BIHAR ELECTRICITY REGULATORY COMMISSION Vidyut Bhawan-II, Bailey Road, Patna Suo-motu Proceedings No. 09/2013

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1 BIHAR ELECTRICITY REGULATORY COMMISSION Vidyut Bhawan-II, Bailey Road, Patna IN THE MATTER OF: Appearance : Suo-motu Proceedings No. 09/2013 Determination of Generic Levelised Generation Tariff for FY for Power Generated from Solar Power PV Projects including Rooftop Solar PV and Small Power Projects and Solar Thermal Power Projects. Quorum: 1. Sri U. N. Panjiar- Chairman 2. Sri S. C. Jha- Member 1. Sri Rakesh, EEE (Inter-state) and Shri Mukesh Kumar, AE (Inter-state) 2. Shri Awnish Anand, Senior Officer, Purchase On behalf of Bihar State Power (Holding) Co. Ltd. On behalf of HPCL Biofuels Ltd. 3. Shri B. P. Suman, J.E. On behalf of BREDA 4. Shri Shambhu Nath Prasad, Project Officer (Solar) 5. Shri Ashish Nandan, Manager Regulatory Affairs) On behalf Beltron Telecommunication Ltd. On behalf of Moser Baer Engg. and Construction Ltd. Dates of Hearing : and Order reserved for / Order Dated : The Bihar Electricity Regulatory Commission (BERC) (Terms and Conditions for Tariff Determination from Solar Energy Sources) Regulations, 2010, hereinafter called Regulations, 2010, were approved 1

2 by BERC. In exercise of powers conferred to it under section 61 read with section 181 (2) (zd) of the Electricity Act, 2003 and were issued on 2 nd August, Three years control period specified in the Regulations, 2010 ended on As such norms for determination of tariff for Solar PV and Solar Thermal Projects are to be fixed. CERC issued (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations, 2012 on and fixed norms on different parameters for determination of tariff for generation from renewable energy sources. 2. The Commission is empowered to specify the terms and conditions for determination of tariff under section 61 of the Act. Section 62 (1) (a) of the Act stipulates that the Appropriate Commission shall determine the tariff for supply of electricity by a generating company to a distribution licensee. The Commission has to determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State under section 86 (1) (a) of the Act. 3. Regulation 39 of the Regulations, 2010 empowers the Commission to amend any provision of the Regulations, 2010and may from time to time add, vary, alter, modify or amend any provisions of the Regulations, 2010 on its own motion or on any application made before it by an interested person. 4. The Commission decided to initiate a suo-motu proceedings under Regulation 8 of the BERC (Terms and Conditions for Tariff Determination from Solar Energy Sources) Regulations, 2010 pursuant to revised norms approved by Central Electricity Regulatory Commission for determination of tariff for electricity generated from Solar PV and Solar Thermal Power Projects and issued a suo motu petition to obtain views from general public and stakeholders on determination of generic levelised tariff for FY for Solar PV Projects including Rooftop Solar PV and small Power Projects which are commissioned upto and for Solar 2

3 Thermal Projects which are commissioned upto and for which PPA is signed upto Accordingly suo-motu proceedings no. 9/2013 was initiated for fixing norms for determination of generic levelised generation tariff for FY for power generated from Solar PV and small power projects which are to be commissioned upto and Solar Thermal Projects which are to be commissioned upto and for which Power Purchase Agreement is signed upto The proposed draft was put on the website of the Commission and a public notice was issued on inviting objections/suggestions/comments from general public and all stakeholders latest by The notice was published in Hindustan Times dated 26 th March, 2013 (daily newspaper in English) and Danik Jagran dated 26 th March, 2013 (daily newspaper in Hindi). A copy of the proposed draft was also sent to Ministry of Power, Govt. of India, Ministry of New and Renewable Energy, Govt. of India, Central Electricity Authority, Central Electricity Regulatory Commission, Energy Department, Govt. of Bihar, all SERCs/JERCs, Bihar State Power (Holding) Co. Ltd., South Bihar Power Distribution Co. Ltd., North Bihar Power Distribution Co. Ltd., PTC Bermaco Green Energy System Ltd., Glatt Solutions Pvt. Ltd., Claro Energy Pvt. Ltd., Cogeneration Association of India, Bihar Sugar Mills Association, New Swadeshi Mills, Narkatiyaganj, Bharat Sugar Mill Sidhwalia, Harinagar Sugar Mills Ltd., Kumar Tech Bio Product Ltd., Alex Green Energy Pvt. Ltd., HPCL Biofuels Ltd., Vishnu Vishal Paper Mills Pvt. Ltd., Bihar Chamber of Commerce, Bihar Industries Association and Bhojpur Chamber of Commerce inviting objections/suggestions/comments so as to reach Secretary of the Commission by Public hearing was held on , but no comment/suggestion was received from general public and any of the stakeholders including Bihar State Power (Holding) Company Ltd. (BSPHCL). BSPHCL sought twenty 3

