Projected Payments  over Next 20 Years
 
Below we present an estimate of the payment due to DPC over the next 20 years. Our calculations are based on the Power Purchase Agreement and a number of reasonable assumptions (for instance, about the dollar rupee exchange rate and the price of oil over this period) listed below.

According to this estimate,  at 90 percent off-take, MSEB will pay DPC  a sum of approximately Rs. 4 lakh crores over the life of the project. This estimate merely adds up rupee payments made over various periods without attempting to correct for inflation. However, even mutliplying the payments due in the first year by twenty (surely an underestimate) yields a net payment of 30 billion dollars or about 1 lakh 40 thousand crore rupees at todays rates!

Chart Showing payments to Enron by MSEB and the cost per unit over the life of the contract

year
amt (billion dollars per year)
Re Value
(assuming a depreciation of 6.5 % per year)
yearly payments
per unit (90% off- take)
60% off -take
30% off- take
Rupee Value
(assuming a depreciation of 5 % per year)
total payments
(Rupee Depreciation at 5%)
1.00
1.52
50.06
7608.4
4.40
6.60
13.21
49.35
7501.2
2.00
1.57
53.56
8385.2
4.85
7.28
14.56
51.82
8112.5
3.00
1.61
57.31
9241.3
5.35
8.02
16.04
54.41
8773.7
4.00
1.66
61.32
10184.8
5.89
8.84
17.68
57.13
9488.8
5.00
1.71
65.61
11224.7
6.50
9.74
19.49
59.99
10262.1
6.00
1.76
70.20
12370.8
7.16
10.74
21.48
62.98
11098.5
7.00
1.81
75.12
13633.8
7.89
11.83
23.67
66.13
12003.0
8.00
1.87
80.38
15025.8
8.70
13.04
26.09
69.44
12981.2
9.00
1.93
86.00
16560.0
9.58
14.37
28.75
72.91
14039.2
10.00
1.98
92.02
18250.7
10.56
15.84
31.69
76.56
15183.4
11.00
2.04
98.47
20114.1
11.64
17.46
34.92
80.39
16420.9
12.00
2.10
105.36
22167.8
12.83
19.24
38.49
84.41
17759.2
13.00
2.17
112.73
24431.1
14.14
21.21
42.42
88.63
19206.5
14.00
2.23
120.62
26925.5
15.58
23.37
46.75
93.06
20771.9
15.00
2.30
129.07
29674.6
17.17
25.76
51.52
97.71
22464.8
16.00
2.37
138.10
32704.4
18.93
28.39
56.78
102.60
24295.7
17.00
2.44
147.77
36043.5
20.86
31.29
62.58
107.72
26275.8
18.00
2.51
158.11
39723.6
22.99
34.48
68.96
113.11
28417.2
19.00
2.59
169.18
43779.3
25.34
38.00
76.01
118.77
30733.2
20.00
2.67
181.03
48249.2
27.92
41.88
83.77
124.70
33238.0
Total 
40.84

446298.5

349026.8

 
Data Source: Prayas, MSEB, DPC, CEA
Analysis: Abhay Mehta.

Notes

  1. The first figure – i.e. 1.52 billion is derived as follows
A 2184 MW plant at 90% is capable of generating 17.28 billion units
At the price of US $0.088 per unit (Rs4.13) which is the price assuming oil at US 28 a barrel
In the alternative – assuming oil to be say 20, the price per unit is of the order of8.1 cents or so; i.e. total payments would be of the order of 1.4 billion 
  1. The rupee has been historically devaluation at an rate of 6.5 % per year – This pattern has been observed over the last 50 years! – The exchange rate in 1965 was Rs 5 ; in 1980 it was 10 - 
This is the rate used in the second column – Of interest is to note that if the assumption of 5 %is used – i.e. a difference of only 1.5 %Over the life of the contract, it makes a difference of 1 lakh crores! 
  1.  The sensitivity of absorption – There is no way that we can absorb base load power i.e. at 90% - This was the main objection of the world Bank, the CEA or even Dr Kirit Parikh (who later changed his mind for “unknown” reasons) – We have to stop generating cheap coal power (for example in the night where even the most ardent proponent of Enron admits that the Enron power is useless- If we take less, say even 60% the price per unit increases by 50%!! 
  2. The price of oil has been taken to be relatively steady at 28 dollars. This is the current price and appears to be a reasonable approximation (between $24 to $32) of the prices over the next 4-5 years . However if there is a sudden increase in prices (as it happened last year), the assumptions take a toss and needless to add we will have to pay much more . Additionally a steady long term increase cannot be ruled out – To illustrate in dollar terms oil prices have been steadily increasing at about 3 % per year (this is a 40 year trend !!). If this assumption were made – we are in deeper trouble 
  3. The total payments are with the assumption that all three blocks (of about 700 MW) will be online in January 2002 (as envisaged currently). Currently (Jan 2001) - it does appear that Enron will try and delay at least one of the 3 blocks for another year. If that is the case, payments would decrease proportionately. 
  4.  Currently (in the absence of all documentation) - it appears that Enron’s fuel supplies are limited to 82% of the installed capacity – (2.1 million tones of LNG and the equivalent of 5% capacity on Naphtha). If this were indeed the case, the payments would reduce by 2-3% in dollar terms.