TABLE OF CONTENTS

(Experience Based)
Chapter No. Subject Page No.

1.0 Executive Summary
2.0 Introduction
a. Objectives (for gaining maximum experience and
exposure in the company)
3.0 Industry Profile
a. Review of literature on the industry
b. Major Companies
c. Growth chart past and projections for future
d. SWOT etc.
4.0 Company Profile
a. Review of literature on the company
b. Historical analysis
c. Growth Chart past and projections for future
d. SWOT etc.
5.0 Issues and challenges facing the organization
6.0 Reflections on what has been learned during the
placement experience
7.0 Recommendations
8.0 Bibliography
9.0 Annexure
a. Tables
b. Graphs
10.0 Case Study (minimum 10 pages)
11.0 Synopsis of the project (150-200 words)









EXECUTIVE SUMMARY


The project was undertaken at TATA Power company Ltd. In NOIDA in the Finance department
and the project I undertook was Project Finance. Project Financing discipline includes
understanding the rationale for project financing, how to prepare the financial plan, assess the
risks, design the financing mix, and raise the funds.

As the project taken was in a power company the project finance was related to the upcoming
maithon thermal power project undertaken by TATA power in a joint venture with Damodar
Valley Corporation for a 1000 MW thermal power plan at Maithon site in the State of
Jharkhand. The power from the Maithon project is to be exported to power deficit western and
northern states and for meeting the requirements of damodar valley corporation.

The TATA power Ltd. Is the largest private sector power utility with an installed capacity of
over 2300 MW. The company has emerger as a forerunner in the indian power industry with a
track record of great performance, Customer care and sustained growth. TATA power has
presence in all the other kinds of power generation types such as solar power, hydro and wind
and transmission and distribution.

The electricity sector in india is the worlds 6
th
largest

energy consumer. About 65% of the
electricity consumed in india is generated by thermal power plants and around 22% is
generated through hydropower plants. As the economy of india has been growing at a faster
rate the energy needs are also growing at at an average rate of 3.6% per annum over the past
the 30 years.
The project was undertaken to know how the project financing of long term projects in the
power industry and and also in other industries done . The project will help me understand why
some projects were a success while others failed. The knowledge base is required to design the
contractual agreements to support the project financing issues for the host government
legislative provisions, public and private infrastructure partnership, public private financing
structures, credit requirements of lenders, how to determine the projects borrowing capacity,
how to measure the cash flow from a particular project and how to use them to measure the
expect rates of return, taxes and analytical techniques to validate the project feasibility.

SALIENT FEATURES OF PROJECT FINANCE

1. Project finance is used to describe a range of financing arrangements, which is actually a
century old financing technique which predates corporate finance.

2. The lenders finance the project looking at the creditworthiness of the project, not the
creditworthiness of the borrowing party. The repayment of the loans is made from the earnings
of the project.

3. Project financing is also known as limited recourse financing as the borrower has a limited
liability. The security taken by the lenders is largely confined to the project assets.

4. another important feature of project financing is that it is highly leveraged as debt usually
account for 65% to 80% of the total capital capital.

5. These projects are highly capital intensive in nature.
6. the number of participants is generally high. Even if one finds around 10 participants, it is
very normal.

7. it is generally costlier than corporate financing because of the greater need for information,
monitoring and contractual agreement.

Now, from the above two salient features of project financing, we see that the lender finance
the project looking at the creditworthiness of the project and not the creditworthiness of the
borrowing party, so we will also understand what exactly are the things the bank look into to
measure the creditworthiness of the project.

OBJECTIVES

To gain knowlwdge about the whole finance industry as a whole and especially about long
term projects financing.

To gain knowledge about the work culture as a whole and understand why has organizations
like TATA been able to write success stories for such a long time as it is one of the oldest private
sector companies in india.

To practically understand what are the steps undertaken to decide the correct financing mix for
a particular project both long term and short term to broaden the horizon of my knowledge in
the field of finance.

The long term project financing is also important from the point of view of the devising the
incentive and penalty mechanism to ensure performance of a particular project so it will also
help me understand that. As there is always a possibility that the projects are not completed on
time because of soe unforeseen event which could be like political disruption or any natural
disaster.

To understand what are the future prospects of the company and how does it take the
challenges (mainly financial) faced by them. For eg- when TATA motors was asked to leave
singur in West Bengal what kind of business continuity plans were made then.

To gain maximum exposure while working in the company.







INDUSTRY PROFILE

THE INDIAN POWER INDUSTRY

The electricity sector in india is the worlds 6
th
largest

energy consumer. About 65% of the
electricity consumed in india is generated by thermal power plants and around 22% is
generated through hydropower plants. As the economy of india has been growing at a faster
rate the energy needs are also growing at at an average rate of 3.6% per annum over the past
the 30 years. According to a research report published by Citigroup Global Markets, India is
expected to add up to 113 GW of installed capacity by 2017.

The Ministry of Power is the apex body responsible for coordination administration of the
electrical energy sector in India. Major PSUs involved in the generation of electricity include
National Thermal Power Corporation (NTPC) , National Hydroelectric Power Corporation (NHPC)
and Nuclear Power Corporation of India (NPCI). The PowerGrid Corporation of India is
responsible for the inter-state transmission of electricity and the development of national grid.

The Ministry of Power provides funding to national schemes for power projects via Rural
Electrification Corporation Limited (REC Ltd) and Power Finance Corporation Limited (PFC Ltd)
These Central Public Sector Enterprises provide loans for both public sector and private sector
companies/ projects involved in building power infrastructure.
Total Installed Capacity (as on 28-02-2011) is 171,926.40 MW.

The data below are in MW

COAL GAS
DIESE
L
NUCLE
AR
HYDR
O RES TOTAL
PERCENTA
GE(%)
STATE
SECTOR
47257
.00
4327.
12
602.6
1 0.00
27257
.00
3008.
85
82452.
58 47.49%
CENTRAL
SECTOR
34045
.00
6702.
23 0.00
4780.
00
8885.
40 0.00
54412.
63 31.34%
PRIVATE
SECTOR
12616
.38
6677.
00
597.1
4 0.00
1425.
00
15445
.67
36761.
19 21.17%
TOTAL
93918
.38
17706
.35
1199.
75
4780.
00
37567
.40
18454
.52
173626
.40
PERCENTA
GE(%)
54.09
%
10.20
%
0.69
% 2.75%
21.64
%
10.63
%

100.00%






The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This
mission would require that the installed generation capacity should be at least 200,000
MW by 2012 from the present level of 167278.36MW. Power requirement will double
by 2020 to 400,000MW.