4 days time for filling response, which was allowed and the next date of hearing was fixed on Written comments/suggestions were received from the following stakeholders : (i) Bihar State Power (Holding ) Co. Ltd. (ii) Bihar Steel Manuacturers Association (iii) Bihar Chamber of Commerce and Industries (iv) Moser Baer Engineering and Constructions Ltd. 8. The matter was finally heard on Oral submissions were also made on behalf of BSPHCL and Moser Baer Engineering and Constructions Ltd. 9. It was submitted on behalf of Bihar Steel Manufactures Association and Bihar Chamber of Commerce and Industries that the decision of the Hon ble Commission to allow the Licensees to purchase power at exhorbitant rates from non-conventional source of energy is totally against the interest of the consumer and needs to be corrected as early as possible. The Hon ble Commission may ask the State Government to compensate the additional cost resulting from the difference of average cost of power between the non-conventional and conventional source of power, if the State Govt. wants Licensees to purchase electricity from non-conventional sources, so that unwarranted burden may not be passed on to the already harassed consumers of the State. 9.1 The Commission is empowered to specify terms and conditions for the determination of tariff under section 61 of the Electricity Act, In doing so it has to be guided by the principles and methodologies specified by the Central Commission for determination of the tariff applicable to generating companies and transmission licensees. It has also to be guided by the promotion of co-generation and generation of electricity from renewable source of energy. 4

5 For the determination of tariff, the Commission has also to be guided by the National Electricity Policy and tariff policy under section 61 (i) of the Electricity Act, The National Electricity Policy was notified by the Central Government on the 12 th February, 2005 and the tariff policy on the 6 th January, 2006 under section 3 of the Electricity Act, Clause of the National Electricity Policy requires adoption of suitable promotional measures for encouraging higher generation from non-conventional energy sources while clause requires to make efforts to reduce capital cost of the projects based on nonconventional and renewable source of energy and promote competition within such projects for energy cost reduction. Clause 6.4 of the Tariff Policy provides for preferential tariff to be determined by the Commission for new and renewable source of energy. It is thus clear that the Commission has to promote cogeneration and generation of electricity from renewable source of energy, preferential tariff is also to be determined by the Commission for new and renewable source of energy. These provisions have been made keeping in mind that new and renewable source of energy is costlier compared to conventional source of energy. Moreover the Commission is not empowered under the Act to ask the State Government to compensate the additional cost resulting from the difference of average cost of power between the non-conventional and conventional source of power. Besides, impact of power purchase from new and renewable source of energy may not be more than 1 Paisa per unit in FY 13-14, which is clearly evident from the table provided in the comments submitted on behalf of both Bihar Steel Manufacturers Association and Bihar Chamber of Commerce and Industries. 9.2 The Commission notified the Bihar Electricity Regulatory Commission BERC (Renewable Purchase Obligation, its Compliance and REC 5

