guidelines for allocation of hydro projects.pdf

7/21/2019 GUIDELINES FOR ALLOCATION OF HYDRO PROJECTS.pdf

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Guidelines for development of Hydro Electric Projects Sites

Sanjay Chadha Page 0 5/23/20064

INDEXSl.No. Particulars Page No.

CHAPTER I

11.1

Background:Development of Hydro Power in India

11-2

1.2

Need for Private Sector Participation

2-3

2 Recent Initiatives of GOI to facilitate private sectorparticipation in Power -

3

2.1 The Electricity Act, 2003. 3

2.2 National Electricity Policy : 2005 3-4

2.3 Guidelines for determination of tariff by bidding process forprocurement of power by distribution licensees (ICBGuidelines) notified on 19thJanuary, 2005

4

3 Low level of participation of private sector in hydro sector Special requirements of Hydro Power Projects

4

3.1 Location specific nature of Hydro Potential 4-5

3.2 Funding of Hydro Projects Concerns of Financial Institutions 5-6

3.3

Back ending of tariff longer tenor loans

6

3.4 Integrated Transmission planning for Hydro Projects in a riverbasin

6-7

3.5 Development of multipurpose Large storage reservoir projects 7

CHAPTER II

1

Guidelines for Allocation of Hydro Sites:Objectives of the Guidelines

9

2. Requirements for selection of developers 10

2.1 Identification of Developer 10

2.2 Selection of Developer 10

2.3 Provision of 12% free power to the home state 10-11

2.4

Resettlement & Rehabilitation 11

2.5 Environment Protection 11

2.6 Payment Security through long term PPAs Co-terminus withlong term booking of transmission corridors and addressingthe concerns of the FIs.

12

2.7 Ensuring a time bound development 13

3 Allocation of Projects upto 100 MW 13

4 Allocation of Projects above 100 MW 14

4.1 Criteria for selection of developer 15

4.2 Minimum Bidding requirements 15

4.3 Bid Evaluation Methodology to be adopted by the SPV/State

Govt.

17

4.3.1 The standard information to be provided by the State Govt. inthe RFQ

17

4.3.2 The standard documentation to be provided by the State Govt.in the RFP

18

4.3.3 Final Evaluation of bids by the SPV/State Government 20

5 The Bid Process 21

6 Arbitration 21

7 Time table for Bid Process 21

8 Contract Award and Conclusion 21


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CHAPTER - 1

1. Background

1.1 Development of Hydro Power in India

India is a country with a dynamic economy growing at over

8% per annum. To meet the growing demand for energy, the

country is projected to require an addition in power generating

capacity of over 100,000 MW in the next 10 years. The bulk of

this capacity addition is expected to come from the main power

resource potential of the country i.e. coal and hydro power.

India is endowed with a large economically exploitablehydro potential assessed at about 84,000 MW at 60% load factor

equivalent to a probable installed capacity of 1,48,700 MW. Only

about 21% of this comprising of just over 32,000MW has been

exploited so far. However, the construction of hydel projects ismost challenging due to a number of factors such as difficult and

inaccessible locations, fragile and unpredictable geological

conditions, long gestation for projects, environmental issues likeforests and wild life aspects, resettlement and rehabilitation

problems etc.

The capacity addition in hydro since independence have not

grown in tandem with the additions in the thermal capacity, as

shown below: The hydro thermal ratio which stood at 46:54 in

the 70s has come down to24:76.

Hydro power being renewable, economical and environment

friendly is the preferred source of power particularly in the

context of rising fuel costs and environmental concerns of globalwarming. The government have accorded the highest priority tothe rapid development of hydro power and have launched the

50,000 MW hydro initiative under which 162 pre-feasibility

reports have been prepared. Work has just commenced on thepreparation of Detailed Project Reports for 78 projects totaling an

installed capacity of over 30,000 MW.


