

(ii) The condition of inter-state sale of power for getting mega power status to be removed.

(iii) The present dispensation of 15 percent price preference available to the domestic bidders in case of cost plus projects of PSUs to continue. However, the price preference will not apply to tariff based competitively bid projects of PSUs.

(iv) The benefits of Mega Power Policy will also be extended to supercritical projects to be awarded through ICB with the mandatory condition of setting up indigenous manufacturing facility provided they meet the eligibility criteria.

(v) All other benefits under Mega Power Policy available to Greenfield projects would also be available to expansion unit(s) (brownfield projects) even if the total capacity of expansion unit(s) is less than the threshold qualifying capacity, provided the size of the unit(s) is not less than that provided in the earlier phase of the project granted mega power project certificate.

All of these are welcome changes and will help the private investors in a number of ways. The condition that power purchasing states shall undertake to carry out distribution reforms is a positive change as along with easing the norm for seeking a mega power project status, it would also expedite distribution reforms. Removing the condition of inter-state sale of power is also encouraging development as earlier only the power plants selling electricity on a long-term basis to two or more states were eligible for seeking a mega power project status. Given the significant demand for power across all states, mandatorily selling power inter-state for the tax incentives was anyway an obsolete requirement.

The benefits of Mega Power Policy to be extended to projects based on supercritical technology is also a very positive move as it would provide a thrust for shifting on to clean coal technologies that minimize carbon foot prints. Finally, the move to extend the incentives under the Mega Power Policy to brownfield expansions by existing mega power projects would significantly reduce the tax costs on capacity

expansions for existing power projects and therefore would boost massive capacity expansions through brownfield expansion.

AnalysisTrend analysis

The term "trend analysis" refers to the analysis of data that exhibits an ongoing upward or downward pattern that is not due to seasonality or random noise. Analysing trends is useful in detecting patterns that could lead to future quality problems, and in forecasting future demand periods.

In project management trend analysis is a mathematical technique that uses historical results to predict future outcome. This is achieved by tracking variances in cost and schedule performance. In this context, it is a project management quality control tool.

The trend analysis of the Industry is done here by two methods.

Exponential Trend Analysis Moving Average Method

The factor considered by us for the Trend analysis is the power generation over the period of years.

India's power generation has grown with nominal rate at 0.65% in December 2008 compared with 3.90% increased in December 2007. Thermal, hydro and nuclear are three major source of power generation. Thermal power generation recorded positive growth at 3.25% in December 2008 however hydro and nuclear were recorded negative growth rate at 12.41% and 21.62% respectively in December 2008 compared with December 2007.

Trend in Power Generation in India

Power Generation in India in billion KWH in billion KWH

Year Gross Energy

Generated (A)

Trend Analysis (Exponential)

{F1=F0+0.2*(A0-F0)}

Trend Analysis (Moving Average Method)

1980 – 81 129.2 129.2 129.201981 – 82 131.1 129.2 131.101982 – 83 140.3 129.58 140.301983 – 84 151 131.72 133.531984 – 85 169.1 135.58 140.801985 – 86 183.4 142.28 153.471986 – 87 201.3 150.51 167.831987 – 88 219 160.67 184.601988 – 89 241.3 172.33 201.231989 – 90 268.4 186.13 220.531990 – 91 289.4 202.58 242.901991 – 92 315.6 219.94 266.371992 – 93 332.7 239.08 291.131993 – 94 356.3 257.8 312.571994 – 95 385.5 277.5 334.871995 – 96 418.1 299.1 358.171996 – 97 436.7 322.9 386.631997 – 98 465.8 345.66 413.431998 – 99 496.9 369.69 440.201999 – 00 532.2 395.13 466.472000 – 01 554.5 422.54 498.302001 – 02 579.1 448.94 527.872002 – 03 596.5 474.97 555.272003 – 04 633.3 499.27 576.702004 – 05 665.8 526.08 602.972005 – 06 672.4 554.02 631.872006 – 07 697.4 577.7 657.172007 – 08 704.47 601.64 678.53

