Govt cancels auction under Phase 2 of pilot scheme to salvage stressed power units

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New Delhi | Published: December 19, 2019 5:49:05 AM

The pilot scheme is one of the two steps taken by the government to salvage commissioned power plants lying stranded, several due to the lack of PPAs.

The move comes a year after state-run NHPC was appointed as aggregator for the second phase of the scheme.

The Union power ministry has cancelled the auctions under the second phase of the pilot scheme to salvage stressed power units held earlier this year to sign power purchase agreements (PPAs) with 2,500 mega-watt (MW) of stressed electricity generating units. It has issued tenders afresh for selecting an aggregator for this batch of power plants.

The move comes a year after state-run NHPC was appointed as aggregator for the second phase of the scheme. Though no reason has been cited by the ministry for the cancellation of the auctions, industry sources say a fall in spot market prices for electricity amidst overall low demand could have prompted the move. They also pointed out that NHPC’s lack of experience as an aggregator might have delayed the process.

Emails to the power ministry and NHPC sent on Wednesday morning haven’t elicited responses.

The pilot scheme is one of the two steps taken by the government to salvage commissioned power pants lying stranded, several due to the lack of PPAs. The government has managed to bring as many as 11 coal-based projects with combined capacity of 12.7 giga watt (GW) out of stress over the last six months. But the first tranche of the pilot scheme had evoked rather lukewarm response from the industry, with only seven power plants with a combined capacity of 1,900 MW agreeing to sell electricity against the call for 2,500 MW.

However, with the government tweaking bidding parameters for the second round, almost 4,000 MW of private generators competed for an offered quantum of 2,500 MW. The Rs. 4.41/unit price discovered in the latest auction was 4% higher than the previous versions as the industry accounted for risk factors such as deficit in receiving adequate coal, slippages in quality of fuel received and curtailment of fixed charges depending upon vagaries of power demand of discoms.

According to the pilot scheme, the aggregator will sign PPAs with successful bidders and ink back-to-back power supply agreements separately with electricity distribution companies (discoms) interested in buying power from these units. The power ministry has “further advised PFCCL (the nodal agency) to undertake rebidding of Pilot Scheme-II through another aggregator”, the latest tender document showed.

According to industry sources, under the second phase of auctions held earlier, as many as 13 companies including Jindal Power, JSW Energy, Adani Power and Sembcorp emerged as the successful bidders. E-mails sent by FE to the four companies named above was not responded to, till the press time. “To the best of our knowledge the process has still not been cancelled and we have no such advice from the aggregation agency (NHPC),” a senior official from one of the involved companies told FE on conditions of anonymity.

“Cancellation of these bids based on perception that the quoted prices are high is misplaced when examined on basis of design of bid documents,” said Ashok Kumar Khurana, director general, Association of Power Producers. “With the improvement in the design by apportioning risks equitably, the prices can come down by 65-75 paise per unit,” he noted, adding that “the choice of NHPC as a an aggregator was wrong as they have no experience”.

Icra, on Wednesday, downgraded the conventional power sector’s outlook to negative. “The progress on stressed asset resolution also remains slow, with only about 10% of the 40 GW stressed coal-based capacity achieving resolution,” Icra noted, as there has been a “long lead time to achieve a sustainable resolution, limited progress in signing of new long-term PPAs and still subdued thermal PLF levels”.

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