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1.2 Need for Private Sector Participation

The magnitude of investment and work involved is so huge that

even with the presence of state level utilities , Central Public

Sector Undertakings like the NHPC, SJVNL,NEEPCO, THDC, and

the entry of NTPC into hydro power development it may take

decades to even develop this capacity of 30,000 MW. It istherefore imperative that the private sector should also

participate in this programme.

It is expected that the managerial capabilities and commercial

orientation of the private sector would minimize time delays.More importantly, involvement of the private sector would reduce

the need for funding of equity by the Public Sector. It is also,

expected that capital and operating efficiencies of the privatesector would help reduce tariffs. Summing up, involvement of

private sector in development of hydro potential becomesimperative due to:

Massive resource requirement.

Need for rapid development of hydro potential.

Efficient development of the potential within budgeted costs.

Capacity Additions Over The Years

0

20000

40000

60000

80000

100000

120000

1950

1960

1970

1980

1990

1995

2000

2005

(02/05)

Capacity(MW)

Total

Hydro


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2. Recent Initiatives of GOI to facilitate private sector

participation in Power

2.1 TheElectricity Act, 2003:

The Electricity Act, 2003 has put in place a liberal and progressiveframework for the electricity industry in India. It has removed/reduced

entry barriers to different segments. This is aimed at promotingcompetition and protecting interests of consumers. Regulatory

framework both at the central level and at the state level along with the

Appellate Tribunal for electricity has been put in place to provide

transparent regulation.

While thermal generation has been completely delicenced, hydro

projects presently only require clearances with respect to optimal

utilization of water and inter-State and public safety issues. The Policy

permits open access to transmission and allows construction of both

captive and group captive power plants. Power trading has been

recognized as a distinct licensed activity under the supervision of the

Central Electricity Regulatory Commission (CERC)/ State Electricity

Regulatory Commission (SERC) and with the numerous power trading

companies becoming operational, the marketing risks of private power

producers has considerably decreased.

2.2 National Electricity Policy : 2005The National Electricity Policy, announced by the Government in

February, 2005 has identified hydro generation as a thrust area

for development. The salient features are extracted below:

Hydroelectricity is a clean and renewable source of energy.

Maximum emphasis would be laid on the full development of the

feasible hydro potential in the country. Harnessing hydro potential speedily will also facilitate economic

development of States, particularly North-Eastern States, Sikkim,

Uttaranchal, Himachal Pradesh and J&K, since a large proportion of

our hydro power potential is located in these special categoryStates.

Hydro projects call for large initial capital investment but once

completed require no further fuel costs but only the O&Mexpenses once the debt has been serviced. Therefore, debt

financing of longer tenure would need to be made available for


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hydro projects. Central Government is committed to policies that

ensure financing of viable hydro projects.

2.3 Guidelines for determination of tariff by bidding process

for procurement of power by distribution licensees (ICBGuidelines) notified on 19thJanuary, 2005

Under the guidelines, competitive bidding for purchase of power

can be initiated by a distribution licensee for the development of

projects taking benefit of Section 63 of the Electricity Act, 2003.

The guidelines envisage the purchaser of power procuring the

site getting all the requisite clearances and then inviting bids

for developing the project at the lowest cost of power on the

basis of tariff.

3 Special requirements of Hydro Power projects

This Policy seeks to address issues that have come in the way of

speedy financial closure of projects already allotted. It alsoaddresses the unique requirements of the special category hill

States where most of the underdeveloped hydro potential exists.Some of these issues are discussed below :

3.1 Location specific nature of Hydro Potential

The formulations in the guidelines described above adequatelyaddress the requirements of distribution licencees when they seek

to procure power from independent power producers (IPPs) or seek

to develop sites under their control (e.g. load centre based

generation) in a competitive environment. However, most of the

undeveloped hydro power sites are located in hill States which areeither surplus in power already, or whose ability to consume power

would be much less than the hydro potential existing in the State.