2008 – 09 744.34 622.21 691.422009 – 10 projected 646.63 715.40

Output of Trend Analysis – Exponential method (1980 – 2009)

1980 - 81

1982 - 83

1984 - 85

1986 - 87

1988 - 89

1990 - 91

1992 - 93

1994 - 95

1996 - 97

1998 - 99

2000 - 01

2002 - 03

2004 - 05

2006 - 07

2008 - 09

0

100

200

300

400

500

600

700

800

Gross Energy Generated (A)

Trend Analysis (Ex-ponential) {F1=F0+0.2*(A0-F0)}

Years

Pow

er g

ener

ated

Interpretation:

The output (Fig.7) shows that there has been gradual and continuous growth in power generation in India, the trend analysis using exponential method also shows the similar curve in growth, showing the projected power generation for the year 2008-09 in the growing pattern.

SWOT Analysis

SWOT analysis is a tool for auditing an organization and its environment. The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories:

Internal factors – The strengths and weaknesses internal to the organization. External factors – The opportunities and threats presented by the external environment to

the organization

S t r e n g t h s Well established and vast T & D network. Non conventional energy resource base Regulatory mechanism for tariff setting established Emergence of strong and globally comparable central utilities:

W e a k n e s s e s Persisting shortages Power theft Pitfalls in billing and revenue collection

O p p o r t u n i t i e s Natural sources Use of digital technology Rural electrification Untapped hydro power in northeast

T h r e a t s High AT & C losses (Aggregate technical and commercial losses) Waste generation leading to environmental damage

Technical Analysis

Important factors in site selection for Thermal power plants

In general, both the construction and operation of a power plant requires the existence of some conditions such as water resources and stable soil type. Still there are other criteria that although not required for the power plant, yet should be considered because they will be affected by either the construction or operation of the plants such as population centers and protected areas. The following list lists most of the factors that should be studied and considered in selection of proper sites for power plant construction:

Transportation network: Easy access to transportation network is required in both power plant construction and operation periods.

Gas pipe network: Vicinity to the gas pipes reduces the required expenses.

Power transmission network: To transfer the generated electricity to the consumers, the plant should be connected to electrical transmission system Therefore closeness to a electric network can play a roll.

Geology and soil type: The power plant should be built in an area with soil and rock layers that could stand the weight and vibrations of the power plant.

Earthquake and geological faults: Even weak and small earthquakes can damage many parts of a power plant intensively. Therefore the site should be away enough from the faults and previous earthquake areas.

Availability of laborHuman resource is very important factor and cheap manpower helps in reducing the cost of production.

Topography: It has been proved that high elevation has a negative effect on production efficiency of gas turbines. Therefore, the parameters of elevation and slope should be considered.

Rivers and floodways: The power plant should be at a reasonable distance from permanent and seasonal rivers and floodways.

Water resources: For the construction and operating of power plant different volumes of water are required. This could be supplied from either rivers or underground water

resources. Therefore having enough water supplies in defined vicinity can be a factor in the selection of the site.

Environmental resources: Operation of a power plant has important impacts on environment. Therefore, priority will be given to the locations that are far enough from national parks, wildlife, protected areas, etc.

Population centers: For the same reasons as above, the site should have an enough distance from population centers.

Need for power: In general, the site should be near the areas that there is more need for generation capacity, to decrease the amount of power loss and transmission expenses.

Climate: Parameters such as temperature, humidity, wind direction and speed affect the productivity of a power plant and always should be taken into account.

Area size: Before any other consideration, the minimum area size required for the construction of power plant should be defined.

Distance from airports: Usually, a power plant has high towers and chimneys and large volumes of gas. Consequently for security reasons, they should be away from airports.

