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Rediff.com  » Business » Large power projects may be delayed

Large power projects may be delayed

August 25, 2006 14:21 IST
Only one of the ambitious seven ultra mega power projects, the coal pit-head project in Sasan in Madhya Pradesh, is likely to be awarded for development work by the end of this calendar year.

The coastal Mundra project, which was also slated to be awarded by end-2006, is likely to be delayed and will only be awarded early next year.

The last date for submission of bids for Sasan is November 22, with the bid opening slated for November 29. The handing over of the project to the successful bidder is scheduled for December 31.

Two more projects, Krishnapatnam in coastal Andhra Pradesh and the pit-head project at Bhasma in Orissa, are expected to be awarded by April next year.

The companies to which request for participation have been issued so far include Tata Power, Reliance Energy, Sterlite, Torrent, Essar (for Sasan), NTPC (Sasan), GMR-China Light and Power (Sasan), Adani (Mundhra) and Jindal (Sasan).

The ministry has agreed to relent on some of the issues raised by the bidders. These include flexibility in unit size subject to adoption of minimum supercritical parameters, land acquisition for power plant and coal mine by the special purpose vehicles for the projects, as well as in-principle environmental clearance for coal mines and transmission lines by the Power Grid Corporation to evacuate power.

Bidders are, meanwhile, concerned about the nine-month time frame in which the financial closure of the project is expected to take place, since there is a lack of clarity on fuel and relief and rehabilitation issues. They also argued that the time frame was not sufficient for the lenders to give a final sanction to the projects.

Meanwhile, according to ministry sources, the states have agreed to provide Rs 1 crore (Rs 10 million) per 100 MW as commitment advance. This will be treated as equity in the SPV, enabling it to mobilise funds for land acquisition and relief and rehabilitation.

The bidders had also requested for an extension of the November 22 bid submission deadline. Since an accurate mining plan and some other details are yet to be clarified, bidders would be forced to factor in a higher risk margin in the bids.

This proposal was, however, rejected by the government, said Shubhranshu Patnaik of PricewaterhouseCoopers, which is advising some of the bidders.

The ministry has also not budged on the issue of payment security mechanisms. It has, on the other hand, laid down that a letter of credit by distribution utilities and escrow on receivable will be a part of the Power Purchase Agreements.

The ministry has continued to reiterate that in the event of a default, other procurers have the first right to buy. Failing this the power can be sold in the market through transmission open access either directly or through power traders, or supply directly to HT customers under provisions of the Electricity Act 2003.

The ministry has also pointed out that 9 out of 10 purchasing states have given letters of confirmation for power allocation.

Gayatri Ramanathan in Mumbai
Source:
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