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    Primer On Group Captive Power Plant

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    bhanu
    A group captive power plant allows a group of industrial consumers to jointly set up a power generation facility for their collective use. Key provisions require the consumers to collectively own at least 26% of the plant and consume at least 51% of the annual generation. A special purpose vehicle is formed where consumers and the promoting company hold equity shares. The capital structure includes equity, preference shares, and debt. Consumers' investment and electricity allocation are based on their proportional ownership share of the plant. Group captive plants provide reliable supply and cost benefits compared to the unreliable grid.

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    Primer On Group Captive Power Plant

    Uploaded by

    bhanu
    154 views4 pages
    A group captive power plant allows a group of industrial consumers to jointly set up a power generation facility for their collective use. Key provisions require the consumers to collectively own at least 26% of the plant and consume at least 51% of the annual generation. A special purpose vehicle is formed where consumers and the promoting company hold equity shares. The capital structure includes equity, preference shares, and debt. Consumers' investment and electricity allocation are based on their proportional ownership share of the plant. Group captive plants provide reliable supply and cost benefits compared to the unreliable grid.

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    Primer on Group Captive Power Plant

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    A group captive power plant allows a group of industrial consumers to jointly set up a power generation facility for their collective use. Key provisions require the consumers to collectively own at least 26% of the plant and consume at least 51% of the annual generation. A special purpose vehicle is formed where consumers and the promoting company hold equity shares. The capital structure includes equity, preference shares, and debt. Consumers' investment and electricity allocation are based on their proportional ownership share of the plant. Group captive plants provide reliable supply and cost benefits compared to the unreliable grid.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    154 views4 pages

    Primer On Group Captive Power Plant

    Uploaded by

    bhanu
    A group captive power plant allows a group of industrial consumers to jointly set up a power generation facility for their collective use. Key provisions require the consumers to collectively own at least 26% of the plant and consume at least 51% of the annual generation. A special purpose vehicle is formed where consumers and the promoting company hold equity shares. The capital structure includes equity, preference shares, and debt. Consumers' investment and electricity allocation are based on their proportional ownership share of the plant. Group captive plants provide reliable supply and cost benefits compared to the unreliable grid.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    BRIEF OVERVIEW OF GROUP CAPTIVE POWER PLANTS

    I.

    Captive Power Background:

    Captive power refers to generation from a unit set up by industry for its exclusive
    consumption. Industrial sector is one of the largest consumers of electrical energy in
    India. To sustain and excel in the dynamic global environment, it is imperative for
    the industries to ensure uninterrupted power supply for performance optimization
    which subsequently led to the growth in captive power plants. A number of
    industries are now increasingly relying on their own generation (captive and
    cogeneration) rather than on grid supply, primarily for the following reasons:

    II.

    Non-availability of adequate grid supply


    Poor quality and reliability of grid supply
    High tariff as a result of heavy cross subsidization
    Enabling Legal Provisions:

    Captive power plants are a necessity for the Indian electricity scenario. The
    Electricity Act 2003 has been a landmark in institutionalizing captive power. Captive
    power generation also finds mention in the National Electricity Policy and the
    Electricity Rules 2005. Some of the important provisions highlighting captive power
    are listed below:

    Provisions for Captive Power Plants in Electricity Act 2003o Captive generating plant is defined under Section 2 (8) as It is a power
    plant set up by any person to generate electricity primarily for his own use and
    includes a power plant set up by any cooperative society or association of persons
    for generating electricity primarily for use of members of such cooperative society
    or association.
    o Section 9 (1) further stipulatesa person may construct, maintain or operate
    a captive generating plant and dedicate transmission lines. It also provides that
    supply of electricity from the captive generating plant through the grid shall be
    regulated in the same manner as the generating station of a generating company.
    o

    Section 42 (2) states that surcharge (for meeting the requirements of crosssubsidy) on wheeling charge shall not be leviable in case open access is

    Page 1 of 4

    provided to a person who has established a captive generating plant for


    carrying the electricity to the destination of his own use.

    Provisions for Captive Power Plants in National Electricity Policy- In


    consonance with the Electricity Act 2003, the National Electricity Policy
    emphasizes that
    o Article 5.2.24: The liberal provision in the Act with respect to setting up of
    captive power plant has been made with a view to not only securing reliable,
    quality and cost effective power but also to facilitate creation of employment
    opportunities through speedy and efficient growth of industry.
    o Article 5.2.25: The provision relating to captive power plants to be set
    up by group of consumers is primarily aimed at enabling small and medium
    industries or other consumers that may not individually be in a position to set up
    plant of optimal size in a cost effective manner. It needs to be noted that efficient
    expansion of small and medium industries across the country would lead to
    creation of enormous employment opportunities.

    Provisions for Captive Power Plants in Electricity Rules 2005- These rules
    state that
    Quote
    3. Requirements of Captive Generating Plant.(1) No power plant shall qualify as a captive generating plant under section 9 read
    with clause (8) of section 2 of the Act unless(a) in case of a power plant (i) not less than twenty six percent of the ownership is held by the captive user(s),
    and
    (ii) not less than fifty one percent of the aggregate electricity generated in such plant,
    determined on an annual basis, is consumed for the captive use:
    Provided that in case of power plant set up by registered cooperative society, the
    conditions mentioned under paragraphs at (i) and (ii) above shall be satisfied
    collectively by the members of the co-operative society:
    Provided further that in case of association of persons, the captive user(s) shall hold
    not less than twenty six percent of the ownership of the plant in aggregate and such
    Page 2 of 4

    captive user(s) shall consume not less than fifty one percent of the electricity
    generated, determined on an annual basis, in proportion to their shares in ownership
    of the power plant within a variation not exceeding ten percent;
    Unquote;

    Further the Ownership has been defined as


    Quote
    Ownership in relation to a generating station or power plant set up by a
    company or any other body corporate shall mean the equity share capital with voting
    rights. In other cases ownership shall mean proprietary interest and control over the
    generating station or power plant;
    Unquote;

    Above legal provisions made it abundantly clear that


    o Any person (company) or association of persons (companies) can come
    together and set up a captive generating station for own consumption.
    o This group of companies collectively has to ensure that they own at least
    26% of equity (with voting rights) and consume at least 51% of the
    generation.

    III. General Structure of a Group Captive Power Plant

    SPV: A special purpose vehicle is formed for developing a group captive


    power plant.
    o The group of consumers collectively hold at least 26% of equity with
    voting rights
    o Rest of the equity is held by the promoting company (in this case-XYZ
    Power Limited)

    Investment: The capital structure of interested power generation plant (XYZ


    Power Limited) would be divided into 3 parts:
    o 1% Equity shares held by consumers and XYZ Power Limited
    o 29% Preference shares held by parent i.e. XYZ Power Limited
    o 70% Debt

    Page 3 of 4

    The group of consumers collectively needs to invest 26% of the equity. This
    brings down the value of investment by an individual consumer to a very
    nominal value.

    XYZ Power Limited


    (50.4 MW)
    Debt
    70%

    Preference
    Shares

    Equity
    1%

    29%

    XYZ Power Ltd.--- 74%

    All Consumers--- 26%

    Consumer 'A': (Lets say 20 MW)


    Equity--- 20/50.4 of 26%

    Other Consumers: (Balance 30.4


    MW)
    Equity--- 30.4/50.4 of 26%

    Consumption: The group of consumers are expected to consume the


    electricity generated from the proposed power plant within the ratio of
    ownership

    Energy Quantum Eligible to Supply to Group Captive Consumer(s):


    Consumer gets energy quantum credit equivalent to their share of generation
    only.

    Page 4 of 4

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