Archeological and historical sites: Usually historical building …are fragile and at same time very valuable. Therefore the vibration caused by power plant can damage them, and a defined distance should be considered.

Raw Material procurement

Plant uses coal for generation of electricity. Its daily requirement of coal is about 10476 metric tons, delivered from ernakulam Coalfields, Idukki Coalfields and Kollam Coalfields. The coal supplied is sampled using a computerized system and sent to the laboratory for testing. This ensures that properly graded coal is being used.

LAND REQUIREMENT & AVAILABILITY

For a 675 MW thermal power plant, around 598 Ha. Of land will be required for Plant, Raw Water Storage, Green Belt, Ash Disposal etc. The break up of the land requirement is as follows:

Land Requirement Area (in Hectares)Main Plant (including power plant, water treatment plant & reservoir, adm. building etc.)

195 Ha.

Green Belt 200 HaAsh Disposal Area 162 Ha.

Others (rail, road, intake pipe corridors) 41 HaTotal 598 Ha

FUEL REQUIREMENT & AVAILABILITY

For a 675 MW Thermal Power Plant, raw coal is proposed to be used as a base fuel. The daily coal requirement shall be about 10476 tonnes based on gross calorific value of 2000 Kcal/Kg, @ MCR and 1230 Kcal/KWh unit heat rate. The annual coal requirement would be about 2.58 MTPA considering 90% plant load factor.

ASH UTILIZATION & ASH DISPOSAL

At this thermal power plant, various avenues for utilization of ash in application areas shall be explored.

With all possible efforts it is expected that fly ash generated at the thermal power stations shall be utilized in the areas of cement, road construction, mine filling etc.

Clean coal technologies

Clean coal technologies offer the potential for significant reduction in the environmentalemissions when used for power generation. Several of these systems are not only very effective in reducing SOx and NOx emissions but, because of their higher efficiencies they also emit lower amount of CO2 per unit of power produced. CCT's can be used to reduce dependence on foreign oil and to make use of a wide variety of coal available.

Projected Site Map

Process Layout

Thermal energy is derived from Boilers by burning Coal and the steam produced in Boilers rotates the Steam Turbines, which in turn act as the prime movers of Alternators for generating Electrical Power.In a Boiler or Steam Generator, water is heated until it turns into Steam at temperature above 350 degree Centigrade, depending on the pressure of the Boiler. Then it is further superheated to temperature above 500 degree Centigrade. When water is boiled into steam, its volume increases about 1600 times, producing heat energy – the force used to turn the turbine rotor that generates electricity.

In all Steam Generating Stations, the water used to create steam must be highly purified. This is important because the steam is forced against the row of blades that rotate the shaft. Steam constantly hits these metal parts, so even the tiniest impurities will erode the metal blades. Therefore water is softened, filtered and demineralised until it is as pure as distilled water. Each Generating Station has a chemical Lab where water purifying process is regularly monitored.

As the Steam releases heat energy to turn the turbine, its temperature drops. To reuse water used in Generating Power, the Steam is condensed back into water. To condense the steam, it is discharged into a vacuum and passed over cooling water in tubes.

Transport layout

Transportation network: Easy access to transportation network is required in both power plant construction and operation periods. Railway connection will be there upto coal storage and a one way Road will be running through the plant.

Distance from harbor: Usually, a power plant needs large volumes of coal. For this purpose sometimes coal is imported. Therefore keeping this in mind the plant will be situated in close proximity to a harbor, distance being approx. 5 kms.

To setup entire Transportation network the project cost will be 10 crore rupees.

Organizational Layout

Environmental Analysis

ANTICIPATED ENVIRONMENTAL IMPACTS & MITIGATION MEASURES

LAND USEThe proposed thermal power plant (675 MW) shall be installed in around 598 hectares of land at Uddipi region in Kerala. The land is fully vacant land, free from habitation. The construction activities are likely to attract a sizeable population. However, this will be only a temporary change and shall be restricted to construction period. As soon as the construction phase is over, the land use pattern modified to meet the requirement of construction phase shall be reversed. In view of the above, no change in land use pattern is envisaged due to construction and operation of the project.