The government had earlier planned to add 78,000 MW of power capacity by the end of
the 11th Plan, which the Planning Commission had scaled down to 62,000 MW.

The average per capita consumption of electricity in India is estimated to be 704 kWh
during 2008-09. However, this is fairly low when compared to that of some of the
developed and emerging nations such US (~15,000 kWh) and China (~1,800 kWh).The
world average stands at 2,300 kWh .

The entire value chain of the power sector is dominated by the central and state sector
utilities. For instance, in the generation space, out of the overall capacity of 152 GW, the
share of central and state utilities stands at 49.8 GW and 76.6 GW, respectively; and
that of private sector stands at 25.8 GW. Even, of the 78.7 GW planned capacity
additions during the 11th five-year-plan, central and stateutilities together are
estimated to add nearly 63.7 GW5.

The story remains pretty much the same in power transmission and distribution space.
The central and the state utilities own nearly 40 percent and 60 percent,respectively of
the total transmission lines of 2.7 million circuit kilometers (ckm). Power Grid
Corporation of India Ltd (PGCIL), the central transmission utility (CTU), is the largest
transmission company in India.



RULES AND REGULATIONS GOVERNING THE POWER SECTOR

MEGA POWER POLICY

1. Inter-state and Inter-regional mega power projects are proposed to be set up both in
the public and private sectors. In the public sector, the National Thermal Power
Corporation (NTPC) and Damodar Valley Corporation (DVC) would be setting up the
following projects: Kahalgaon Stage II (1500 MW),North Karanpura STPP(2000 MW),
Barh STPP(2000 MW), Maithon Project (1000 MW) and Cheyyur (1500 MW). In addition,
NTPC would be expanding the four gas based plants, namely, Anta, Auriya, Kawas and
Gandhar to an additional capacity of 1300 MW each.

2. In the private sector, in addition to Inter-regional Hirma (6 x 660 MW) project in
Orissa, the following projects are also proposed to be taken up: Cuddalore (1000 MW) -
based on a blend of domestic and imported coal; Krishnapattanam (1500 MW) - based
on a blend of domestic and imported coal; Pipavav (2000 MW) - based on imported coal
and Narmada ( 1000 MW, which could be expanded to 2000 MW ), based on LNG. Two
or three more projects based on LNG, may be developed on the Western coast later.

3. The Standing Independent Group (SIG) which had been constituted by the
Government of India in November, 1997, to establish parameters for negotiation of
large power generation projects would initially be the apex body to oversee the
implementation of the mega private power projects.

4. A Power Trading Company (PTC) would be established with majority equity
participation by Power Grid Corporation of India Ltd. (PGCIL), along with NTPC, Power
Finance Corporation (PFC) and other financial institutions. Concerned State
Governments/State Electricity Boards (SEBs) would also be co-opted, if found feasible.
The PTC would purchase power from the identified private projects and sell it to the
identified State Electricity Boards. As power would be sold to the States, the
concurrence of the concerned State Governments would be taken.

4. A pre-condition would be that the beneficiary States should have constituted their
Regulatory Commissions with full powers to fix tariffs as envisaged in the Central Act.
They would also have to privatize distribution in the cities having a population of more
than one million.

5. The import of capital equipment would be free of customs duty for these projects. In
order to ensure that domestic bidders are not adversely affected, price preference of
15% would be given for the projects under public sector, while deemed export benefits
as per the EXIM policy would be given to domestic bidders for projects both under
public and private sector. The domestic bidders would be allowed to quote in US Dollars
or any other foreign currency of their choice.

Changes in Deemed exports benefits(as discussed in the meeting on 15
th
march 2011 ):

1. Issue of deemed exports benefits in case of imports made by the project authority was discussed
and it was decided that if the bills of entry is in the name of the project authority then the
deemed exports benefits would not be available.

2. It was clarified that any supplies made to the project authority by an entity other than the
contractor or the main contractor or the sub contractor shall not be eligible for deemed exports
benefits.

3. Regarding the refund of terminal excise duty for non-mega power projects it was clarified that
FTP clearly stipulates that TED is not available for such supplies.


7. The projects would be offered to the developers only after all the clearances/land
have been obtained so that projects can start soon after they are granted to the most
competitive bidder. The environmental clearance would be given in two phases by the
Ministry of Environment and Forest - the site clearance being given initially.

8. In addition, the income-tax holiday regime would be continued with the provision
that the tax holiday period of 10 years can be claimed by a promoter in any block of 10
years, within the first 15 years.

The tax regulations come under sec 80 IA of the income tax .

Sec 80 IA deals with the deductions in respect of the profits and gains from industrial undertaking or
enterprise engaged in infrastructural development or power generation.

A deduction of an amount equal to 100% of the profits and gains is allowed under the section. The
deductions will also be given if it undertakes substantial renovation and modernization of the existing
transmission or distribution lines.the company can enjoy the deductions if it is set up in any part of India
for the generation or generation and distribution of power and it begins to generate power at any time
during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March 2011

9. It is visualised that the country would be adding 15,000-20,000 MW of capacity
through this policy at the most competitive tariffs payable by State Electricity Boards
and consequently by consumers.

ULTRA MEGA POWER PROJECTS
Government of India has envisaged capacity addition of 100,000 MW by 2012 to meet
its mission of power to all. It needs huge capacity addition during 10th & 11th plan,
which is not feasible from the ongoing and proposed new projects already identified. As
such there is need to develop large capacity projects at the national level to meet the
requirements of a number of states under the competitive bidding guidelines
dispensation.
Ultra Mega Power Projects are steps in that direction. Recognizing the fact that
economies of scale leading to cheaper power can be secured through development of
large size power projects using latest super critical technologies.
The Ultra Mega Power Projects with each having a capacity of minimum 4,000 MW,
would have scope for expansion in future as well. The size of these projects being large,
they will meet the power needs of a number of states through transmission of power on
regional and national grids.



