2. Components of ARR of GenCo
• Fixed Charges
– Return on Equity
– Interest on loan capital
– Depreciation & AAD;
– Interest on working capital;
– Operation and maintenance expenses;
– Cost of secondary fuel oil (for coal-based and lignite fired generating
stations only);
– Special Allowance in lieu of R&M or separate Compensation Allowance
• Energy Charges
• Special allowance in lieu of R&M or separate compensation
allowance, wherever applicable.
3. Norms of Operations
• Availability of generation plant – 85%
• PLF for incentives – 80%
• Secondary Fuel Oil Consumption for Coal genCo – 1 ml/ kWh
• Secondary Fuel Oil Consumption for Lignite fired genCo – 2 ml/ kWh
• Auxiliary energy consumption for Coal Plants – 8.5%
• Auxiliary energy consumption for Gas and Liquid Plants – 3% for Combined
Cycle, 1% for Open cycle
• Limestone consumption norms
• Normative Annual Plant Availability factor for Hydro plants redefined in
new regulation
• NAPAF for AC Transmission system – 98%
• NAPAF for DC bipole Transmission link – 92%
• NAPAF for DC back to back Transmission link – 95%
4. Return on Equity
• 30% of the Capital Investment in Plant, Machinery and its
offices
– Where actual equity is more than 30%, excess equity shall be treated
as debt
– Where actual equity is less than 30%, actual equity shall be considered
for Return
• Base Pretax Return 15.5%/(1-tax rate) (Earlier Post tax 14%)
• Base pretax Return 16.0 %/(1-tax rate) for projects
commissioned after 01.04.2009 within prescribed Timeline
• The Tax on income shall be trued at actual every year after
assessment
5. Interest on Loan Capital
• The benefit of swapping of loan shall be shared
between genCo/ TransCo and beneficiary in ratio 1: 2
• Normative loan repayment equal to depreciation
• Accordingly interest shall be calculated on balance
normative loan at weighted average interest rate.
• Cost of hedging and foreign exposure shall be
recoverable from beneficiary
6. Depreciation & AAD
Regulation 2004 Regulation 2009
Coal Thermal Plant 3.60% +AAD 5.28% for 12 years
Gas/Diesel/ Liquid 6.00% +AAD 5.28% for 12 years
Fuel Thermal Plant
Hydro Plant 2.57% +AAD 5.28% for 12 years
Transmission Line 5.28% for 12 years
Land and Civil 0% 0.00%
Building
Licence fee/ lease 3.34%
life
Depreciation D & AAD D
Depreciation after Remaining unavailed depreciation to
debt repayment period spread on remaining useful life of
asset.
7. Interest on Working Capital
Regulation 2004 Regulation 2009
Coal/ Lignite/ 1.5 month for pit head plants at 1.5 month for pit head plants at
limestone cost normative Plant availability normative Plant availability
Coal/ Lignite/ 2 month for non-pit head plants 2 month for non-pit head plants at
limestone cost at normative Plant availability normative Plant availability
Secondary Fuel 2 month at normative Plant 2 month at normative Plant
oil Stock availability availability
Gas Station One month of Oil/ Gas One month of Oil/ Gas
Maintenance 1% of GFA in first year 20% of O&M Cost for Coal/ Lignite
Spares Thereafter escalated by 6% Plant
every year 30% of O&M Cost for Gas Plant
15% of O&M Cost for Hydro Plant
Receivables 2 months fixed + variable 2 months fixed + variable charges
charges calculated at target calculated at target availability
availability
O&M Cost One month One month
Interest rate SBI PLR as on 1.4.2004 SBI PLR as on 1.4.2009
Notional charge Notional charge
9. Other matters in generation &
Transmission
• Rebate 2% for payment through L/c
• Late Payment Surcharge 1.25% after 60 days
from date of billing.
• UI Charges – Variation between actual
generation and scheduled generation
10. Comparison of Key parameters
Parameter Regulation 2004 Regulation 2009
Useful Life of Coal/ 25 years 25 years
Lignite Thermal Plants
Useful Life of Gas & 15 Years 25 Years
Liquid Fuel
AC/ DC S/s 25 years 25 years
Hydro Stations 35 years 35 years
Transmission Lines 25 years 35 years
Return on Equity 14% 15.50%
16.00%
Refinancing the Loan Cost to be borne by Cost to be borne by
beneficiary if there is net beneficiary if there is net
benefit benefit
All benefit to the Benefit to be shared in
beneficiary GenCo 67%: beneficiary
33%
11. CDM benefit
• CDM revenue of 1st year for GenCo/ TransCo – 100%
• CDM revenue of 2nd year for GenCo/ TransCo – 90%
• CDM revenue of 3rd year for GenCo/ TransCo – 80%
• CDM revenue of 4th year for GenCo/ TransCo – 70%
• CDM revenue of 5th year for GenCo/ TransCo – 60%
• CDM revenue of 6th year for GenCo/ TransCo – 50%
• CDM revenue of subsequent year for GenCo/ TransCo – 50%
