My request to the DOE, please at-least carry out a top level review before uploading the PDD. If you do a simple google search you will find that many of the details mentioned in the PDD are incorrect. 

Description of Baseline Scenario
Under case 2 bidding (Ultra Mega Projects) the location (Sasan), the technology (super critical) and the fuel (imported coal) were fixed. I am surprised, how can Reliance Power argue that they had the alternative of putting up a sub critical plant using Indian coal. The only way you could have done this project was if you put up super critical, you could not have done sub critical even if you wanted to do, since the technology was specified in the tender. Still, how can you argue that setting up a 4000 MW sub critical coal plant was an alternative for you when the bidding condition in the RFP itself was that it should be super critical?
Now if you are saying that you could have set up a 4000 MW plant elsewhere, in the last 30odd years of Reliance Energy’s operation, you have managed to build only 900 MW thermal capacity. You are only doing this project because the UMPP programme came up and the benefits that are offered to UMPPs. Now, if in the absence of the UMPP programme, you would not have done any 4000 MW project, so, how can there be any baseline alternatives to the project. 
Ask any power sector expert, he would say that land acquisition for new projects is the most difficult and time consuming process in setting up a new plant. Singur, Nandigram and the Posco site in Orissa are classic examples of how difficult the process can be and what could be the complications. In case of UMPPs, the Ministry of Power has undertaken the responsibility of acquiring land. If one assumes that Reliance could have set up several smaller capacity (sub-critical) plants across various locations in the state/country. At all these locations Reliance Power would have carry out acquisition of large areas of land. Acquiring 2750 acres at one location or 400-500 acres at 8 different locations for would be clearly very difficult for any company. 
Further, availability of domestic coal for new projects is major problem now a days, there have been several instances where existing thermal plants have been asked by the CEA to buy imported coal to make up for the deficit in availability of domestic coal. Therefore one needs to ensure the availability of other resources like rail connectivity, water availability, coal linkage, only then can this alternative be a plausible baseline alternative. Clearly, if the captive coal mines were not allotted to you, you could not have done a domestic coal based sub critical plant. In such a case you would have had no other option but to use imported coal which automatically makes supercritical as the obvious choice.
Unfortunately, Reliance Power has not bothered to present in the PDD whether it has executed a 4000 MW, single or distributed, sub critical project without the benefits given to Ultra Mega Power Projects (under the UMPP program). I know Reliance power is talking about one more 4000 MW project in Krishnapatnam, but these are only talks and any body can show plans. What matters is whether the PP can show that in previous instances it has executed projects of similar size and scale. Unfortunately, the DOE also has not bothered to check this information.
Comments on Investment Analysis page 44 of PDD

The guidance on Investment Analysis says that values for investment analysis should be the ones that are applicable at the time of the investment decision. Now for bidding purpose you submitted a bid security of INR 1200 millions and undertaking that if the bid is accepted then it will be binding on you. Which means that your investment decision document is the financial bid. To your misfortune the financial bid document is available in the public domain, since the expert eyes of the DOE have not located the weblink, you can find the documents at www.upcl.org/bid.html. This weblink contains the detailed bid of reliance power. In the bid you have submitted a tariff schedule that reads as follows:

Non escalable fixed charge - INR 0.163 per kWh
Escalable fixed charge – INR 0.001 per kWh per year
Non escalable variable charge – INR 1.148 per kWh
Escalable variable charge – INR 0.001 per kWh per year

Now based on this, your tariff works out to INR 1.29 per kWh; I also know that you subsequently revised your bid to INR1.19 per kWh. But the working provided by you in the PDD indicates a cost of INR1.08 per kWh. Now, this can only mean that you have ignored the CDM guidelines and have intentionally provided wrong information to mislead the stakeholders, the DOE and the CDM EB. Because, clearly, as any one can see, this is not the information based on which the investment decision was taken.

Also, the information provided in the PDD is insufficient to recreate the analysis, I am surprised that even after so many instances, the DOEs choose to blatantly ignore the guidance given by the CDM EB. This can only mean that either the DOEs are ignorant or have no respect for the rules.