WATER QUALITYWhile developing the water system for the project, utmost care has been taken to maximize the recycle/ reuse of effluents and minimize effluent quantity. As there will be no discharge of any effluent outside the plant boundary, there will be no impact on the surface water quality of the area.

NOISEThe operation of the proposed Thermal Power Plant is expected to generate relatively high and continuous noise levels especially near Compressor House of Thermal Power Plant. However, all the machineries will be within the permissible noise limit as per Environment Protection Act. Operational activities are not expected to cause any unduedisturbances to the people living in the proximate areas outside the plant boundary. Impacts of noise on workers could be minimized through the adoption of adequate protective measures in the form of (a) use of personal protective equipment (ear plugs, ear muffs etc.), (b) education and public awareness, and (c) exposure control through the rotation of work assignments in the intense noise areas.

ECOLOGYThe surrounding area of the proposed THERMAL POWER PLANT has some vegetation in the form of village orchards, roadside trees and agriculture. If the gaseous emission is controlled properly, there will not be significant impact. There will be sufficient plantation of trees at the plant site. All these measures, if implemented properly will ensure insignificant impact on the local vegetation from the proposed project and may improve the vegetation scenario of the area. The runoff from construction area may lead to a short-term increase in suspended solids and decrease in dissolved oxygen near the discharge point in receiving water body. This may lead to a temporary decrease in the photosynthetic activity of phyto-planktons, rise in

anaerobic conditions and food chain modification. However, for major part of the year during construction phase, no detectable impact is expected because water quality will not change significantly.

DEMOGRAPHY & SOCIO ECONOMICSAs the area is close to Dhenkanal Town, the skilled people from the town will be available to work here. So, there will be no major change of local occupational scenario, though the establishment of the proposed project will increase the direct and indirect jobs and other economic opportunities. There will be some development of secondary service market, which will be beneficial to the local economy.

GREEN BELT DEVELOPMENT PLANOut of the total plant area of 598 Ha, 200 acres shall be covered under green belt, which constitutes around 33% of the total project area.

ASH UTILIZATION & ASH DISPOSALAt this thermal power plant, various avenues for utilization of ash in application areas shall be explored. With all possible efforts it is expected that fly ash generated at the thermal power stations shall be utilized in the areas of cement, road construction, mine filling etc.

ENVIRONMENTAL MONITORING PROGRAMMEAn environmental monitoring programme has been developed for the proposed THERMAL POWER PLANT with the objective of assessing the changes in environmental conditions, if any, during operation of the project; monitoring the effective implementation of mitigatory measures envisaged and warning of any significant deterioration inenvironmental quality so that additional mitigatory measures may be planned in advance.

DISASTER MANAGEMENT PLANThe EIA Report includes a Disaster Management Plan covering elements of emergency planning like organization, communication, coordination, procedure, accident reporting, safety review checklist, on-site emergency plan and off-site emergency plan. During the commissioning of the project, a detailed Disaster Management Plan (DMP) shall be prepared and implemented at site, specifyingresponsibilities at various levels to be discharged in case of an emergency.

ENVIRONMENTAL MANAGEMENT PLANAn Environment Management Plan for construction and operation phases of the project has been prepared. For environmental management of proposed THERMAL POWER PLANT, an Environmental Management Group shall be created at site, which shall act as coordinator for environmental matters.

Social Cost Benefit Analysis

Introduction:The main reason for doing social cost benefits analysis in projects is to subject a project to a consistent set of general objective and national policy. The choice of reviewing different project not only in term of the profitability but also it must be view in the contest of national impact and this total impact has to be evaluated in terms of consistent and appropriate set of objectives.

SCBA method followed in this project:

Setting up a Thermal Power Project, the IDBI method has been used to analyze the Social cost & the benefit of this project.