These States would therefore have to necessarily produce power

for sale in other States. The existing guidelines require the

purchaser/distributing licensee to secure the site, obtain all

clearances and after acquisition of the required land, call for tariff

based bids for development of the project. It would be difficult for

power consuming utilities in load centres - far off from these hill

States - to do all this as they do not have any control over thepotential sites. The hill States would like to utilise the hydro


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potential as a source of revenue for developing their backward

areas. The hill States possessing the hydro potential must

therefore like to develop their hydro sites for sale of power to

other areas and at the same time securing benefits like 12% free

power for their own development.

It is vital for the countrys security and prosperity that storage of

water to be increased. Given the nature of the monsoon system,

the volume of storage built the storage of water in the country is

inadequate compared to the needs. There are very few suitable

sites for construction of multipurpose storage projects and these

should be developed as storage type schemes thereby harnessing

their full potential. The water stored could not only generate power

but would also provide other benefits like irrigation, drinking, watersupply, flood control, etc. Moreover construction of large storage

dams is the most effective method for controlling floods.

3.2 Funding of Hydro Projects Concerns of FinancialInstitutions (FIs):

One of the main factors responsible for the slow development ofhydro projects in the private sector has been the reluctance of FIs

to fund these projects given the huge risks of geological andhydrological uncertainties, delays in land acquisition,

rehabilitation and resettlement issues, law and order problems

and natural calamities - in addition to the general problems ofIPPs like payment security etc. The financial institutions(FIs) who

have the largest stake in the project (as they fund about 70% of

the total project cost) have been seeking credit enhancement

through guarantees against such specific risks. However,

encouraged by the various provisions of the Electricity Act, 2003such as open access, recognition of power trading and setting up

of regulatoy commissions, the financial institutions are no longer

looking for Government guarantees and have reiterated that

there would be no dearth of funds for good projects with viable

tariffs promoted by credible developers.

An Inter-Institutional Group (IIG) with the MD,SBI as its

convener and representatives from other financial institutions and

the Ministry of Power has been constituted to facilitate financialclosure of private sector power projects. The IIG has been


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instrumental in getting financial closure for a large number of

projects and its experience has shown that projects with

competitive tariffs covered by long-term power purchase

commitments are essential requirement for funding by FIs.

Rather than depend upon Guarantees by Govt., the FIs instead,evaluate projects on the basis of tariffs of the project, ability of

the developer to bring in the required equity and technical

expertise for completing the project on time. Given the unique

tariff structure characteristic of hydro stations (of high tariffs

during the initial years which progressively decrease as debt gets

repaid), a long term PPA which incentivises meeting timely

payment by utilities in the initial years in return for purchase of

low cost power in the later years is considered a major payment

security mechanism. The FIs, therefore, would like sale of powerto be tied up with power purchase agreements covering the full

tenure of the loan such that it not only

a) ensures full repayment of debt to lenders

b) but also facilitates availability of cheaper power toconsumers who are required to pay higher tariff during

the initial years. This incentivises adherence to theconditions of the PPA and timely payments during the

initial years of higher tariffs.

3.3 Back ending of tariff longer tenor loans

A special requirement of hydel projects is the availability of long-

term funding at reasonable interest rates for back ending of

tariffs so that the cost of power during the initial years is

reasonable. The FIs perceive a lower payment security risk if the

first year tariff is reasonable and are reluctant to fund projectswith high first year tariff even if it is demonstrated that the tariff

would be reasonable in the later years. Institutions like the

Power Finance Corporation have developed special schemes for

funding hydro projects with tenures of upto 25 years to address

this concern.

3.4 Integrated Transmission planning for Hydro Projects in ariver basin:

Hydro projects are generally located in remote areas and requirelong dedicated transmission lines to carry power to the load


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centres. This not only adds to the cost of power but also

increases the risk associated with hydro projects as the

availability of the transmission line would have to be

synchronized with the commencement of generation. Further,

since hydro potential generally exists along the river valley itwould be necessary to optimize the transmission system given

the difficult terrain and limited availability of space. It is,

therefore, necessary that a detailed transmission plan be

prepared for the river valley and the plan implemented keeping in

view the timing of completion of projects and optimizing the

redundancies for future capacities. The Central Electricity

Regulatory Commission (CERC) in its recent order has required

that the transmission corridor would have to be booked for a

minimum period of 25 years to qualify as long-term user. PowerPurchase Agreements would therefore have to also reflect this

development and coincide for at least this period of 25 years.