Alternative 2 – Sub critical pithead [Page-40 of PDD]

You have very cleverly taken a capital cost of INR 35 million per MW so that the levelised cost works out to lower than that of super critical plant. This is one clever thing that PPs have been doing in recent times; given that only project related documents are required to be reviewed by the DOE, only the assumptions relating to the project i.e. super critical coal will get vetted. Reliance power will very cleverly produce some forged document to support the capital cost of the sub critical unit and since this is only a hypothetical analysis no attention will be paid towards checking these assumptions. 

To cross check your story, we looked at the power projects that are being implemented by NTPC which is by far the largest utility in India accounting for more than 25% of the country’s generations. NTPC is also well known for its efficient project management and plant operations, all NTPC plants feature as the least cost generators. This data is again publicly available on the website of the CEA  at http://www.cea.nic.in/thermal/project_monitoring/BS%20NTPC.pdf
 
Plant name		Unit Size
MW	Cost per MW (Crores)
Kahalgaon STPS St.II	Unit-5,6,7	500	       3.91 
Korba STPP St-III	Unit-7	500	       4.90 
National Capital Tpp Dadri-st.II, PhI and II	Unit-5,6	490	       5.24 
Simhadari	Unit-3,4	500	       5.04 
Indira Gandi STPP	Unit-1,2,3	500	       5.53 
Bhilai Exp.	Unit-1,2	250	       4.96 
Sipat 	Unit-4,5	500	

Note: 1 Crore = 10 million

Anyone can see that the capital cost of most sub critical projects is in excess of INR 40 million per MW. The least cost of a sub critical unit is INR 39.1 million per MW (3.91 Crores). Interestingly, this cost is achieved by NTPC that has installed more than 30,000 MW of thermal capacity whereas Reliance Power that only has three thermal units with total capacity of less than 900 MW has claimed that it can do a sub critical unit at significantly lower cost than NTPC. Also interestingly, Reliance has not done a single 500 MW size unit till date, whereas NTPC has scores of 500 MW units. We don’t know what kind of professional competence is followed by the DOEs in checking the PDDs, surely even if the DOEs do some basic checks, such blatant misrepresentation of facts can be avoided.

Anyone who knows basic arithmetic can now say that Reliance has intentionally taken a lower capital cost so that the levelised cost comes out to be lower. Whereas in reality, the super critical plant is the most economical option for Reliance and hence the baseline.

Not only this, there are sufficient number of research studies available in the public domain that state that there are four types of coal based generating technologies i.e (a) sub critical (b) super critical (c) ultra super critical,  (d) ultra super critical with FGD and SCR. One such report is published by the International Energy Agency (IEA) and is available at http://www.netl.doe.gov/publications/proceedings/97/97cct/cct_pdf/97CCP1_2.PDF [Page No.-14 of the Published Paper by IEA] we would request the DOE to kindly read this report and gain some basic understanding of the comparative power generating technologies before even trying to analyse what is written in the PDD. As any one can see, the paper clearly writes that the capital cost of super critical plant is more or less same as that of sub critical plant (1% higher), this analysis has been done for non OECD countries. Further when you do a project of the size of 4,000 MW, the economies of scale will further reduce the capital cost of the project, which means that the cost at which you would have done a sub critical project, you are now able to do a super critical project at the same or lower cost. You are still trying to say that you would not have done this project without CDM. 

Further, Supercritical projects are already operational in Asian non OECD countries and that too without any CDM. It is indeed disturbing to note the extent of lies and stories that project developers would concoct to get their hands on extra money.

Also, the DOE would notice that IEA in its research paper has mentioned that the efficiency difference between sub critical and supercritical is of the order of 5% [Page No.-3 of the Published Paper by IEA], there are numerous other publications available in public domain that substantiate this data. In the PDD on page 39, the heat rate given for supercritical translates to an efficiency of 38.97% (860/2207) [Page-38 of PDD] and the efficiency for sub critical is given as 36.99% (860/2325) [Page-39 of PDD]. As it can be seen Reliance has very cleverly taken only a 2% efficiency difference instead of 5%. We are sure that Reliance will have presented some kind of forged document to back up their efficiency number, but as can be seen, there are numerous public evidences that establish the true story. 

In fact, I know that the EB in its Validation and Verification Manual has asked the DOEs to make an independent check of the information provided by the PP by checking the information available in public domain. I wonder what DOE has to say about this?