6 Framework Implementation) Regulations, 2010 under section 61, 66, 86 (i) (e) and 181 of the Electricity Act, Renewable Purchase Obligation has been specified under clause 4.1 of the Regulations. Every obligated entity is duty bound to comply with these regulations. 9.3 The Commission, thus, does not find any merit in the contention of Bihar Steel Manufacturers Association and Bihar Chamber of Commerce and Industries. Common norms for both Solar PV and Solar Thermal Projects 10. Control Period or Review Period : 10.1 No change in three years control period/review period has been proposed in the draft No comment has been received from any of the stakeholders except BSP(H)CL. It has been submitted on behalf of BSP(H)CL that control period should be one year instead of 3 years in view of the fact that the tariff of the project is closely related to the capital cost and benchmark capital cost of solar project is reviewed annualy by the Commission It is a fact that benchmark capital cost of solar power projects may be reviewed annually by the Commission as per provision under Regulation 5 of the Regulations, But control period or review period means the period during which the norms for determination of tariff specified in the regulations shall remain valid. The CERC has fixed the control period or review period of five years starting from FY with a provision that the benchmark capital cost for Solar PV and Solar Thermal Projects may be reviewed annually by the Commission. The Regulations, 2010 makes provision of 3 years control period or review period first year of which started from the date of notification of the Regulations, 2010 to 31 st March, The Commission, thus, retains 3 years control period, first year of which shall start from the date of this order to 31 st March, The last year of the control period shall be FY However the 6

7 benchmark capital cost of Solar PV and Solar Thermal Projects may be reviewed annually by the Commission. 11. No comment has been received from any of the stakeholders on Tariff period, Debt Equity Ratio and Loan Tenure. The Commission, therefore, makes no change in these parameters and retains tariff period of 25 years, Debt Equity Ratio of 70:30 and 10 years Loan Tenure. 12. Interest Rate : 12.1 As per the existing norms in the Regulations, 2010, the interest rate shall be average long term prime lending rate (LTPLR) of State Bank of India (SBI) prevalent during the previous year plus 150 basis points. As per CERC Regulations, 2012, the interest rate shall be SBI Base Rate during first six months of the previous year plus 300 basis points. In view of significant policy shift from Prime Lending Rate (PLR) to Base Rate for banks as per RBI guidelines, interest rate on the basis of average State Bank of India (SBI) Base Rate prevalent during the first six months of the previous year plus 300 basis points has been proposed BSPHCL submitted that the consideration of the additional interest rate i.e. 300 basis point over and above the SBI base rate coupled with high rate of return proposed by the Commission on equity to be employed by the developer will be an additional income to the developer and at the same time it may have considerable impact on the tariff to be paid by the Distribution Licensee and ultimately by the end consumers. It has further been submitted that due to reduction in repo rate for FY under the liquidity adjustment facility by 25 basis points from 7.5 to 7.25, the marginal standing facility rate determined with a spread of 100 basis points above the repo rate, and also Bank rate, stand adjusted to This thereby implied that the Bank will get money at cheaper rate, which would ultimately lead to reduction in the lending rate. Besides, PPAs have been signed with solar 7

8 generation projects for supply of entire power at preferential tariff determined by the Commission and payment is being ensured through LC. As such the solar project Developers are fully insulated from any risk and interest rate of SBI Base rate plus 300 basis points is not justified. BSPHCL is in favour of interest rate equivalent to SBI Base Rate plus 200 basis points In view of significant policy shift from Prime Lending Rate (PLR) to Base Rate for Banks as per SBI guidelines, the Commission is inclined to consider interest rate based on Base rate. Accordingly, the Commission decides to fix interest rate equivalent to State Bank of India (SBI) Base Rate prevalent during the first six months of the previous year plus 300 basis points in line with the CERC RE Regulations, Solar generation in the State needs promotion as present solar generation in the state is nil, Base Rate prevalent in SBI during the first six months in FY is 10. As such interest rate shall be 10 plus 300 basis points equivalent to interest rate of Depreciation : No comment has been received from any of the stakeholders on this point. The Commission, therefore, decides to make no change in it. The depreciation shall be allowed upto maximum value of 90 of the capital cost of the asset. The depreciation rate for the first 10 years of the tariff period shall be 7 percent and remaining depreciation shall be spread over the remaining useful life of the project from 11 th year onwards. 14. Return on Equity : 14.1 As per existing norms in the Regulations, 2010, the normative return on equity shall be pre-tax 19 percent per annum for the first 10 years and pre-tax 24 percent per annum from 11 th years onwards. The normative return on equity has been proposed 20 8