3.5 Development of multipurpose Large storage reservoirprojects

i) Importance of storage reservoirs for India - India gets mostof its rainfall during 3 to 4 months and experiences very hot

summers. Yet, its per-capita storage capacity for water is amongthe lowest in the world and many regions face frequent droughts.

There is a need to build such reservoirs in the upper reaches of

the rivers before they enter the plains as suitable sites are mostlyin the hills.

Past experience has shown that Large storage reservoir

multipurpose projects like Tehri Dam and Sardar Sarovar project

have unique problems of R&R, Co-ordination with state irrigationdepartments and environmental and forest clearance related

issues. Experience has also shown that such project are prone to

time and cost overruns for many extraneous reasons not within

the control of the project developer. These guidelines do not

cover large storage reservoir multipurpose hydro projects, having

live storage capacity of more than 30 days, and envisage that

such projects be only taken up through MOUs with Government /

Public Sector Agencies and Private Sector as being done

currently. However, such MOUs should be transparentlynegotiated and must necessarily consider Central and State PSUs


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in the process of selection. The MOUs must ensure that all actual

contracts are awarded under the ICB guidelines with fixed price,

time certain commitments.


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CHAPTER-II

GUIDE LINES FOR ALLOCATION OF HYDRO SITES FOR

DEVELOPMENT:

1 Objectives of the Guidelines:1.1. To enhance hydroelectric generation capacity in the Eleventh

Plan and beyond..

1.2. To bring about uniformity in the approach of State Governments

towards allocation of hydro sites.

1.3. To create an enabling and conducive environment for the

accelerated development of hydro power projects including IPPs,

by harmonizing the interests of various stake holders such as

State Govts., displaced persons, power consumers, funding

agencies, project developers etc.1.4. To ensure allocation of hydro sites in a fair and transparent

manner keeping in mind the optimal development of the riverbasin.

1.5. To ensure safety and adherence to relevant construction,

operation and maintenance standards in compliance of the

regulations being framed by CEA (under various section 73,

section 177 clause 2(b) and section 53 clause (a) & (b) of theElectricity Act 2003) and ensure construction and operation of

projects optimizing generation at the site.1.6. To ensure development of the required transmission network in

an optimal manner meeting the integrated requirements of the

projects in the river basin.1.7 Ensure funding of projects by FIIs by meeting their concerns of

payment security through long-term power purchase

commitments.

1.8 Ensure adequate compliance on Vital issues like proper

rehabilitation of Project Affected Families (PAFs) in compliance ofthe National Policy on Resettlement and Rehabilitation (NPERR -

2003) and taking up environment protection measures in

compliance to provisions of Environment Clearance issued by

Ministry of Environment and Forests (MOEF) and as envisaged in

the EIA/EMP including Catchment Area Treatment and

social/community development.

2. Requirements for selection of Developers


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2.1 Pre-Qualification of Developers

Utmost care needs to be taken while identifying developers in the

interest of transparency and timely development of the project

so as to only ensure a time bound development but also deliveryof power at the most competitive rates to the consumers in line

with the overall national objective of exploiting hydro resources to

the benefit of consumers. The pre-qualification of the developer

must be done in a transparent manner by laying down in

advance the eligibility, evaluation criteria and method of

selection. The evaluation of potential developer should inter-alia

be on their financial and technical strengths and their past track

record.

2.2 Selection of Developer

The selection of the successful developer from the pre-qualified

developers should be on the basis of tariff based bidding. The

competing bidders must be required to post a bid bond(suggested figure is in the vicinity of Rs.5-10 lakhs/MW) and a

performance bond (suggested figure is Rs.10-20 lakhs/MW.)Failure, to take up the project within a prespecified time, after the

award should lead to a call on the bid bond and award to the nextqualified bidder. The performance bond should be linked to

achieving specific milestones in a predefined timeframe and

subject to call in case of non-performance as per the PERTschedule.

