PPA auction for stressed power stations gets bids for 2,200 mw

Industry:    2018-06-27

Sembcorp Energy, Jaiprakash AssociatesNSE -6.82 %, IL&FS and RKM PowerGen are among eight companies that responded to the government’s pilot scheme to aggregate and auction power purchase agreements (PPAs), to help them generate electricity from idling plants and repay loans.

Bids were received for 2,200 mw PPAs against 2,500 mw offered by the government.

Projects of some companies, including GMR Energy, Coastal Energen and Lanco Infratech, which do not have assured coal supplies or are pending in insolvency court, could not participate in the bidding process, people close to the development said.

“Companies that are in the insolvency court did not receive the requisite permission from NCLT,” one of the sources said. “Companies that do not have an assured supply of coal have stayed away from bidding. The no escalation clause could also have been a deterrent,” the person said. The aggregate PPA demand from states, however, has been close to 5,000-mw, he said.

Companies that submitted bids for the PPA auction include MB Power, Jindal India Thermal Power, Avantha Group’s Jhabua Power, and SKS Power. These companies either have fuel supply agreements with Coal India or have imported coal tieups, sources said.

The companies had submitted technical and price bids on Tuesday. The price bids of technically qualified companies will be opened on July 6.

“It is a welcome step, idling capacity with coal linkage/imported coal of 2200 mw will get PPA and will be able to service loan and meet O&M costs,” said Ashok Khurana, director general at Association of Power Producers, said. “Next aggregated bid should be with coal linkage so that idling plants without coal can also bid,” he said.

The government had in April kicked off the pilot scheme for procurement of aggregate power of 2,500 mw on competitive basis for three years from commissioned projects without PPAs.

PFC Consulting Ltd has been appointed as nodal agency and PTC India is the PPA aggregator that will sign the PPAs with successful bidders and discoms.

Under the scheme, a single entity can be allotted maximum capacity of 600 mw. The scheme assures minimum offtake of 55% of contracted capacity and the tariff will be fixed for three years without any escalation. Also the fixed cost for the PPA auction has been kept at 1 paisa per unit.

The scheme looks to address the issue of stressed assets. Lack of PPAs is one of the key reasons for stress in the power sector, besides factors such as promoters’ equity crunch, no coal supply, and regulatory and contractual issues.

Electricity distribution companies have not called long-term contracts in the last few years. Long-term PPAs of some states like Kerala, Maharashtra and Uttar Pradesh did not materialise.

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