MAJOR PLAYERS


Adani Power Ltd
The Company was incorporated as Adani Power Limited on August 22, 1996 and
received a certificate of commencement of business on September 4, 1996. The
Company became a private limited company on June 3, 2002 and the name of the
Company was subsequently changed to Adani Power Private Limited. The RoC issued a
fresh certificate of incorporation on June 3, 2002.The company is promoted by Gautam
S. Adani, Rajesh S. Adani and Adani Enterprises Limited.


Birla Power Solutions Ltd
Birla Power Solutions (BPSL) was established in April1984 in collaboration with globally
renowned Yamaha Motor Company, Japan, by the dynamic visionary late Ashok Birla.
The company has many a firsts to its credit. It was the first company to manufacture
portable generators in India in 1986. The company has the expertise of manufacturing 2-
stroke as well as 4-stroke engines. The company is presently producing a wide range of
generators catering to the power requirements of 500W to 40KW being fuelled by
variety of fuel options like kerosene, petrol, diesel, LPG, CNG, biogas, etc. It was the first
company to roll out self-start gensets and became the first company to launch emission
compliant generators under the brand name -- Birla Ecogen -- once again taking a step
ahead, to launch low-noise gensets, complying with phase-II noise norms and entering a
new era of silent technology gensets.




DLF Power Limited
DLF Power is engaged in the business of generation, storage and supply of power. It
operates five power plants in the country. The aggregate installed capacity of these
power plants is 55 MW. It supplies electricity mainly to Central Coalfields Ltd and Assam
State Electricity Board. The electricity generated is also used for captive purpose by the
holding company, DLF Ltd for the development of large SEZ, townships and
infrastructural projects. For FY07, its Profit after Tax grew by 5% over the previous year
and stood at Rs 63 mn.


Jaiprakash Power Ventures Ltd
Jaiprakash Hydro Power (JHPL), incorporated in 1994, is part of Jaypee group that has a
turnover of $650 million.

JHPL is subsidiary of Jaiprakash Associates (JAL). JAL is a merger between Jaiprakash
Industries (JIL) and Jaypee Cement (JCL).


NHPC Ltd.
NHPC Company was incorporated on November 7, 1975 under the Companies Act as a
private limited company under the name National Hydro Electric Power Corporation
Private Limited. The company was converted to a public limited company with effect
from April 2, 1986. The promoter of the company is the President of India acting
through the MoP, GoI and currently holds 100% of the paid-up share capital of the
company.



NTPC Limited
NTPC, India's largest power company, was incorporated on November 7, 1975 to
accelerate power development in India. Today, it has emerged as an Integrated Power
Major, with a significant presence in the entire value chain of power generation
business.


Power Grid Corpn. Of India Ltd
Power Grid Corporation of India (PGCIL) is one of the largest transmission utilities in the
world. PGCIL, incorporated in 1989, was earlier known as National Power Transmission
Corporation. In the year 1980 the Rajadhyayaksha Committee on power sector reforms
submitted report to the Government of India (GoI) expressing a need of reforms in the
Indian power sector.


Reliance Power Ltd
Reliance Power was incorporated as Bawana Power Private Limited on January 17, 1995,
its name changed to Reliance Delhi Power Private Limited by a special resolution of the
members passed at the EGM on February 1, 1995. On January 23, 2004 the Name got
changed to Reliance EGen Private Limited by a special resolution of the members passed
at the EGM. On March 5, 2004 the name changed to Reliance Energy Generation Private
Limited by a special resolution of the members passed at the EGM. Finally on July 4,
2007 the name got changed to Reliance Power Limited by a special resolution of the
members passed at an EGM.




Suzlon Energy Limited
Suzlon energy is leader in wind energy in the India, which is worlds fifth largest wind
energy market .The company, which was established in 1995, now has global presence
in five continents with manpower of over 13,000 people located in 14 countries. Its
business model has range of services that include development, manufacturing,
marketing, EPC project delivery & operations and maintenance of wind turbine
generators around the world.


Tata Power Company Limited
Tata Power, erstwhile known as Tata Electric, pioneered the generation of electricity in
India nine decades ago. The company started as Tata Hydroelectric Power Supply
Company in 1911, it got its new status with the amalgamation of two entities viz, Tata
Hydroelectric Power Supply Company and Andhra Valley Power Supply Company in
1916. Today, it is the country's largest private power utility, established as a licensee in
Mumbai and with ambitious expansion plans from being essentially Mumbai-centric to a
major national player, not only in the fields of Power but also in Energy and Broadband
Communication.


Torrent Power AEC Limited
Torrent Power (TPL) is engaged in generation, transmission and distribution of power.
Torrent forayed into the power segment by acquiring management control of Surat
Electricity Company in 1996-97. Later in 1998-99 it acquired management control of
Ahmedabad Electricity Company (AEC).




COMPANY PROFILE

Type Public (BSE: 500400)
Industry
Electricity generation
Electricity transmission
Electricity distribution
Founded 1911
Founder(s) Dorabji Tata
Headquarters Mumbai, Maharastra, India
Key people Ratan Tata Chairman
[1]

Revenue
18,985.84 crore (US$4.21 billion) (2009-
2010)
[2]

Net income
2,147.53 crore (US$476.75 million)(2009-
2010)
[2]

Employees 3809 (2010)
Parent Tata Group
Website www.tatapower.com

VISION

To be the most admired Integrated Power and Energy Company delivering
sustainable value to all stakeholders.