About the method: The develop financial institutions of India, probably most of them own by the central of state govt evaluate all their projects mainly in terms of how much social benefit can happen through their projects. In this project the method followed by the IDBI to analyze the SCB will be used to find out the SCB of this project.

The social cost benefit analysis carried out by IDBI is based on three concepts:

i. Economic rate of return.ii. Effective rate of protection.

iii. Domestic resource cost.

Capital Expenditure Estimates of project

Particulars Amount in(Cr.)Land 148.5

Building 244.35

Plant and machinery ( imported) 163.35

Plant and machinery (indigenous) 676.35

Transportation cost 28.35

Technical know-how fess 55.35

Pre-operative expenses 19.71

BY IDBI Approach

Social Conversion Factor (SCF) or Proportions of Three Components, Tradable (T), labor (L) and Residual (R)

Item SCF or ProportionsLand SCF=1/1.5Building and construction Proportion: T=0.5, L=0.25, R=0.25Indigenous equipment SCF=0.7Transportation Proportion: T=0.65, L=0.25, R=0.1Engineering and know-how fees SCF=1.5Preoperative expenses SCF= 1Labor SCF=1Salaries SCF=0.5Repairs and maintenance SCF=1/1.5Water, fuel etc Proportion: T=0.5, L=0.25, R=0.25Electricity Proportion: T=0.71, L=0.13, R= 0.16Domestic stores SCF=0.8Other overheads SCF=1/1.5

Calculation of Social cost of initial outlay for 1 year.

Item Financial cost

Basis of conversion

Tradeable value ab initio

T L R

Land 148.5 SCF=1/1.5 98.99 - - -

Building

244.35

T=0.5L= 0.25R=0.25

- 122.175 61.08 61.08

Plant & Machinery(imported)

163.35 CIF Value 163.35 - - -

Plant & Machinery(indigenous)

676.35 CIF value 676.35 - - -

Transportation cost

28.35

T=0.65L=0.25R=0.1

- 18.42 7.08 2.835

Technical know-how 55.35 SCF=1.5 83.02 - - -

Preoperative expenses 19.71 SCF=1 19.71 - - -

Working capital requirement

95.215

CIF value 95.215 - - -

Total 1431.176 1136.63 140.59 68.16 63.91

Calculation of social value

Particulars Rs (crore)Tradable value ab Initio 1136.63Social cost of tradable component 93.72Social cost of labor component 34.08Social cost of residual component 31.95

1296.38

Projected annual Profitability statement

Amount (Crs)IncomeNet sales 546.75

Expenditure

Raw material (indigenous) 125.091

Labor 2.3625

Salaries 5.0625

Repairs & maintenance 0.7425

Fuel 0.3105

Depreciation 336.987

Other overheads 0.7425

Taxable Profit -206.253

Calculation of Social value

Item Financial cost

Basis of conversion

Tradeable value ab initio

T L R

Raw material (indigenous)

125.091 SCF= 0.8 100.07 - - -

Labor 2.3625 SCF=0.5 1.18 - - -

Salaries 5.0625 SCF= 0.8 4.05 - - -

Repairs & maintenance

0.7425 SCF=1/1.5 0.497 - - -

Fuel

0.3105

T=0.5L=0.25R=0.25

- 0.155 0.07 0.07

Depreciation 336.987 - - - - -

Other overheads

0.7425 SCF=1/1.5 0.497 - - -

Total 106.29 0.155 0.07 0.07

Particulars Rs (crore)Tradable value ab Initio 106.29Social cost of tradable component 0.103Social cost of labor component 0.035Social cost of residual component 0.035

106.46

CIF value of output=1,56,21,40,000*3.5= Rs 546.75 crs

Social Net Benefit per annum= Rs (546.75-106.46) = Rs 440.29

STRUCTURING OF THE PROJECT

Project Structuring

Today projects need to be better planned, more transparently presented, and then to be monitored and reported on according to key performance indicators. Likewise, the demands for speed and higher returns from a project are constantly growing, and so only the best-integrated, business driven structures are able to achieve the desired project outcomes.