9 percent per annum for the first 10 years and 24 per annum from 11 th years onwards in conformity with the CERC (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations, No comment has been received on this point from any of the stakeholders except BSPHCL. It has been submitted by BSPHCL that return on equity should be 19 for the first 10 years and 24 for the balance period In order to attract investment the Commission adopts ROE of 20 percent per annum (pre-tax) for initial 10 years and 24 percent per annum (pre-tax) for subsequent periods in tune with CERC RE Regulations, Interest on Working Capital : 15.1 As per the existing norms in the Regulations, 2010, the interest on working capital shall be at interest rate equivalent to average State Bank of India Short Term Prime Lending Rate (STPLR) during the previous year plus 100 basis points. As per CERC Regulations, 2012, the interest rate on working capital shall be at interest rate equivalent to the average State Bank of India Base Rate prevalent during the first six months of the previous year plus 350 basis points. In view of policy shift from Prime Lending Rate (PLR) to Base Rate for Banks as per RBI guidelines, interest Rate on the basis of average State Bank of India (SBI) Base rate prevalent during the first six months of the previous year plus 350 basis points has been proposed Comments on this matter have been received from BSPHCL only. It has been submitted on behalf of BSPHCL that interest on working capital should be equivalent to SBI Base Rate plus 200 basis points As already explained under para 12.3 above, the Commission is inclined to consider interest rate based on Base Rate. Accordingly 9

10 the Commission decides to fix interest rate equivalent to State Bank of India (SBI) Base Rate prevalent during the first six months of the previous year plus 350 basis points in tune with CERC RE Regulations, Average Base Rate for the first six months prevalent in SBI in FY is 10. As such interest rate on working capital shall be 10 plus 350 basis points equivalent to interest rate of Discount Factor : No change has been proposed in discount factor, which as per existing Regulation 22 (ii) is equivalent to weighted average cost of capital. No comment has been received from any of the stakeholders on this point. The Commission thus retains the existing regulations related to Discount Factor. At 13 interest rate for loan component and 16 post tax ROE, the discount factor is { 13 x 0.7 ( ) + (16 x 0.30) }, which comes to Norms for Solar PV Power Projects 17. Capital Cost 17.1 The Commission proposed normative capital cost of Rs. 800 /MW for FY for Solar PV projects considering proposed benchmark capital for Solar PV Projects by CERC in its order dated It has been submitted by Moser Baer Engineering and construction Ltd. that Hon ble CERC while determining the Benchmark Capital Cost norm for Solar PV Power Projects and Solar Thermal Power Projects applicable during FY in its order dated in petition no. 242/SM/2012 (suo-motu) has, inter-alia, decided (in para 12) that an annual degradation of 0.5 from fourth year 10

11 onwards will be taken and the same will also be computed while determining the levelised generation tariff for Solar PV Power for the FY It has been submitted by BSPHCL that Mr. Tarun Kapoor, Joint Secretary, MNRE presented the solar power scenario in India in the 27 th meeting of Forum of Regulators (FOR) held on Dec. 16,2011 and said that MNRE is now sure that Solar Power would attain grid parity by It has further been submitted that due to drop in demand in the biggest market world over, European, Chinese and American manufacturers are left with huge inventory of solar modules and cells and these are being liquidated/dumped in India at throw away prices. The U.S. company Solyndra has sold some solar modules at a dirt cheap price of 55 cents/watt to some solar Power Developers of India. The Commission would like to approve an appropriate capital cost considering the declining capital cost and other financial parameters. The capital cost proposed by Commission in the draft proposal may be reviewed CERC vide order dated in suo-motu petition no. 242/SM/2012 has fixed benchmark project cost of Rs /MW for Solar PV Projects for FY for determination of tariff. Module cost of 0.60 US$/WP has been approved taking downward trend into consideration. Exchange rate of Rs /US$ has been considered. An additional 0.5 of the module cost has also been allowed every year after 4 th year on notional basis and included in the benchmark project cost. The Commission considers this project cost reasonable and approves benchmark project cost of Rs /MW for Solar PV Projects for FY for determination of tariff. 11