I also know for sure that during the bidding process, you had considered a debt equity ratio of 90:10 and an interest rate of 7.5%. You have intentionally provided wrong information in the PDD, I request the DOE to check the calculations done for submitting the bid to PFC. The calculations presented in the PDD should be revised using data based on which the bid was submitted. Since it is clear that the PDD is fraught of errors and inconsistencies, I request the DOE to re web host the PDD after making the corrections. I also urge the DOE to show some transparency by uploading the excel spreadsheets for stakeholder comments.

Financial parameter:
I know that ACM13 states that levelised cost should be used for investment analysis. But it must also be noted that the additionality tool stats that the financial parameters’ used for showing additionality should be the one that is most relevant to the decision making context [Source- Page-8 of Combined tool for demonstration of additionality]. World wide Investment decisions are always based on IRR no where in the world people invest purely on the basis of cost. Even if levelised cost can be criteria the project must still provide adequate IRR in order to ensure that the investors earn returns out of the project. Therefore the relevant financial parameters for additionality should be IRR and not levelised cost. 

To put things in perspective, the DOE would note that if levelised cost is considered as the financial parameter then all wind projects in India would be additional, as the levelised cost of wind projects would, on any day, be higher than coal and thermal projects. But as everyone knows the EB has stipulated that additionality for wind and renewable energy projects be shown on the basis of IRR.

By focusing attention on the levelised cost, the DOE stands the risk of completely ignoring the true financial parameter based on which investment decisions are taken i.e. IRR. It may so happen that the supercritical project, despite of not being cheaper than sub critical (if the representations made in the PDD are to be believed) can still provide very high IRRs often in excess of 20%. As the DOE knows, wind project that have equity IRRs of about 14% are anyway not considered as Additional, in such a case, will it not be strange that a coal fired project with IRR in excess of 20% receives CDM benefits. I guess CDM was meant for coal fired projects after all.

Merchant Power Plant

One major advantage that Reliance has gained out this project is the allocation of captive coal mine block. Coal linkage is a major problem in India nowadays and so the coal linkage will help Reliance create additional capacity. In fact there is news that Reliance is going to propose an expansion of 800 MW at the same site that will be used as a Merchant Power plant. It is commonly known that in some regions peak electricity is traded at in excess of Rs. 10 per kWh. It is anybody’s guess how much money Reliance will make out of it. Even if reliance sells power to HT consumers through open access, it would still get a tariff of in excess of  Rs.3 per unit which would mean that the IRR would be somewhere in the range of 50%.

Unfortunately, the DOEs do not have the sectoral or the financial knowledge to analyse these things because of which completely non CDM projects like Sasan have now lined up for CDM registration.

ICRA

Reliance power has got its public issue prospectus vetted by ICRA which is a very renowned credit rating agency in India. In fact on page no. 4 of the Reliance power’s Red herring prospectus, ICRA has written that it expect that projects coming up after 2010 will have substantial upside potential in earnings. ICRA will not make any false statements, therefore Reliance Power must have provided them with the true financial projection of Sasan power project and their other ventures. Clearly, the one presented in the PDD has been doctored to suit CDM rules and guidelines. We request the EB to take a note of this and the DOE to check with ICRA and obtain from ICRA the detailed projections provided to ICRA based on which ICRA has made such statements in the prospectus.
Common Practice Test, page 24
You have written that currently there are no projects in India that use super critical technology. Your project also is not going to be operational before 2012. The common practice test therefore should consider capacity addition programs. In the 11th plan (2007 – 12), Government of India has targeted 88,000 MW thermal capacity addition. The capacity addition from super critical in the 11th plan is as follows:
	Capacity MW
9 UMPPs (9 x 4000 MW)	36,000
NTPC Sipat	1,980
NTPC Barh	1,980
Adani Power	1,320
IFFCO Chhatisgarh	1,320
APGENCO	1,600
Coastal Power Projects using imported/blended coal	10,000
Total	54,200
Out of 88,000 MW capacity planned, 54,200 MW or 62% is expected to come from Supercritical projects. Still you have written that common practice analysis for the project is not necessary. I would request DOE to look into this in more detail. 


There are tables in my comments; should they are not in readable form, please send me email at snaveen511@yahoo.com to get a pdf file