So the project structuring can be define as a multifunctional exercise that selects the best implementation strategy, sets the scope according to a defined basis, selects the best contracting strategy, and then plans and schedules all business and project aspects from mobilization through to ramp-up.

Project Structuring also includes: organizational Structure Capital Structure Ownership Board Contractual Corporate Participants Common Facility Customize Facility

And besides this hierarchical structure of the organization, there are different works allotted to specialized officers. These works include

Business strategy Business development Technology Research Finance Operations Compliance Human resources

Each of the above department is headed by a chief officer and has various managers to perform specialized functions.

Capital structure

It is the way of financing of organization through the different means of debt, equity or the combination of both.

This project of shopping mall comprises of 50% debt and 50% equity and hence D/E ratio is 1 in this case.

Now let us see what is the cost of financing debt and equity and this also called as cost of capital.

Cost of capital is the opportunity cost for a particular investment. It is the rate of return that an individual or organization would otherwise expect to receive, given the same level of risk as the investment that is chosen. Two terms used in cost of capital are cost of debt and cost of equity. In basic terms, cost of debt is calculated as the rate of a "risk free" bond with the same term structure as the investment, added with a default premium. Cost of equity, likewise, can be counted as a similar rate of return on a risk free investment, with an added premium for the expected risk.

Cost of debt

The cost of debt is computed by taking the rate on a risk free bond whose duration matches the term structure of the corporate debt, then adding a default premium. This default premium will rise as the amount of debt increases (since the risk rises as the amount of debt rises). Since in most cases debt expense is a deductible expense, the cost of debt is computed as an after tax cost to make it comparable with the cost of equity (earnings are after-tax as well).

Cost of equity

Cost of equity = Risk free rate of return + Premium expected for risk

Capital asset pricing model (CAPM)

The capital asset pricing model (CAPM) is used in finance to determine a theoretically appropriate price of an asset such as a security. The expected return on equity according to the capital asset pricing model where the market risk is normally characterized by the β parameter is given by:

Where:

Es: The expected return for a security

Rf: The expected risk-free return in that market (government bond yield)

βs: The sensitivity to market risk for the security

RM: The historical return of the stock market/ equity market

(RM-Rf): The risk premium of market assets over risk free assets.

The model states that investors will expect a return that is the risk-free return plus the security's sensitivity to market risk times the market risk premium. The risk free rate is taken from the lowest yielding bonds in the particular market, such as government bonds. The sensitivity to market risk (β) is unique for each firm and depends on everything from management to its business and capital structure. This value cannot be known "ex ante" (beforehand), but can be estimated from ex post (past) returns and past experience with similar firms.

Weighted average cost of capital

The Weighted Average Cost of Capital (WACC) is used in finance to measure a firm's cost of capital. The total capital for a firm is the value of its equity (for a firm without outstanding warrants and options, this is the same as the company's market capitalization) plus the cost of its debt (the cost of debt should be continually updated as the cost of debt changes as a result of interest rate changes). Notice that the "equity" in the debt to equity ratio is the market value of all equity, not the shareholders' equity on the balance sheet. To calculate the firm’s weighted cost of capital, we must first calculate the costs of the individual financing sources: Cost of Debt Cost of Preference Capital Cost of Equity Capital. Calculation of WACC is an iterative procedure which requires estimation of the fair market value of equity capital.

