PTC to conduct second round of power procurement, seeks partners for PEL

Plans to go the whole hog into trading through power exchange in a tie-up with ICICI and Bombay Stock Exchange

At a time when demand concerns have dogged the power sector, Power Trading Corporation (PTC) is playing the role of an aggregator and has successfully completed bidding for 1,900 Mw of short-term power contracts. Simultaneously, it is looking for a second tranche of power procurement and is planning to go the whole hog into trading through power exchange in tie-up with ICICI and BSE.

TN, Telangana, Haryana, Punjab, Jharkhand and Bihar are likely to sign the power sales agreement (PSA) for the first tranche of 1,900 Mw, for which PTC has aggregated bids. “Through the use of scheduling, we will able to cater to the demand of the state without the power plant suffering. Within a month, the final PSA should be signed,” PTC Chairman and MD Deepak Amitabh said in an interview with Business Standard. The pact would be for three years with a composite charge and just 1 paise fixed charge in the tariff. At 55 per cent plant load factor (PLF), states would be buying power at Rs 4.24 a kilowatt an hour (unit), said Amitabh.

Further, every 5 per cent increase in PLF would get a 1 per cent discount in tariff under the agreement. In case PLF goes below 55 per cent, the differential power would be sold in the open market and any under-recovery would be charged to the distribution company. If power is sold at a premium, the profit would be divided equally between discom and the generating firm. The arrangement would be different from the normal power purchase pact under which a discom pays fixed charge even if it does not draw the contracted power.

Power under this mechanism would be supplied by companies like RKM PowerGen, Jaiprakash Associates and IL&FS. With some of these assets being stressed and there being high chances of them landing in insolvency tribunal, there is a question mark on signing of contracts.

Amitabh, however, said sale of plants under insolvency should not be an issue. “I don’t see any difficulty in signing. If an exemption is required, we will ask the government,” he said. According to him, the fact was that no financial closure for coal-based power plant has taken place in the last three-four years though coal continued to be important as base load. “Over a period of time, as new refineries and other industry come up, demand will grow.” For the volume of second tranche, he said 2,000-3,000 Mw is the sweet spot where there is always a demand. The company was looking at providing more such value-added products. For its proposed power exchange with BSE and ICICI, he said after a product is used in the over-the-counter market and becomes standardised, they will hand it over to the exchange. 

“Our domain knowledge of power sector is available to anyone. We will develop the product and our partners will bring in expertise in trading and clearing. Consortium agreement has been signed and we have filed an application with the Central Electricity Regulatory Commission,” he said.

On the company’s subsidiaries PTC Energy Ltd (PEL) and PTC Financial Services, he said the two were fully equipped to fund their own operations. “We will not fund PEL any further. We are looking for equity participation from generators as well as funds. We do not want to put money in non-core business any more,” he said.

PEL is doing wind assessment currently, and clarity on how much equity would PTC hold eventually would emerge in the next three months. PEL plans to increase its installed capacity from 300 Mw to 2,000 Mw in the next five years.

PTC handles about 56-55 billion units of power and has maintained 13 per cent compound annual growth rate (CAGR) in volumes. Amitabh expects the company to continue to grow in that range. “We have been volume oriented more than margin oriented. We are maintaining an overall 4 paise margin,” he said.