MISSION

We will become the most admired Company delivering sustainable value by:
- Being the supplier and partner of choice
- Achieving excellence in safety, operations and project management
- Focusing on the culture of sustainability
- Ensuring growth and delivering value to all stakeholders
- Caring for the community

JOURNEY

Tata Power's journey over the past nine decades has been a fascinating saga of
pioneering initiatives; responsible business practices that have a minimal
impact on the environment; and initiating several socioeconomic changes in our
community. In our quest to deliver sustainable energy, we are spreading our footprint
nationwide, setting new benchmarks for operational efficiencies, investing in global
resources and redefining paradigms. Our focus on building lasting and trusting
relationships with our customers, partners and employees, and our legacy of caring for
our communities, remains the bedrock of our continued sustainability. We aim to
energise consumer lifestyles by providing sustainable. We hope to inspire efficient use
of energy and endeavour to educate our customers, and the world, about the benefits
of implementing energy conservation practices. We are committed to developing our
business in a way that adds value to our local communities. Also, we aim to set higher
benchmarks in terms of development standards, and in the implementation of cutting-
edge eco-friendly technologies and processes of energy management. As we strive to
lead the reform process for sustainable power, we are also committed to safeguarding
the environment for future generations. After all, it was way back in the 1900s,that, our
Founder, Jamsetji Tata, vowed to provide the country and its people with cheap, clean,
and abundant power. Tata Power continues to make good on that promise and takes
pride in lighting up lives! power.





OVERVIEW



Tata Power today, is India's largest integrated private power and Energy Company and
has an installed generating capacity of about 3000 MW and a presence
across the entire value chain in power generation(thermal, hydro, solar, wind and
geothermal) transmission, trading and distribution. The Company has a great track
record for its performance, customer care and is a frontrunner in introducing state-of-
the-art power technologies. The Company has successful public-private partnerships in
generation, transmission, and distribution such as the 'North Delhi Power Limited' with
Delhi Vidyut Board for distribution in North Delhi, 'Power links Transmission Ltd.' with
Power Grid Corporation of India Ltd. For
evacuation of power from Tala Hydro Project in Bhutan to Delhi, and 'Maithon Power
Ltd.' with Damodar Valley Corporation for a 1050 MW Mega Power Project.




Our Pioneering Initiatives
y Bringing the first 800 MW Thermal unit to India basedon super-critical technology
for Mundra UMPP
y Commissioning the first 500 MW Thermal Unit in India
y Commissioning the first 150 MW Thermal Unit in the country
y Touch-screen based Distributed Digital Control and Energy Management Systems
y Computerised Grid Control and Energy Management Systems
y 220 KV Transmission Lines on Four-Circuit Towers
y 220 KV Underground Cable Transmission Network
y Flue Gas Desulpharisation plant using sea water
y Operators Training Simulators for 150 MW, 500 MW
y Thermal Power Plants and Switchyard Operations Fly-ash Aggregate plant of
200,000 tonne per year to convert fly-ash into useful building material
y 150 MW Reversible Hydro Pumped Storage Unit




INDIA'S LARGEST PRIVATE SECTOR POWER PRODUCER

Tata Power generates about 3000 MW of power from energy sources like thermal (coal,
gas, oil), hydroelectric, solar, wind and geothermal energy. The Company has been
associated with the growing legacy of Mumbai as a business city for over nine decades.
Mumbai's growth has literally been powered by Tata Power's reliable power supply.
Tata Power has now spread its footprint across the country and overseas. Outside
Mumbai, the Company has generation capacities in the states of Jharkhand, West
Bengal, Gujarat, and Karnataka and a Distribution Company in Delhi. The thermal power
stations of the Company are located at Trombay in Mumbai, Jojobera in Jharkhand,
Haldia in West Bengal, and Belgaum in Karnataka. The hydel stations are located in the
Western Ghats of Maharashtra and the wind farms in Maharashtra, Karnataka, and
Gujarat. An optimum mix of hydel and thermal capacities enables the company to
supply power at competitive tariffs to its customers. At 1.8% the Company's
transmission and distribution losses in Mumbai is among the lowest in the country.

INDIA'S LEADING PRIVATE TRANSMISSION PLAYER
The 51:49 joint venture with Power Grid Corporation of India for the 1,200 km Tala
Transmission Project: Power links Transmission Limited (Power links) is India's first
transmission project to be executed as a Public- Private-Partnership. Power links
transmit power from the Bhutan based Tala Hydroelectric Project (in Nilgiri, West
Bengal), through the Eastern/North-Eastern Region of India to Mandola in Uttar Pradesh
(near New Delhi) a total distance of 1,200 km. Ten States (West Bengal, Bihar,
Jharkhand, Sikkim, Punjab, Haryana, Uttar Pradesh, Jammu & Kashmir, and Delhi)
benefit from this project, which transfers about 3000 MW of regional power.
Maintaining an average availability of 99.7%, the project is an important link in the
national power grid and is the first inter-state transmission project that has been
implemented through the Public-Private-Partnership route. Powerlinks has also
balanced the ratio between thermal power and hydel power in the eastern region of
India. Tata Power's transmission operations in Mumbai License Area stretch from Colaba
in South Mumbai to Bassein Creek in North Mumbai and to Vikhroli in North-East
Mumbai (bypassing Bhandup and Mulund).

Mumbai Consumer Base
Ensuring Uninterrupted Power Supply Tata Power has a consumer base of over 85,000
direct customers in Mumbai and on, average about 12,000 million units (MU) are sold in
a year. Some of our bulk consumers include BEST, Railways, Port Trust, BARC, Refineries
and other important installations in Mumbai.
As in all parts of the business, improvement in operational efficiency is a key focus area.
Tata Power has taken a number of initiatives to improve the quality and reliability of its
power supply. The Company is also expanding its consumer base to embrace medium-
sized industries and large commercial and residential complexes in Mumbai.

DELHI CONSUMER BASE
The Companys partnership for distribution with the State Government of Delhi for its
North Delhi consumers, the North Delhi Power Limited (NDPL), is the only success story
of privatization in India. This company serves over 1 million consumers (from a
population of 4.5 million) spread over in an area of 510 sq. kms and has a peak load of
1050 MW.

INTERNATIONAL OPERATIONS


The company has executed overseas projects in the Middle East, Africa and South East
Asia including the Jebel Ali G station (4 x 100 MW + desalination plant) in Dubai, Al-
Khobar II (5 x 150 MW + desalination plant) and Jeddah III (4 x 64 MW + desalination
plant) in Saudi Arabia, Shuwaikh (5 x 50 MW) in Kuwait, EHV substations in UAE and
Algeria, and power plant operation and maintenance contracts in Iran and Saudi Arabia.