Calculations

Means of Finance

Particulars Rs.(In Cr) Rs.(In Cr)Means Of FinanceEquityPromoters 303.75

Public 222.75

Total 526.5

DebtTerm Loan From Financial InstitutionsIDBI 513

IFCI 371.25

ICICI 303.75

Total 1188

Term Loan From BankSBI 195.75

Canara Bank 60.75

Total 256.5

Total Amount 1971

Public Information DeriveGiven Pre-tax cost of debt =15%

BeD:E T

Ba using equation 17 Tax bracket 30%  

Reliance power 1.23 1.8 40% 0.591:1 debt equity to fund the project

Tata power 0.93 2.2 35% 0.38 Rf=10%    Ksg power 1.1 1.4 40% 0.60 Rm=18%    Find average       0.52      

Now use equation 16, page 238: Be=Ba*((1+(d/e)*(1-T))

For new project Be 1.26 1.4 2.2 1.152718

The Value of equity beta thus obtained is put in CAPM

Ke = Rf+β(Rm-Rf) = 0.200601

Derive WACC = 0.0525

Ownership Structuring

To own and operate property, structures (often known today as legal entities) have been created in many societies throughout history. The concept of ownership has existed for thousands of years and in all cultures. Over the millennia, however, and across cultures what is considered eligible to be property and how that property is regarded culturally is very different. Ownership is the basis for many other concepts that form the foundations of ancient and modern societies such as money, trade, debt, bankruptcy, the criminality of theft and private vs. public property. Ownership is the key building block in the development of the capitalist socio-economic system.

Legal advantages or restrictions on various types of structured ownership have existed in many societies past and present. Cooperatives, corporations, trusts, partnerships, condominium associations are only some of the many varied types of structured ownership; each type has many subtypes. To govern how assets are to be used, shared or treated, rules and regulations may be legally imposed or internally adopted or decreed.

This Thermal power company is a limited company which has its own identity. The company has its own legal status (like a person). It is separate from its shareholders (its owners). It is legally formed company, which includes registering the company name, creating a constitution (rules) for the company and issuing shares. Company also has a separate Inland Revenue number.

The company is administered by Directors, who are not shareholders in the company. All Directors are legally bound to act in keeping with the relevant legislation and the Company’s own constitution.

The company profits are taxed at the flat company tax rate of 30%.  The advantage of setting up a limited company to own my investment property is that it’s a separate legal entity, so I can separate business and my personal assets.  This helps protect my personal assets if anything goes wrong. 

In our company depending on internal rules and regulations, certain classes of shares have the right to receive increases in financial "dividends" while other classes do not. After many years the increase over time is substantial if the business is profitable. Examples of this are common shares and preferred shares in private or publicly listed share capital corporations.

Board Structuring

In this project board of directors consists of 10 persons i.e. 1 CEO and 9 Senior Managers and they will be responsible of every decision regarding the organization. The role of the Board of Directors is to manage the corporation. This will likely include establishing policies which the organization will follow, and making major business decisions such as:

Establishing and amending bylaws; Issuing dividends; Approving major contracts or mergers;Making key decisions regarding real estate owned or managed by the corporation; Electing or appointing officers.

Contractual Structuring

This portion will include all the business proposals or parts of the business which I am going to give on contracts or to which I am going to outsource.

It will include housekeeping, Maintenance, Security and logistics responsibilities.

Corporate participants: - I have taken different place for professional corporate offices like NTPC, Reliance Power, JSW Power and more like this.

Common Facility

There are so many common facilities for the workers and officers are there. These are

Eco-friendly working environment. 24*7 transportation facility. Cafeteria CCTV (For security) Centralized A/c in the Administrative offices.

Financial Projection

Cost of the Project

Particulars Rs (In lakh)

Land & site development

Building & Civil work

Plant & Machinery

Know How & Engg. Fees

Miscellaneous Assets

Preliminary & Preoperative expenses

Working Capital Margin

15099.75

24502.5

83868.75

5535

9787.5

1971

4779

Total Project Cost 145543.5

Calculation of Land & Site development

Particulars Rs (In lakh)

Land

Site Development

Leveling the Plot

Laying of Factory Road

Construction Of Boundary wall

Construction of main gate

Tube well digging

14850

74.25

60.75

87.75

20.25

6.75

15099.75

Construction of Building & Civil Works

Particulars Rs (In lakh)

Construction of main factory

Building administrative office

Construction of Godown

Civil works for utilities

26426.25

3645

2733.75

273.375

33078.38

Calculation of plant & machinery

Sl. No Particulars Rs (In lakh)

A.

