NLC, formerly Neyveli Lignite Corporation, which is in talks with IL&FS for possible purchase of the latter’s 1,200 MW thermal power plant at Cuddalore in Tamil Nadu, wants the crisis-hit conglomerate to pare its expectations. IL&FS is believed to have asked NLC to assign a per-mega watt value of around `8.7 crore to the unit, citing the cost of NLC’s own plant coming up at Ghatampur in Uttar Pradesh.
NLC’s chairman and managing director Rakesh Kumar told FE that unlike its UP unit, which has power purchase agreements with UP discoms and will run on domestic coal, there is uncertainty over the Cuddalore unit’s PPAs.
“It should be noted that Cuddalore plant of IL&FS is based on imported coal and right now imported coal prices are highly volatile. Besides, it is unclear if the PPAs with the Tamil Nadu discoms will exist in their current form. The company has also never used captive coal mines for the power plant, so whether these will be offered for power generation is also not clear,” Kumar said.
IL&FS had cited the location of the TN plant as a positive. “Despite the location benefits, the cost of `8.7 crore/MW for Ghatampur project in UP is not comparable with IL&FS project,” Kumar said. “The acquisition will depend on probable tariffs, which could be secured or be market rates agreeable to both the parties.
The Cuddalore unit was taken to the NCLT by lenders, led by SBI, for default on payments. In parallel, IL&FS has been talking to NLC for possible sale of the plant under a deal acceptable to lenders.
IL&FS on November 28 issued request for proposal for its renewable projects. The renewable assets of the group include operating wind power plants with an aggregate capacity of 873.5 MW, and under-construction wind power plants of 104 MW capacity. Assets also include the solar power business, under which it has around 300 MW of under-construction projects.
It is expected that the company might consider inviting tenders for the thermal power plant as well. However, as of now, the company has not decided on the process.
When contacted, a IL&FS spokesperson declined to comment.
In its discussion with banks, IL&FS had blamed rising coal prices in Indonesia for Cuddalore plant’s cash flow problems. Besides, it does not have a power purchase agreement in place for the second phase and had to sell electricity in the spot market, where prices are currently below its cost.