2.3 Provision of 12% free power to the home state

Government of India, vide its O.M. dated 17th

May, 1989 haveapproved that since the Home States are increasingly finding it

difficult to locate alternative land and resources for rehabilitation

of the oustees in hydro-electric projects. They, need to be

suitably assisted by giving incentives, such as the (proposed)12%

free power, to enable them to take care of the problems of

rehabilitation in the areas affected by the hydro-electric projects.

Without such assistance and incentives, considerable hydel

potential of the country would remain unutilized. Accordingly, the

State Government shall be entitled to realize 12% free powerfrom the project for local area development and mitigation of


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hardships to the project affected people in line with the Govt. of

India policy.

It is proposed to continue with this provision so that the home

state retains its right to realize 12% free power from hydel

projects over 25 MW capacity, for local area development,mitigation of hardships to the project affected people and also

overall economic development of the state, in line with the

Government of India policy.

In case of projects having unviable tariffs in the initial years, the

12% free power to the home state can be staggered in a manner

such that it is kept low in the initial years and higher in the latter

years so as to average 12% over the life of the project

2.4 Resettlement & RehabilitationThe Rehabilitation and Resettlement of the Project affected

people should be undertaken by the State Govt. (or got doneunder its supervision) to at least meet the minimum requirements

of the National Policy on Resettlement and Rehabilitation for

Project Affected Families -2003 (NPRR-2003). The total moneyspent on the project development including land acquisition would

be recovered from the developer and loaded on to the projectcost upfront, at the time of allocation, based on the DPR

assessment. However all subsequent enhancements/increaseduring the R&R implementation would be to the account of the

State Govt. in line with the GOI Policy of provision of 12% free

power to the host state for mitiagation of hardships to the localpopulation.

2.5 Environment ProtectionThe project developer should be made responsible to ensure strict

compliance to the provisions of the Environment Clearance issuedby the Ministry of Environment & Forests, and implement various

environmental measures envisaged in the EIA/EMP, including

Catchment Area Treatment (CAT) and social/community

development..

2.6 Addressing concerns of the FIs and meeting requirementsof the tariff policy-a) payment security mechanisms and

b) booking of transmission corridors.


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a) payment security mechanisms

The project developer would be expected to enter into a long

term PPA with the tariff being determined either under Sec. 63 of

the Electricity Act 2003. The Payment security mechanism shallconsist of :

Revolving Letter of credit (LC) by distribution licensee

Escrow Account claims against the receivables of

distribution uitilty, signed and finalized at the time of PPA

Empowerment to developers to directly supply to HT

consumers in the event of default as per provisions of the

Electricity Act 2003

In cases where the sites have already been allocated, the

developer could offer bids for supply of electricity on the basis ofallocated site and if such a bid isselected and a PPA is executed

incorporating the above security structure, the financial closure

could be achieved on the basis of the PPA so concluded.

b) Booking of transmission corridors.

It is, necessary that the transmission for evacuation ofpower from the project is planned keeping in view the timing of

completion of the project and optimizing the redundancies for

future capacities. In accordance with CERC guidelines.

3. Allocation of projects upto 100 MW:

3.1 After the launch of the Private Power Policy in 1991, the initial

project development by the private power project developerswas through the MOU route. During January-February, 1995,

vide No. A-32/95-IPC dated 18.1.1995 and 15.2.1995, it was

stipulated that power projects could only be awarded to private

developers through the process of competitive bidding after the

cut off date of 18.2.1995. The instructions were reiterated vide

No. A-40/95-IPC dated 11.9.1995. Thereafter this condition was

slightly relaxed in the Hydel Policy announced in August, 1998,

wherein States were allowed to select developers though theMOU route for hydel projects upto a capacity of 100 MW. Theseinstructions were reiterated vide No. A-32/95_IPC.1(Vol.II)


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dated 3.7.2002 wherein it was also clarified that wherever the

power projects are developed on the MOU route, the State

Governments would have to ensure that the EPC contract is

finalized on the basis of International Competitive bidding.