Strategic Electronics Division



The firm's Strategic Electronics Division (SED) has engaged in defence systems and
engineering for over four decades. It works with the MoD and laboratories to provide
products and solutions for the defence requirements of the country.

It has already cleared the Joint Receipt Inspection (JRI) for the first two lots of Pinaka
launchers and command posts; the third and fourth lots have successfully undergone
factory acceptance tests. It has recorded significant success in the offsets opportunity
with five orders worth about Rs. 13 crores from IAI, Israel. Phased deliveries have
already started. Phase II of Bengaluru factory upgrade is underway.

CORPORATE SOCIAL RESPONSIBILITY

Tata Power is committed to setting high standards in its pursuit of social responsibility
and remaining sensitive to the issues of resource conservation, environment protection
and enrichment and development of local communities in its areas of operations. The
company has a simple philosophy that guides its activities in these matters, Giving back
is a means towards going ahead".

Our widespread programmes on biodiversity conservation, afforestation, pisciculture,
family planning, health services, primary and secondary education and many more have
made inroads into the tiny hamlets and tribal regions of our hydro catchment areas and
it is our endeavour to light up these dark and narrow streets to new dawns.







SWOT ANALYSIS OF TATA POWER

STRENGTHS

Cost advantage- TATA power is the biggest private player in the power sector so,
achieving economies of scale will be comparatively easy in the companies.

Strengths
y Cost advantage
y Superior technology
y Company has sufficient coal reserves
to serve its upcoming power projects
after acquiring 30% equity stake in
Bumi resources, which secures 88% of
its requirement.
y Experience
y Human Resource capability
Weaknesses

y Low market share
y Capacity creation time is very high
(gestatation period)


Opportunities
y Emerging markets and expansion
abroad
y Product and services expansion
y Increasing demand
y Alternative sources of power
generation
y Acquisitions and mergers
y As indo-US deal is concluded this
would open up opportunities
in the nuclear power business for
private sector companies
y Big push to Hydro - 162 projects =
50,000 MW identified.
y Joint ventures possible with CPSUs eg
NTPC & States NTPC financially
strengthened by one-time settlement
scheme
Threats
y External changes (government,
politics, taxes, etc)
y Price wars
y Highly capital intensive
y Any delay in project implementation
y Increase in interest rate.
y Free market
y Low barriers
y Globalization

Superior technology- The companys huge financial resources can be used to buy the
best technology to make full use of whatever the company is into, whether nuclear
power or thermal or wind power generation.

Resources of thermal power generation- Company has sufficient coal reserves to serve
its upcoming power projects after acquiring 30% equity stake in Bumi resources, which
secures 88% of its requirement.

Experience- TATA power has been serving india for nearly a century now and has great
experience in this field.

Human Resource capability- The human resurce which the company has is from the
best institutions of inda and world with good experience in their respective fields which
is one of the biggest strengths of the organization.
Another quality of the human resource is that the turnover percentage of the company
is low comparing it to the industry as a whole.

WEAKNESSES

Low market share- One of the biggest weaknesse of the organization is that the
company has fairly low market share. The power industry has largely been dominated
by the public sector moreover the high investment cost and the high gestation period
also deter the company to have a low share of market share even after so many years
after its inception.

Capacity creation time is very high- The capacity creation time of a power plant is also
very high because of which the company has wait for long to start new projects
moreover there are a lot of government regulation governing the power industry
because of which even to start a power plant the company has t o take a lot of
permission because of again there are a lot of delays.


OPPORTUNITIES

Emerging markets and expansion abroad- there are a lot of ambitions and plans the
government of india has proposed in order to increase its per capita power generation
because of which the company has been able to take benefits from them moreover the
countries around india are also developing companies which also a have similar plan to
expand their power generation capacities because of which the company has high
chances of expansion.

Product and services expansion- the Indo-US nuclear deal has opened up new avenues
of investment for the company and the company being the largest power company in
India can capitalize on the opportunity given to the company.

Increasing demand- The per capita electricity in india is also very low comparing it to
the rest of the world and the people of the country want to increase this level of
demand moreover as the economy of India is growing and has also become the 11
th

argest economy of the world there will be high demand of electricity in the coming
future also. So the company can capitalize on it as well.

Alternative sources of power generation- The company can also look for new avenues
such as wind power generetion, solar power generation in which the company has not
really started working whereas other companies like suzlon and the like are working on
it as these are renewable sources of energy.

Acquisitions and mergers- the company can also look for getting into acquisions and
megers in order to take advantage of the current situation. In this way the company will
be able to acquire a larger size and it can take advantages of the Mega power policy of
the government in which if the company generates power above a certain limit it can
avail some concessions and advanteges.

Any delay in project implementation- It is also possible that there might be delays in
the project implementation and execution in land acquisition and other regulations
which are important to be undertaken without which the company might not be able to
commence business.

THREATS

External changes (government, politics, taxes, etc)- the external environment of the
company i.e consisting of the go0vernment, politics, taxes etc. are volatile in nature, and
there are possibilities that theses rules and regulation might change any time. For eg.
there has been some changes in the deemed exporter benefit which were earlier
availaible to the power companies are not being given now.

Price wars- After globalisaton and liberalisation ther is always a possibility that the new
and big players might might enter the industry because of which the sector which is not
that price sensitive right now might become price competitive which might affect their
revenues.

Highly capital intensive- the work done is power industry is highly capital intensive
because of which so a lot of machine acquisition also takes place before everything
starts.

Interest rates- there is always a possibility that the government might increase or
decrease the interest rates depending on the policy the government want o follow. In
case there is high inflation in the economy the policy makers might chose for a higher
interest rates and the cost of the project might again fluctuate.

ISSUES AND CONCERNS GOVERNING THE ORGANISATION

1. Converting a loss making sector requiring massive budgetary support into a
profitable, self-sustaining consumer oriented operation. And for this the
electricity act of 2003 was also passed. Salient features are:
y Licensing free generation from except for hydro projects
y Open access to transmission lines
y Trading of power permitted under a specific license
y Central Government to prepare National Electricity Policy and Tariff
Policy
y Strict anti-theft provisions.


2.


