NEW DELHI: RKM PowerGen, Jaiprakash Associates, IL&FS and MB Power are among seven companies that have bid the lowest in an auction of three-year power supply contracts with stressed plants, quoting a price of Rs 4.24 per unit. 

According to a senior official, Jindal India Thermal Power, Avantha Group’s Jhabua Power and SKS Power were the other three that matched the lowest price in the pilot scheme for plants stressed for want of power contracts. The companies either have fuel supply agreements with state-run Coal India or have tieups for imported coal, the official said. 

The contracts will help these plants meet part of their debt obligations, persons aware of the matter said. Sembcorp Energy, which had submitted technical bids, decided against matching the winning price. The company is looking for a long-term power purchase agreement (PPA), but its plant is not financially stressed because it is running with short-term contracts and spot market sales. The financial bids were opened on Friday. 

 

“RKM PowerGen’s Chhattisgarh-based coal project emerged as L1 with Rs 4.24/unit power supply at state’s periphery,” the official said. “All bidders, except Sembcorp, matched the L1 tariff.” 

The scheme, which is likely to see tie ups for a total of 1,900 Mw, assures minimum offtake of 55% of contracted capacity. The tariff will be fixed for three years without any escalation. Also, the fixed cost for the PPA auction has been kept at 1paisa per unit. 

The official said that as per the tender, the distribution company will get additional discount of 1% in tariff on each 5% extra procurement over 55% of a project’s capacity. “Hence, if a distribution company dispatches 100% power, it would get a discount and shall pay tariff reduced up to Rs 3.86 per unit,” he said. 

Industry executives, however, said, high power supply will be possible with increased coal supply availability. According to the official, power flow should start in October, considering the required transmission access. He said eight states including Gujarat have requisitioned a total of 4,800 Mw under the scheme. 

Ashok Khurana, director-general of Association of Power Producers, said, “Lowest bid of Rs 4.24 per unit, fixed for three years in the pilot scheme is very encouraging. This is a very good mechanism for providing PPAs and improving cash flows of stressed assets. Next tender with slight adjustment of risk apportionment and coal linkage may see bids in the range of Rs 3.75 unit.” 

In April, the government had kicked off the pilot scheme for procurement of aggregate power of 2,500 Mw, with PFC Consulting Ltd as the nodal agency and PTC India is PPA aggregator. Bids were received for 2,200 Mw from eight companies. 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.