These guidelines seek to continue this dispensation available tothe states to develop hydro power projects upto the capacity of

100 MW, through private developers, under the MOU route

subject to the condition that wherever the power projects are

developed on the MOU route, the State Governments ensures

that the EPC contract is finalized by the developer(s), on the

basis of International Competitive bidding.

4. Allocation of Projects above 100 MW:

Promotion of competition in the electricity industry is one of the

key objectives of the Electricity Act, 2003. Power purchase costsconstitute the largest element for distribution licensees.

Procurement of power at competitive rates by utilities will

optimize the overall costs and facilitate development of power

markets. International experience has shown that competition in

wholesale electricity markets has actually led to reduction inprices of electricity bringing significant benefit for consumers.

The IPP experience has highlighted the critical importance of

government intervention to

Tie up transmission/evacuation requirements

Assist in obtaining environmental & other statuotory

clearances

Coordination with states and bulk power purchasers

for achieving financial closure.

There exists a vast hydro potential in some of the states which is

more than their own requirements. There is a need for harnessing

this potential, which is surplus to the requirements of the home

state, in the overall interest of the country. This would afford the

dual benefits of economic and local area development to the host

State through revenues of 12% free power and provision of

cheaper power to the other power deficit states of the country.


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To ensure that the development of hydro projects larger than 100

MW takes place in a time bound manner and a shelf of

meaningful and bankable PRs, duly vetted by an agency of

ingternational repute, are available within a reasonable time

frame of next 3 years, the Central Government will adopt suchfacilitating mechanisms as constitution of task forces, Shell

Companies and other statutory / non-statutory bodies which

would take action for

- Preparation of project report.

- Land acquisition and preliminary R&R.

- Formulation of R&R plan and assessment of cost thereof

- Preparation for EIA & EMP reports.

- Various approvals and statutory clearances.- Aggregating demand for power from the licensees of

different States.- Power Evacuation System, Load Flow Study.

The above facilitating mechanism by the Central Government is

only illustrative in nature and not exhaustive. The role of the

Central Government will be facilitated through its Shell Company/ SPV / facilitating organization. It is expected that for

expeditious development of hydro power projects a separate shellCompany/SPV would be created for each large hydro project.

Each Shell Company / SPV will then work independently to reach

a stage where major tie-ups, statutory clearances and linkagesare in placeexcept for project covered by para 3.5 (Chapter I).

Selection of final developer will be through a Tariff based ICB.

The Shell Company / SPV will be thereafter transferred to the

successful bidders for execution.

4.1 Criteria for selection of developer

In the case where the host state is developing the hydro site for

its own consumption i.e. the SERC of the host state is the

competent authority for adopting the tariff of the project under

Sec 63 of the EA-2003, the state may itself or though an

SPV/Shell Company as outlined for the Central Goverment, invite

tariff based bids for development of the site in accordance withthe ICB guidelines notified on 19.01.2005.


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However, in case where the site is being developed primarily for

sale of power to other states i.e. the saleable energy will be sold

to other states and CERC is the competent authority for accepting

the tariff of the project under Sec 63 of the EA-2003, the hoststate is expected to necessarily avail the multi stake holder

facilitation mechanism of Govt. of India as outlined in para 3.0

above. The shell company/SPV after obtaining the Site would

proceed with the development of the site to reach a stage where

major tie ups, statutory clearances, linkages are in place and

thereafter the shell company/SPV/(hereafter referred to as theSPV) will be transferred to the successful bidder selected througha tariff based ICB.