12 18. Capacity Utilisation Factor : No comment has been received from any of the stakeholders on this smatter. The Commission,thus, retains the existing 19 CUF for Solar PV and other small solar power projects. 19. Operation and Maintenance Expenses : No comment has been received from any of the stakeholders on this matter. The Commission, therefore, decides to approve proposed O&M expenses of Rs /MW for the first year of operation for FY The existing annual escalation provision of 5.72 in O&M expenses under Regulation 27 (2) of the Regulations, 2010 is retained. Norms for Solar Thermal Power Projects 20. Capital Cost : 20.1 The Commission proposed normative capital cost of Rs /MW for Solar Thermal Power Projects for FY considering proposed benchmark capital cost for Solar Thermal Power Projects by CERC in its order dated BSPHCL has requested to review the capital cost proposed by the Commission for Solar Thermal Power Projects in view of declining capital cost and other financial parameters CERC vide order dated in suo-motu petition no. 242/SM/2012 has fixed benchmark project cost of Rs /MW for Solar Thermal Power Projects for FY for determination of tariff taking study report on concentrated Solar Power: Heating up India s Solar Thermal market under National 12

13 Solar Mission- September, 2012, prepared by Council on Energy, Environment and Water and Natural Resources Defence Council, into consideration. The Commission considers this project cost reasonable and retains the project cost of Rs lakh/mw as proposed. 21. Capacity Utilisation Factor : No comment has been received from any of the stakeholders on this matter. The Commission, therefore retains the existing 23 CUF for Solar Thermal Power Projects. 22. Operation and Maintenance Expenses : No comment has been received from any of the stakeholders on this matter. The Commission, therefore, decides to approve proposed O&M expeses of Rs /MW for the first year of operation for FY The existing annual escalation provision of 5.72 in O&M expenses under Regulation 31 (2) of the Regulations, 2010 is retained. 23. Auxiliary Consumption : No comment has been received from any of the stakeholders on this matter. The Commission, therefore, retains the existing auxiliary consumption of 10 for Solar Thermal Projects as provided under Regulation 32 (1) of the Regulations, Moser Baer Engineering and Construction Ltd. has requested that 0.5 annual degradation be allowed from fourth year onwards as decided by CERC. It has further been submitted that this can be allowed in two ways as (i) Reduction in geneation every year (ii) Addition of capacity equivalent to annual degradation. It has been requested to consider alternative (i) as alternative (ii) has the following disadvantages : 13

14 A. Addition of 5kW/MW modules would require its Capital Cost to be known for different years while computing the tariff. This will not only complicate the calculation of tariff but would also be difficult to give projections of capital cost norms for 25 years. B. The added capacity of modules will have further degradation and computing degradation of initially installed modules and then of the added modules will unnecessarily complicate the calculations. Further, modules added in the last few years will still have almost 25 years left as their useful lives, whereas the PPA would have expired after initial 25 years. C. Once a Solar PV Power Plant is commissioned it would be difficult proposition to add additional 5kW modules/mw as the space and other constraints at site would generally not permit the same. After final hearing on , corrigendum to the comments on draft Determination of Generic Levelised Generation Tariff for FY for power generated from solar power PV projects including Rooftop Solar PV and small power projects and Solar Thermal Power Projects has also been received from Moser Baer Engineering and Constructions Ltd. on In this corrigendum it has been requested that constant 0.5 degradation be allowed every year on the installed capacity as Solar PV modules degrade constantly over the years of its life irrespective of the amount of degradation in the previous year instead of previous submission in which degradation had been computed on reduced generation every year The Commission is not in favour of alternative (i) as generation reduces every year. Commission s main concern is generation and it has to promote generation from renewable source of energy for 14

15 which there is provision of preferential tariff. Alternative (ii) makes provision for addition of capacity equivalent to annual degradation every year from fourth year. This will ensure more or less constant generation. It is observed that project cost of 800 /MW has been taken by Moser Baer Engineering and Construction Ltd. for computing levelised tariff for generation from Solar PV Projects which includes the additional module cost of Rs /MW as against degradation and at the same time generation has been reduced every year from fourth year resulting in higher levelised tariff. 25. For availing the benefit of accelerated depreciation applicable income tax ( surcharge + 3 education cess) has been considered for the purpose of determining net depreciation benefit as per straight line method (Book depreciation as per Companies Act, 1956) has been compared with depreciation as per Income Tax Rate i.e. 80 of the written down value method. Additional 20 depreciation in the initial year is proposed to be extended to new assets acquired by power generation companies vide amendment in section 32, subsection (1) clause (ii a) of the Income Tax Act. Depreciation for the first year has been calculated at the rate of 50 of accelerated depreciation 80 and 50 additional depreciation 20 (as project is capitalized during the second half of the financial year as per proviso (ii) to Regulation 22. Income Tax benefit of accelerated depreciation and additional depreciation has been worked out as per normal tax rate on the net depreciation benefit. Per unit levelised accelerated depreciation benefit has been computed taking discount factor into account. 15