Another challenge facing the organization and the industry is that the per capita
power consumption comparing it to developing countries like china and
developed countries like US, UK, Canada are also dismally low. In order to
increase this per capita consumption some real and fast actions are required to
be taken but unfortunately the regulations dont allow the companies to expedite
the process.





3.


Another issue faced by TATA power is of the losses it makes when the power is
not subsidizes. So in order to make profit in the power sector there is a lot of
money which has to be incurred by the government on subsidies. These subsidies
are subject to changes according the earnings made by the government, so it is
very important that whatever is done it is done at minimal costs.

4. Political stumbling blocks- coalition government, one of the major concerns
facing the organizations is that the governments in india if changes they might
bring a completely new power policy which might again lead to changes in the
long term plans of the company. Formulating these long term plans also involves
a lot of time and money so it might prove to be a very costly affair for the
company.

5. Change in social behaviour some events might happen because of which there
might be a complete change in the social behavior of the people or the
environment. For eg. After the tsunami which came in japan this year which lead
to the destruction of the nuclear power plant in fukushima has suddenly risen
the concerns that whether we should also go for nuclear power or not.
Everybody was in the favour of the nuclear power before what happened in
japan but ow suddenly there have been concerns that if the something similar
happens in india because both the countries have faced tsunami in the recent
times, will inida being a new flanged economy, a novice in nuclear power
generation should go for nuclear power?????

6. Land acquisition- another concern is about the acquisition of the land because
TATA group has a very strict code of conduct and it doesnt get into any unethical
activities such as bribing the government officials , so a lot of time is wasted in
the acquisition of the land.

7. R&R- R&R means relocation and rehabilitation. This is another concernt faced by
the project company because relocation of the people is not that easy
everywhere and a lot lot of time and money is incurred in this. It was found that
the cost of R&R was around 2-3% of the project cost.

8. TATA Power gives a lot of attention on the safety of the employees working in
the project site and for this purpose they even have a team who are entrusted
with the responsibility of taking care of the safety of the people working at site.

9. Another concern is that the company has to maintain good relation with the
state electricity boards which might lay down some diferent rules and
regulations to be followed by the TATA power which may affect the long term
goals of he company.














LEARNINGS FROM THE PROJECT

1. Contract- The common loan agreement consist of the following:

The contract is divided into different subheadings

Article I

1.1 Definitions and interpretations- This part consists of the definitions and
interpretations of some of the terms which are frequently used in the contract and may
have different meanings at different times. So it is important that the intended meaning
of the word needs to be clearly stated.

Article II

2.1 Amount and terms of Loan- this clause states the amount of loan to be extended by
different banks. And it also states the term of the contract which might be like that if the
company issues bonds or goes for commercial external borrowings then the availaible
commitment of the lender will be reduced.

2.2 Nature of rights and obligation of the lender- It states the kind of obligation the
lender have with regard o the loan. It states whether one lender is responsible for the
obligation of any other lender.

2.3 Purpose- It clearly states the purpose for which the loan extended will be used by
the company.

2.4 Availaibility period- It is the period starting from the date of first installment uptill
the last installment.

2.5 Upfront fees, commitment fees - There is an upfront fees which is required to paid
to all the lenders which is .1% in this case. Committment fees is also paid which is 1% of
the loan amount.

2.6 Interest- The rates of interest charged by different banks are different. In case the
company makes any default in making the payment an extra interest is paid, this
amount of interest is also mentioned.

Additional interest for non creation of security- In case the company is not able to
create and perfect the security within the period mentioned earlier it wil have to pay an
extra interest to its lenders.

Interest payment for non adherence of some interest payment- Some amount
dependin on the goodwill the company enjoys and past record of the company this
interest is decided.

2.7 Disbursment schedulle- It will include the loan amortisation schedule of the loan
which includes the amount of loan which will be paid off in monthly installments and
also includes the the dates on which the payments will be made.

2.8 not used

2.9 Imposts, costs and charges- This clause talks about all the taxes such as interest tax,
service tax, other taxes and other charges such as investigation charges and
documentation charges to be paid by the company. It states who will be liable for any
taxes and charges paid.

2.10 Computation of interest and other charges- it states how the interest will be
changed on the loan whether it is simple interest or it is compound interest.

2.11 Repayment- repayment to be done in accordance with the amortisation schedule
which is made at the beginning of this agreement.

2.12 Premature repayment of loans-It state the amount of premium charged in case
the money is returned earlier than the scheduled time. It also states the amount of loan
that will be dedcuted from the loan provided by every bank.

2.13 Appropriation of payments

2.14 Place and mode of payment of the borrower- the money is generally paid at the
main branch or the branch in which it was taken from.

2.15 Due date or the payemnt- It states that in case the amount of repayment date is a
bank holiday on which date will the payment flls to be due.
2.16 Review of th progress- The lenders have the right to review the progress of the
project at any point of time and see whther their mones is being incurred at the right
time.

2.17 Review of the project cost- The lenders have the right to review the cost incurred,
the means of finance and other relevant concerns for the smooth functioning of the
project.

2.18 Increased costs- It states how will any increase in the costs on the part of the
lender treated.

2.19 Cancellation of the loan- In case the company is able to manage undisbursed
money on their own what is done in such cases is mentioned.

Article III

SECURITY

3.1 Security of loans- as we know that these loans are geberally off balance sheet
financing loans thus the secutiry paid for them is generally the immovable property of
the project both present and future. All the property is hypothecated to the bankers
untill all the loan is returned back.

3.2 Additional project documents- additional project documents are to be
submitted by the borrower.
3.3 Acquisition of additional immovable property- It states that in case any
additional property is bought by the project authorities then it is to be
hypothecated to the lender again.