4.2 Minimum Bidding requirementsA pre-requisite for meaningful competitive bidding is that the

prospective developers have access to a reasonably reliable

Project Report (PR). A PR with all the relevant data is the basicrequirement for a prospective bidder that will enable it to

properly estimate the various elements of cost and make ameaningful bid on tariff. PRs for hydroelectric projects of

capacities greater than 100 MW would require verycomprehensive studies from the point of view of hydrology,

geology, seismology, meteorology, etc. meeting the CEAs

Guidelines for formulation of project reports for power projectsand CWCs Guidelines for preparation of Detailed Project Reports

of Irrigation and multi-purpose schemes It would not be prudent

to expect each of the developers to spend their time and money

on investigations even prior to the event of putting in their bids.

For the preparation of DPRs the following two options are

available:

(i) The SPV/State Governments could undertake to get the PRs

of identified projects at their cost. In the interest of

development of these projects this exercise should be done

in a time bound manner so that apart from the power being

available early, the State Government also starts getting its

returns early. This exercise will lead to a shelf of projectswith PRs which can be offered to agencies selected on the


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basis of tariff based competitive bidding leading to early

development of the project, quicker returns flowing to the

State and reasonable tariff for the consumers at large.

(ii) Such of the State Governments which are keen to have

these PRs prepared by the Central Government agenciesmay approach the Central Agencies to get these PRs

prepared. Ministry of Power would facilitate this exercise by

making appropriate provisions either in its budget or

through the SPV. In either of these two options a mandatory

condition would be that the agency selected for developing

this project through competitive bidding shall reimburse the

cost of the PR to the SPV .

(iii) The PRs so prepared would be got vetted by another

reputed agency . This would not only ensure that the issuesrelating to dam safety, river basin optimization etc.are

adequately addressed but would also address importantinterstate issues.

4.3 Bid Evaluation Methodology to be adopted by the

SPV/State Govt.:The bidding process must be a two-stage process featuring a

separate request for qualification (RFQ) and a request forproposal (RFP).

4.3.1 The standard information to be provided by the StateGovt. in the RFQ should inter-alia include but need not belimited to the following:

The SPV / State Govt. should publish the RFQ notice in at

least two national newspapers, the Government website and

trade magazines and also accord it wide publicity. Thebidding shall necessarily be by way of international

competitive bidding (ICB). For the purpose of issue of RFQ

the minimum conditions to be met by the bidder shall be

specified in the RFQ notice along with the evaluation criteria

thereof. Standard documentation to be provided by the

State Government in the RFQ shall include the following: PR

(duly vetted by the competent authority) containing the

requisite hydrological, geological, meteorological and

seismological data and basic dam design and project outlineas per CEAs Guidelines for formulation of project reports


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for power projects and CWCs Guidelines for preparation of

Detailed Project Reports of Irrigation and multi-purpose

schemes

Site details including land acquired, details of project

affected people (PAP)and project affected families(PAF). The minimum conditions, both financial and past track

record, required to be fulfilled by the developer and the

evaluation criteria thereof.

In cases of the projects, where electricity is being procured

by licensees of other states also, the RFQ Evaluation

Committee should include

Representative of host State Government

Representative of an FI

CEO, of the SPV / Shell Company.The same Committee could also select consultant for

Projects Report.

4.3.2 The standard documentation to be provided by the SPV/State Government. in the RFP should inter-alia include the

following: Technical requirements on minimum capacity and other

technical requirements/conditions to be met by thedeveloper, which must also be in conformity with the

requirements of CWC/CEA for optimum basin development.

Issues relating to flood control, irrigation, drinking water,navigation, inter-State requirements must be addressed by

the SPV /State Government and the final responsibility for

ensuring clearances /permission from the relevant

authorities for these issues would rest with the SPV / State

Government as per CEAs Guidelines for formulation ofproject reports for power projects and CWCs Guidelines

for preparation of Detailed Project Reports of Irrigation and

multi-purpose schemes.

The time period within which the developer must complete

critical milestones must be spelt out upfront and the

developers informed that failure to adhere to the agreed

time line could result in cancellation of allocation of the

project.

