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  1. Pilot scheme for plants sans PPAs elicits tepid response

Pilot scheme for plants sans PPAs elicits tepid response

Even as nearly 20,000 MW of commissioned power generating units are under stress due to lack of power purchase agreements (PPAs), the government’s pilot scheme to procure electricity from 2,500 MW generation capacity without PPAs has evoked a tepid response from the industry.

By: | New Delhi | Published: July 7, 2018 5:01 AM
power, power sector, power industry The pilot plan proposed that a single entity, which quotes or matches the lowest bid in the auction, would be allocated a maximum capacity of 600 MW.

Even as nearly 20,000 MW of commissioned power generating units are under stress due to lack of power purchase agreements (PPAs), the government’s pilot scheme to procure electricity from 2,500 MW generation capacity without PPAs has evoked a tepid response from the industry.

As per industry sources, only seven power plants with combined capacity of 1,900 MW have agreed to sell electricity to the government under this scheme. PFC Consulting, the nodal agency for the scheme, had initially received bids for 2,200 MW, but sources say Sembcorp Gayatri has relinquished its bid of 200 MW and Jaypee Nigrie has also halved the capacity offered to 100 MW.

According to experts tracking the development, power producers without PPAs were not encouraged to participate in the scheme, even when only 1.4 GW long-term PPAs were signed in the last four years, because of some restrictive features. The scheme did not allow any escalation of tariffs even with the rise in fuel costs.

RKM Powergen is said to have quoted the lowest bid of `4.24/unit, which all the remaining power companies have agreed to match. Nigrie’s quote of `6.5/unit is said to be the highest. The other five firms which are still in the race are: RKM, IL&FS Tamil Nadu, SKS Power, Hindustan Powerprojects’ MB Power, Jindal India Thermal Power (JITPL) and Avantha Jhabua.
Plants belonging to Jaypee, JITPL, RKM, Hindustan Power Projects, Avantha and SKS are already identified as stressed assets. This may be one of the reasons, experts noted, why the companies might have agreed at a relatively lower tariff.

Respective lenders have put Avantha Group’s 600 MW Jhabua plant and SKS Power Generation’s 1,200 MW plant in Chhattisgarh up for sale. NTPC has received proposals to take over JITPL’s 1,200 MW Derang plant and Jaypee’s 1,320 MW Nigrie plant.

According to the scheme, PTC India would sign three-year (mid-term) PPAs with successful bidders and contracts with power distribution companies (discoms) to sell electricity. Gujarat, Maharashtra, Rajasthan, Bihar and Jharkhand together have already evinced interest to buy 3,000 MW under the plan.

The pilot plan proposed that a single entity, which quotes or matches the lowest bid in the auction, would be allocated a maximum capacity of 600 MW.

If PTC procures less than 55% of contracted capacity in a month, the power plant would be paid a compensation, whose quantum would be linked to spot power prices at the Indian Energy Exchange.

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