16 26. The generic levelised tariff determined on the basis of above common parameters and parameters for Solar PV Power Projects shall be applicable for such projects which are commissioned upto and for which PPA is signed upto The generic levelised tariff for Solar PV including Rooftop PV determined on the basis of above common parameters and parameters for Solar PV Projects shall be as hereunder : Particulars Levelised Tariff Rs./KWh Levelised benefit of accelerated depreciation, if available Rs./KWh Net levelised Tariff after adjustment for accelerated depreciation Rs./KWh Solar PV Power Projects including Rooftop Solar PV and Small Power Projects 28. The generic levelised tariff determined on the basis of above common parameters and parameters for Solar Thermal Power Projects shall be applicable for such projects which are commissioned upto and for which PPA is signed upto The tariff shall be valid for 25 years from the commercial operation date (COD). 29. The generic levelised tariff determined on the basis of above Particulars common parameters for Solar Thermal Power Projects for Solar Thermal shall be as hereunder: Solar Thermal Power Projects Levelised Levelised benefit Net levelised Tariff Tariff of accelerated after adjustment for Rs./KWh depreciation, accelerated if available depreciation Rs./KWh

17 30. The detailed computations of the generic levelised tariff are shown in Annexure I for Solar PV Projects and Annexure II for Solar Thermal Projects. 31. Other terms and conditions will remain the same as stipulated in Regulations, With effect from the date of order, Regulations 5, 14 (2) (b), 16 (2) (a), 17 (2), 27 (1) and 31 (1) of the Regulations, 2010 shall stand amended to the extent provided in this order. Sd/- (S. C. Jha) Member Sd/- (U. N. Panjiar) Chairman 17

18 Sl. Assessment No. Head 1. Power Generation Template for Solar PV Power Projects Annexure-1 Sub-Head (1) Sub- Head (2) Unit Assumptions Capacity 2. Power Cost Capital Cost/MW 3. Financial Assumptions Debt :Equity 4. Operation & Maintenance Debt Component Equity Component Depreciation O&M expenses p.a. Escalation Installed Power Generation Capacity Utilization factor Auxiliary Consumption Useful life Power Plant Tariff Period Debt Equity Total Debt Amount Total Equity Amount Loan Amount Moratorium Period Repayment Period Interest rate Equity Amount Return on Equity first 10 years ROE 11 th year onwards discount rate Depreciation rate first 10 years Depreciation rate 11 th year onwards Income Tax MW Year Rs. Lac/MW Year Rs. Rs. Rs. Year Year Rs. p.a. p.a Rs

19 5. Working capital for O&M 5.72 O&M Month 1 expenses Maintenance 15 Spare (O&M Receivables expenses) Month 2 Interest on working 13.5 capital 19

20 Determination of Tariff for Solar PV Annexure-I Units Unit Years Generation > Installed MW capacity Net generation MU Fixed Cost Unit Years- > O&M Rs. Expenses Depreciation Rs. Interest on Rs. Term Loan Interest on Rs. working capital Return on Rs. equity Total fixed Rs. cost Cost of Rs./K Generation Wh Discount factor Cost of Generation x Discount factor Rs./K Wh Levelised Tariff Rs./K Wh

