Adani Power on Tuesday said it was putting on hold capacity expansion projects of 6,500 Mw due to uncertainty on supply of coal. This massive capacity addition plan involved an investment of Rs 30,000 crore.
The company was originally planning power plants at Bhadreshwar and Dahej in Gujarat and Chhindwara in Madhya Pradesh. “We are not starting physical construction of equipment at the power plants until there is clarity on the coal linkages side,” said Ravi Sharma, chief executive officer.
With near-monopolist Coal India's production not going up as needed, many new coal linkages come with a clause that guarantee only 50 per cent of the requirement. The company, like many others, is waiting for government action on the issue, currently under the ambit of an empowered group of ministers.
Adani Power has even acquired all the land for these projects and sought environmental clearances for Dahej and Chhindwara. It has applied for environmental clearance for Bhadreshwar. For all this, the company has already spent around Rs 500 crore, according to sources. “We are on the priority list for all the coal linkages, have obtained land and other clearances. We would start work once we get the linkages,” said Sharma.
Also, it is yet to get a go-ahead on long-term power purchase agreements. “Not many coal tenders are coming up for us to go for long-term PPAs. Most distribution companies are not willing to commit to purchase agreements, as they are unsure of the coal price,” said Sharma.
In a long-term PPA, spanning at least 25 years, the company would commit to as much as 85 per cent of the power produced. These contracts also help companies tie-up debt for such plants. The rest of the power can be sold in the open market by the company.
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Adani Power currently has 3,300 Mw of capacity. Most of this comes from its project in Mundra, Gujarat, based on imported coal. But these units have also come into trouble after the government of Indonesia, from where they draw coal, changed its regulations.
According to the new rules, the price of coal exported has to be benchmarked to international prices, causing huge escalation in their fuel costs.
“Margins will be hit,” admitted Sharma, without giving details. Adani is also developing 3,300 Mw in Tiroda, Maharashtra, and a 1,320 Mw plant at Kawai in Rajasthan, progressing on schedule, the company said.