Article IV
Borrowers representations and warranties- b the vorroweer hereby represents and
warrants to the lender and lenders agent and the security trustee as follows ir order to
urge and make each of the lender to enter into this agreement and other finance
dosuments. Following are the repersentations, warranties and undertakings made by
the borrower :

4.1 Existence- It talks about the existence of the company
4.2 Capacity- States the capacity of the borrowers with respect to getting into an
agreemnt.
4.3 Documents valid and Enforceable-It states that each of the document with respect
to the loan is enforceable against the borrower.
4.4 Pre commitment conditions- It should be ensured that the pre commitment
conditions have been met by the borrower are stipulated by the lender.
4.5 Action- It is to be made sure that all the acts and conditions to be performed under
the law have been performed and fulfilled.
4.6 Security Documents- It is to be made sure that the security documents are supplied
with to the lenders.
4.7 Registration and filing
4.8 Government approvals, compliance with laws
4.9 No breach, No conflict- It is to be made sure that at the time of signing the contract
no shareholder will now have any problems of any sorts, violate or conflict any
applicatble law, result in a breach of the contract.
4.10 Proirity- It says that the borrowers obligation at all times will remain the top
priority of the lender.
4.11 Proceedings- It is to be made sure that there are no action, suit or proceeding left
in case of any of the security or property with respect to the project.
4.12 Insolvency- This is to make sure that the company is not onsolventand no such
papers have been filled currently.
4.13 Complaince with statutes- The company is in all respect in compliance with all the
laws in respect to the conduct of the busines, ownership oof the property and execution
of the transaction documents
4.14 No default- This clause makes sure that no default is outstanding in respect to any
materiel fact of the company.
4.15 No Indebtedness- This is to make sure that the company hs not been duffering
from any indebtedness apart from what is there in this agreement.
4.16 Informations- This is to make sure that all the information provided is true to the
best of the borrowers knowledge.
4.17 Materiel and adverse effect- ???????

4.18 Title to assets- This is to make sure that the company has the title of the goods the
company has given as aa security.
4.19 Project documents- It states that the the lender has been supplied with all the
project documents.
4.20 Insurance- This is to make sure that all the project propeerties/assets have been
insured against all the customary risks.
4.21 Special Purpose company- This is to make sure that the company has been formed
for the purpose of the project only and not for any other purpose and it has not incurred
any liabilities in respect of that.
4.22 Tax returns and companies- This is to make surthe that the borrower has paid all
the tax returns it is required to pay.
4.23 Project budgets: Construction budget- it says that all the project construction
budget has benn prepared with keeping in mind all the prudent operating practices and
no wasteful expenditure has been included.
4.24 Intellectual Property- This is to make ssure that the company has all the right to
use the intellectual property.

Article V- Effectivemess of agreement and pre disbursment conditions

5.1 Effective date- The agreement shall be effective from the date mentioned in the
contract and the contract and would stay in force uptill the final settlement date.
5.2 conditions preceeding to Initial disbursment-It contains the genral conditions which
are required to be met before making the first payment, these conditions can be related
to the project site, terms related to equity contribution, and agovernment approval.
5.3Condition precedent to all disbursment- Before the final disbursmen starts,
conditions related to fees and other things have to be preapared.

Article VI- conditions applicable during the currency of the agreement.
6.1 Positive covenants- These are th agreements which the comppany has to follow
untill the date of final settlement

6.2 Negative covenants-
(difference between nagative list and positive list???)

Article VII Events of defaults and remidies.
In this clause one is required to mention the different kinds of defalut a borrower can
commit and it remedies.
Article VIII

Taxes

Taxes- About the taxes it is to be made sure that the payment made under the contract
are without taxes or are with taxes.











Project finance

The US financial standards define project finance as:
The financing of major capital projects in whisc the lenders look at the cash flows and
the earning of the project as the source of funds. The general credit of the project entity
is usually not a significant factor.

Or

The financing of a particular unit in which the lender is satisfied looking at the cash flows
and earnings of the economic unit as a source from which the loan will be repaid and to
the assets of the economic unit as a collateral for the loan.

Project finance has evolved through centuries into primarily a vehicle for assembling a
consortium of investors, lenders and others participants to undertake infrastructure
projects which are too large for someone to take individually.
This technique has specifically become prevailent and is used to finance independent
power plants and other infrastructural projects around the world as governments face
budgetary constrains.

Features:

1. Capitals intensive- the project financing projects are generally large scale
projects which require a great deal of money involved and are capital intensive in
nature. According to a study by World Bank in 1993 the average size of
infrastructural projects used to cost around $440 million.
2. Highly leveraged- these projects are highly leveraged projects with around 70 to
80 percent of the financing being done through long term debt.
3. Independent entity with a finite life- The financing is not only for the project but
for the whole new company which is formed as a separate entity whose sole
purpose is executing the project and has a finite life and is made for the sole
purpose of executing the project.
4. Controlled dividend policy- repayment of the loan is given a priority to dividends.
So as the cash is generated they are given to the lenders as the proportion of
debt in project financing is very high.
5. Many participants- the project as we know involves huge amount of costs there
are often many participants involved in it as lenders.
6. Allocated risk- the risk is properly allocated between the project company and
the participants and also among the the various participants. The risk is allocated
according to the risk handling capability of the participant. One who is able to
manage the risk better is being allotted the risk. For eg. In turnkey projects where
the completion of the work id givent top most priority the risk of late completion
of the project infrastructure is allotted to the contractor and not the project
company.
7. Costly- raising capital through project finance is more expensine than corporate
finance becasse of the fact that the the greater need for informaton, monitoring
and contractual agreements increases the cost of transaction.

The difference between the types of financing is given as follows:

Basis Project finance Corporate Finance
1. Finance
vehicle
Single purpose entity Mutli-purpose
organization.
2. Type of
capital
There for a finite period A permanent capital
3. Dividend
policy
Fixed dividend policy Management decision
4. Reinvestmen
t decisions
Not allowed Allowed
5. Capital
decisions
Highly transparent Opaque to creditors
6. Financial
structures
Highly tailored which can
generally cant be reused
Easily duplicable
7. Transaction
cost
Low due to high competiton High due to transaction
cost
8. Basis of
credit
valuation
The cash generating
capabilities
The credit standing of the
company
9. Cost of
capital
Relatively higher relatively lower.

ROLE OF INSURER

As we are aware of the fact that there has been a continuous increase in the
volume of the the rojects in project finance. This development has lead to the ever
quest to control or minimise the exposure to loss or damage to their goods. this lead to
the began of the use of insurance in project finance.