21 Determination of Tariff for Solar PV

22 Calculation showing the admissible gains of accelerated depreciation under Income Tax Act for Solar PV Capital Cost : 800 Discount Rate: Book Depreciation: 5.28 Income Tax Rate (MTA) : 20 Depreciation Amount : 90 Accelerated Depreciation-80 Additional Depreciation- 20 Income Tax Rate (normal rate): Years Unit Book depreciation Book depreciation Rs Accelerated depreciation Opening Allowed during the year Closing Accelerated Rs depreciation Net depreciation benefit Rs (-)10.24 (-)35.84 (-)40.96 (-)42.0 (-)42.16 (-)42.24 (-)42.24 (-)42.24 (-)42.24 Income tax gain Rs (-) 3.32 (-) (-) (-) (-) (-)13.70 (-)13.70 (-)13.70 (-)13.70 Discounting factor Discounted tax gain Rs (-) 2.86 (-) 8.96 (-)9.30 (-)8.59 (-)7.66 (-)6.99 (-)6.30 (-)5.62 (-)5.07 Levelised Income Tax gain Rs. lac Generation MU Levelised Levelised Income Tax benefit U Rs./K Wh

23 Calculation showing the admissible gains of accelerated depreciation under Income Tax Act for Solar PV (-)42.24 (-)42.24 (-)42.24 (-)42.24 (-)42.24 (-)42.24 (-) (-) (-) (-) (-) (-) (-) (-) (-) 4.66 (-) 4.11 (-)3.70 (-)3.43 (-)3.01 (-)2.74 (-)

24 Template for Solar Thermal Power Projects Annexure-2 Sl. Assessment No. Head 1. Power Generation Sub-Head (1) Sub- Head (2) Unit Assumptions Capacity 2. Project Cost Capital Cost/MW 3. Financial Assumptions Debt :Equity Debt Component Equity Component Depreciation Installed Power Generation Capacity Utilization factor Auxiliary Consumption useful life MW Year Power Plant cost Rs. Lac/MW Tariff Period Year Debt Equity Total Debt Rs. Amount Total Amount Loan Amount Moratorium Period Repayment Period Interest rate Equity Amount Equity Return on Equity first 10 years ROE 11 th year onwards discount rate Income tax Depreciation rate first 10 years Depreciation rate 11 th year onwards Income Tax Rs. Rs. Year Year Rs. p.a. p.a

25 4. Operation & Maintenance 5. Working capital O&M expenses p.a. Escalation for O&M O&M expenses Maintenance Spare Receivables Interest on working capital Rs. Month Month

26 Determination of Tariff for Solar Thermal Annexure-II Units Generation Unit Years > Installed MW capacity Total Generation Auxiliary Consumption Net Generation MU Fixed Cost Unit Years > O&M Expenses Rs Depreciation Rs Interest on Term Rs Loan Interest on Rs working capital Return on equity Rs Total fixed cost Rs Cost of Rs./K Generation Wh Discount factor Cost of Rs./K Generation x Discount factor Wh Levelised Tariff Rs./K Wh

27 Determination of Tariff for Solar Thermal

28 Calculation showing the admissible gains of accelerated depreciation under Income Tax Act for Solar Thermal Capital Cost : 1200 Lac Discount Rate: Book Depreciation: 5.28 Income Tax Rate (MTA) : 20 Depreciation Amount : 90 Accelerated Depreciation-80 Additional Depreciation- 20 Income Tax Rate (normal rate): Years Unit Book depreciation Book depreciation Rs Accelerated Depreciation Opening Allowed during the year Closing Accelerated Rs depreciation Net depreciation Rs (-)15.36 (-)53.76 (-)61.44 (-)63.00 (-)63.24 (-)63.36 (-)63.36 (-)63.36 (-)63.36 benefit Income tax gain Rs (-)4.98 (-) (-)19.93 (-)20.44 (-)20.52 (-)20.56 (-)20.56 (-)20.56 (-)20.56 Discounting factor Discounted tax Rs (-) 4.28 (-)13.43 (-)13.95 (-)12.88 (-)11.49 (-)10.49 (-)9.46 (-)8.43 (-)7.61 gain Levelised Rs. l Income Tax benefit Generation MU Levelised U Levelised Income Tax benefit Rs./K Wh

29 Calculation showing the admissible gains of accelerated depreciation under Income Tax Act for Solar Thermal Capital Cost (-)63.36 (-)63.36 (-)63.36 (-)63.36 (-)63.36 (-)63.36 (-) (-)20.56 (-)20.56 (-)20.56 (-)20.56 (-)20.56 (-)20.56 (-) (-)6.99 (-)6.17 (-)5.55 (-)5.14 (-)4.52 (-)4.11 (-)