B

C

D

E

F.

Boiler furnace and steam drum

Super heater

Reheater

Fuel preparation system

Air path

Miscellaneous

Total ( A+B+C+D+E+F)

Tax & Duties@ 16%

Sales Tax @ 4%

Freight, Octroi, Loading & Unloading

Erection & Commissioning

11475

12825

10192.5

11407.5

10057.5

13432.5

69390

11102.4

80492.4

3219.75

83712.7568.8587.75

Total Cost 83868.75

Calculation of Technical Know how Fees

Particulars Rs (In lakh)

Expenses On Foreign Technicians

Know how & Engg. Fees

Royalty & compensation payable

1620

1822.5

2092.5

5535

Miscellaneous Fixed Assets

Particulars Rs (In lakh)

Boiler

Piping

Laboratory Equipment

Testing Equipment

Furniture & office equipment

Payment for Licenses

Water Treatment Equipment

67.5

33.75 3422.25

2085.75

2058.75

20.25

2099.25

Total Cost 9787.5

Calculation of Preliminary & Preoperative expenses

Particulars Rs (In lakh)

Consultancy charges

Rent, Rates ,Taxes

Promotional Expenses

Organizational training Cost

Interest during construction

Postage, telephone, telegram

Printing & Stationary

Guarantee Commission

67.5

168.75

742.5

202.5

607.5

20.25

33.75

128.25

1971

Means of finance

Particulars Rs.(In Cr) Rs.(In Cr)Means Of FinanceEquityPromoters 303.75

Public 222.75

Total 526.5

DebtTerm Loan From Financial InstitutionsIDBI 513

IFCI 371.25

ICICI 303.75

Total 1188

Term Loan From Bank

SBI 195.75

Canara Bank 60.75

Total 256.5

Total Amount 1971

Monthly Salary Estimation

SL.NO Position NO. Salary

1 Chairman 1 33.75 lakh

2 Vice Chairman 1 20.25 lakh

3 Company secretary 1 10.8 lakh

4 Quality manager 2 9.45 lakh

5 Human Resource Manager 2 8.775 lakh

6 Legal Affairs (Officer) 4 8.1 lakh

7 CFO 1 20.25 lakh

8 Finance Manager 3 9.45 lakh

9 Auditor 2 6.75 lakh

10 System manager 4 10.8 lakh

11 Operation manager 4 10.8 lakh

12 Marketing Manager 4 10.125 lakh

13 Supervisor 2 33.75 thousand

14 Ground Staff 225 24.3 thousand15 Labor 1525 16.2 thousand16 Security 16 20.25 thousand

17 Sweepers 5 13.5 thousand

Technical Man Force

1 Production Manager 2 8.775 lakh

2 Civil Engineer 2 7.425 lakh

3 Computer Engineer 4 8.775 lakh

4 Metal Engineer 2 7.425 lakh

5 Electrical Engineer 2 7.425 lakh

6 Mechanical Engineer 2 7.425 lakh

Total salary=741.15 lakh

Salary are expected to increase by 5% every year.

First year salary=741.15 lakh

Second year salary=778 .5

Third year salary=817.3

Fourth year salary=857.6

Fifth year salary=900.4

Sixth year salary=945.8

Seventh year salary=1042.8

Eighth year salary=1094.6

Ninth year salary=1149.2

Tenth year salary=1206.8

Eleventh year salary=1267.4

Twelfth year salary=1330.1

Thirteenth year salary=1396.1

Fourteenth year salary=1465.4

Fifteenth year salary=1539.2