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Infrastructure Growth: The Private Road

Infrastructure Growth: The Private Road

India`s Karnataka state has been a pioneer of private investment in its electricity generation sector, where substantial investment is needed to overcome power shortages. The state electricity board recently took this further, taking the unusual step of introducing private investment in its transmission system. Perhaps this is just the first of many such projects for India.

Steven Marshall

National Grid

United Kingdom

In spite of its abundant natural and physical resources, many parts of India suffer frequent and severe power shortages. However, with the assistance of private investment and financing together with optimal use of the country`s existing resources, much progress could be made to rectify this situation.

In India, the state of Karnataka has been at the forefront of introducing private investment in the power sector, and in particular, in electricity transmission. When considering how to improve the overall supply of electricity to customers, the effective and efficient transmission of power needs to be given as much impetus as the provision of increased generation.

One of Karnataka`s latest projects involves the construction and ownership of a high voltage transmission facility under a private contract.

With the approval of the state government, the state-owned integrated electricity utility, Karnataka Electricity Board (KEB), invited bids for a joint venture partner to assist in the development and financing of a “build, own, maintain and transfer” transmission facility. The National Grid Company plc (National Grid), owner and operator of the high voltage electricity network in England and Wales, was awarded joint venture partner status in February 1998.

The joint venture company, Karnataka Translink Limited (KTL), will have a 30-year concession to evacuate 2500 MW of power from the Mangalore region to load centres at Hassan, Mysore and Bangalore, known as the Mangalore Evacuation Project (MEP). It will bring strong management skills and cost effective technology to the region`s electricity transmission sector, provide much needed additional power to the growing demand centres, and give much improved system security.

The first generating unit to be connected will be the 1000 MW power station being developed in Mangalore by an independent power producer, the Mangalore Power Company (MPC), which is a joint venture between Cogentrix of the USA and China Light and Power International.

The private route

With the growing need in India to undertake large capital expenditure projects to provide adequate electricity supply, the financial reserves of state-owned utilities are becoming stretched. Inevitably, the introduction of private investment becomes more of a necessity as a result.

Private investment not only enables the required sums of money to be raised, but also allows existing funds to be allocated to other areas. Private investors are not only expected to raise project funds, but also to bring in global operating expertise.

Karnataka Translink provides a sharing of resources and risks between KEB and National Grid, and the association of two key parties with complementary strengths improves the bankability of the project. In Karnataka, KEB is responsible for transmission and distribution and has, over the years, acquired considerable expertise in the design, procurement, erection, commissioning, operation and maintenance of high voltage ac transmission systems.

National Grid is the world`s largest privately owned independent transmission company. It brings project management, system design and operation, and maintenance expertise such as live line working. As one of the hundred largest companies quoted on the London Stock Exchange, its strong financial position assists in the raising of project finance. The company is also involved in the ownership, operation and maintenance of transmission systems in both Argentina and Zambia.

MEP is estimated to cost approximately $200 million and will be funded on a 60:40 debt:equity basis. The joint venture partners, National Grid and KEB, will provide equity for the project with National Grid as the lead developer and major shareholder. Equity will also be raised from other sources including domestic financial institutions. Limited recourse project debt will be raised from domestic and foreign sources in a mix designed to optimise cost, tenor, currency exposure and availability.

The proposed transmission will form part of the state grid under KEB`s control. In return, Karnataka Translink will be remunerated on the basis of a cost-plus transmission charge structure designed to incentivise the company to maintain the highest levels of availability while at the same time protect limited recourse project lenders.

Project and financing documentation will include the Shareholders Agreement, Transmission Services Agreement, Govern- ment of Karnataka Guarantee and Imple- mentation Agreement, Escrow Agreement, EPC Contract, O&M Contract, loan agreements and other related agreements. These are currently in various stages of development and negotiation.

Technical operation

The transmission system will consist of approximately 460 route km of double circuit 400 kV overhead line, 300 km of single circuit 400 kV overhead line, two major 400/220 kV substations and some 400 kV equipment at a KEB-owned substation.

The system design was carried out by KEB prior to seeking a joint venture partner and the system studies have been comprehensively reviewed by National Grid using advanced modelling techniques. The review substantiated the basic design, with some alterations to transformer and shunt reactor ratings being proposed by National Grid.

The overhead line routing and surveying was project managed on behalf of KEB by Power Grid Corporation of India (PGCIL), using local contractors in advance of the formation of Karnataka Translink.

The majority of the overhead lines traverse the central plateau area at between 900 m and 1100 m above sea level. The line route from Hassan to Mangalore rises to 1300 m before descending down the Western Ghatts to 150 m over a distance of only 6 km. The terrain here will present some engineering challenges with special tower designs being required in some cases.

The towers will be of conventional self-supporting lattice type, with the standard towers being based on existing designs already in use by KEB and PGCIL. They will support twin “Moose” 500 mm2 ACSR conductors and both the double and single circuit designs utilise twin earth wires, one of which will be an Optical Pilot Ground Wire (OPGW) to provide the communications facilities for the network.

All the substation plant will be of conventional open terminal type, the 400 kV substations are of one-and-a-half switch design and the 220 kV substations have a transfer bus arrangement. Both these arrangements will allow circuit breaker maintenance to be undertaken without the need for a circuit outage. Conventional protection systems using power line carrier and fibre optic signalling will be employed.

The installation will be constructed under a single engineering, procurement and construction (EPC) contract, which will be competitively tendered for by a number of pre-qualified bidders. The pre-qualification process, commencing in the next few weeks, will be advertised in the Indian and European press and is open to all interested parties.

It is anticipated that the vast majority of plant and equipment will be sourced from indigenous suppliers, with only certain specialist plant and materials being imported.

The overhead line routes identified by PGCIL will be used as the basis for competitive tendering, with the responsibility for final tower spotting lying with the EPC contractor.

The privately owned network will be operated by KEB as an integral part of their transmission system from their existing control centre in Bangalore. The substations will not be remotely controlled and will be manned by staff employed by Karnataka Translink, taking switching instructions from the KEB control centre.

Karnataka Translink will have its own monitoring centre to continuously monitor system performance. It will receive plant alarms, system analogue values and system disturbance data. Fault response will be managed from this centre.

As the income of the company will be linked to system availability, equipment reliability and the optimum maintenance regime are crucial and both areas where National Grid`s experience will be relied on. EPC bidders will be asked to demonstrate the reliability of their equipment by providing satisfactory operating experience reports from existing customers.

Karnataka Translink will employ their own maintenance staff based at the three substation sites. As well as carrying out routine and breakdown maintenance at the substations, line patrol teams will operate from these sites, carrying out routine inspections of all line routes.

Assisting growth

As a developing country, India is in need of investment in its infrastructure, but business development can be slow to move. The long-term commitment in India shown by National Grid appears to be the right approach, and the company is therefore well placed to provide the financial and technical assistance that India needs.

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Figure 1. Karnataka Translink will evacuate 2500 MW of power from the Mangalore region to Hassan, Mysore and Bangalore

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Figure 2. Mangalore evacuation project scope diagram

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Figure 3. The project contractual structure

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