Taxation

In projuect finance as the amount of money involed is very high so the government give
the project entity a tax holiday of 10 years which the company can choose from the 15
years starting from the first cash inflow of the project. The income tax of the project
company are governed by section 80IA of the income tax act in which a deduction of
100% of the profits can be taken. The following are the exact wordings of what the
income tax act says in this regard:

The tax regulations come under sec 80 IA of the income tax .

Sec 80 IA deals with the deductions in respect of the profits and gains from industrial undertaking or
enterprise engaged in infrastructural development or power generation.

A deduction of an amount equal to 100% of the profits and gains is allowed under the section. The
deductions will also be given if it undertakes substantial renovation and modernization of the existing
transmission or distribution lines.the company can enjoy the deductions if it is set up in any part of India
for the generation or generation and distribution of power and it begins to generate power at any time
during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March 2011.

In this regard what can be suggested is that the company should claim fo the tax benefit in the last 10
years of the 15 years of the tax benefit because in he last 10 years the project will be fully operational
and it it expceted to generate more revenues than earlier so the project entity can save a larger part of
their revenues in the tax holiday.

Clearances

It is considered to be one of the most important as pect of project finance as we know
that project finance are large infrastructural projects ther also a need of cearances such
as land acquisition and environmental clearances etc. which are required to be
undertaken. It has also be seen the such clearances take a lot of time to take place and
it involves a huge amount of costs. Such clearances also includes relocation clearances
which costs as high as 2 to 3% of the total costs. Before such clearances have been taken
the project doesnt move forward.
This is because of the fact that in case the entity is not able to take all the clearances
which might also be bacause of some commotion and is unable to move forward it
willalso take all the money of the lenders along with itself so this is done to protect the
lenders from from such kind of loss as the amount of money involved is very high that.




BANK PAYMENTS

The project entity is required to give details of the amount in which the company wants
the banks to make the payment to them. Is is required to give details of th articles on
the which the payment has been asked for. The itemise of the payment details are as
follows:

Description Zero Date Month 1 Month 2 Month 3 Month 4 Month 5

0.1 0.1 0.1 0.1 0.3 0.2
Preliminary Investigation 2.00 2.00 2.00 2.00 6.00 4.00

0.4 0.1 0.1 0.1 0.1 0.1
Land & Site Development 324 81 81 81 81 81

0 0.1 0 0 0 0
STG Package 0.00 4,331.10 0.00 0.00 0.00 0.00

0 0 0 0 0 0
Balance Of Plant 0 0 0 0 0 0

0 0 0 0 0 0
External Water Supply
system 0.00 0.00 0.00 0.00 0.00 0.00

0 0 0 0 0 0
External coal transport 0 0 0 0 0 0

0 0 0 0 0 0
Initial Spares 0 0 0 0 0 0

0 0 0 0 0 0
Civil & strl Works 0 0 0 0 0 0

0 0 0 0 0 0
Erection & Comm 0 0 0 0 0 0

0 0 0 0 0 0
Freight 0 0 0 0 0 0

0 0 0 0 0 0
Taxes on Supply 0 0 0 0 0 0

0 0 0 0 0 0
Taxes on Civil Works 0 0 0 0 0 0

0 0 0 0 0 0
Taxes on services 0 0 0 0 0 0

0 0 0 0 0 0
Contigency 0 0 0 0 0 0

0.01 0.005 0.005 0.005 0.005 0.005
Establishment /
Consruction Supervision 20.394592 10.197296 10.197296 10.197296 10.197296 10.197296

0 0.01 0.01 0.01 0.01 0.01
Design, engineering,
inspection and project
Management 0 3.2631348 3.2631348 3.2631348 3.2631348 3.2631348

0 0 0 0 0 0
Startup Fuel 0 0 0 0 0 0

0

0.1

Development expense 0 0 0 0 0 0

0.05

Legal audit, account 0 0 0 2.5 0 0

0.1

0.03 0.02 0.02
CSR 10 0 0 3 2 2

0 0.0178571 0.0178571 0.0178571 0.0178571 0.0178571
Construction Insurance 0 3.7286577 3.7286577 3.7286577 3.7286577 3.7286577

0 0 0 0 0 0
Working capitalmargin 0 0 0 0 0 0

Total Cost Rs Mil 356.39 4431.29 100.19 105.69 106.19 104.19
% 0.41 5.15 0.12 0.12 0.12 0.12
Quarterly Cumulative 356.39 4431.29 4531.48 4637.17 106.19 210.38
% 0.41 5.56 5.68 5.80 5.92 6.04
Cumulative 356.39 4787.68 4887.87 4993.56 5099.75 5203.94
% 0.41 5.56 5.68 5.80 5.92 6.04

This itemise is a shorter version of what is exactly given to the banks. This shorter
itemise is given to imporve understanding and also because of non disclosure norms
which are required to be followed.































Bibliography

Researches:

y The Economic Motivations for Using Project Finance by Benjamin C. Esty ,
Harvard Business School
y Project finance by Tim Thompson
y Project finance the added value of insurance
y Project fianance by Bruce Comer
y Law, Agency Costs and Project Finance by Xue Wang

Websites

y ikipeuiag
y bsg
y pectfinancemagazinecm
y pectfinancemuelscm
y asustcm
y tatapecm
y sinecm
y ttpexpleneinuiaininuustype




















SYN0PSIS




TATA P0WER
C0NPANY LTB

















ST0BENTS NANE Piyus Namgain
INB0STRY u0IBE N uaenua Baua
FAC0LTY u0IBE Ns Navleen kau
0bective Te lean te kn f pect financing
Leaning gt t kn abut eac anu evey uetail abut
pect financing in TATA pe te cntacts ae
maue te lan is taken fm te bankste inteest
cageu secuity f te bank lan te lan amstisatin
sceuule ae te banks csen le f insue inpect
financing etc
Lking int te nitty gitty f pect in tese mnts
pect finance it as been leant tat pect financing is
te best ecuce t finance infastuctual pects anu
te uevelpmental pects f a cmpany In tis ay te
pect cmpany is te ne f te pect is able t
etain nesip f te pect cmpany afte all te lan
as been paiu
0ne f te mst imptant aspect f pect financing is te
cleaances ic te pect cmpany is equieu t take
befe te cmmencement f te pect I gt t lean a lt
abut tat