Default conditions including sluggish progress, cure thereofand penalties would also be clearly stated.


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Dam design, safety and other technical, operational and

safety criteria to be met by the developer including the

provisions of the IEGC/State Grid Code, relevant orders of

the proper commission, regulations framed by CEA under

section 73 , section 177 clause 2(b) and section 53 clause(a) & (b) of the Electricity aAct 2003 etc., as applicable.

Requirements to be met by the project developer to

demonstrate his ability to raise the required finances from

the FIs at the time of submission of bids. This would

accelerate the process of financial closure and development

of the hydroelectric project within a stipulated time.

The SPV / State Government must clearly stipulate the exit

option conditions for the lead developer so that the project

development is not delayed/held up indefinitely in case ofsuch a contingency.

The RFP shall also provide the maximum period within whichthe selected developer must commission the project. This

shall ordinarily not be less than four years from the date of

allocation of site to the developer and would be project

specific.

The RFP shall also specify the liquidated damage that wouldapply in the event of delay in commissioning of the project.

The project developer must be required to submit a detailedaction plan within six months of allotment with clearly

identifiable intermediate milestones. In the case of

inordinate delays and failure to meet the milestones theallotment should be liable for cancellation and should

invariably be cancelled if the project implementation is not

being pursued in line with this policy.

The cost on R & R, environmental measures, Catchment

Area Treatment, land acquisition including social andcommunity development should be frozen before issuance of

RFP and duly indicated therein. The State Government

should be solely responsible to provide land ( both private,

and government) in a phased manner in accordance with the

schedule agreed with the developer.

4.3.3 Final Evaluation of bids by the SPV/State Government

:

The bid must be evaluated solely on the basis of thecomposite levellised tariff quoted by the bidder.


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The project developer must demonstrate his commitments

to the tariff through duly initialed and authenticated PPAs at

the indicative tariff with the distribution utilities, for at least

90% of the design energy. The remaining power upto 10%

could be operated on merchant basis. Formation of consortium by the bidders may be permitted.

In such cases the consortium shall identify a lead member

and all correspondence from the bid process shall be done

by the lead member. The lead member shall not ordinarily

have an exit option before the commissioning of the project.

The SPV / State Government may specify technical and

financial criteria and lock in requirements for the lead

member of the consortium, if required.

The SPV / State Govt. shall ensure evaluation of the bids forall projects on inter-state rivers in line with CEAs/CWCs

optimal development plan of the river basin.

In cases of the projects, where electricity is being procured

by licensees of other states also, Final Bid Evaluation for

selection of developer would be by an Evaluation Committee

which includes- Chairperson/CEO of the lead FI;

- Representative of host State Government;- Representative of the power Purchasers

- CEO, of the SPV / Shell Company.

The evaluation committee shall reject all bids if the

composite tariffs quoted are not aligned to the prevailing

market prices.

5. The Bid process

The bid process adopted should be as outlined in the tariff based

guide lines of GOI issued on 19.1.2005.

6 Arbitration:

The State Government will establish an amicable dispute

resolution mechanism in accordance with the provisions of the

Indian Arbitration and Conciliation Act, 1996. The ADR shall be

mandatory and time-bound to minimize disputes regarding thebid process and the documentation thereof.


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7. Time table for Bid Process:

The SPV / State Government must in advance indicate a time

table for conclusion of the bidding process. However, the SPV /

State Government may give extended time frame based onprevailing circumstances and such alternations shall not be

construed to be a deviation from these guidelines.

8. Contract Award and Conclusion:

The Award of site to the selected developer consequent to the

selection process in accordance with the terms and conditions as

finalized shall be concurred by the State Government.

Consequent to the signing of the award the evaluation committeeshall provide a proper certification on adherence to these

guidelines and to the bid process established. The finalagreement along with certification of the evaluation committee

shall also be forwarded to the appropriate regulatory commissions

for approval under Section 62 or adoption under Section 63 of theElectricity Act, 2003.

guidelines for allocation of hydro projects.pdf

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