 "Gas supply to stranded projects will help increase generation and grid stability: analysts")
The government’s move to provide a subsidy for purchase of imported gas for stranded power projects has got approval from analysts.
They believe this would trigger positive chain reactions for project developers and the sector in general. The first phase of reverse bidding under the new mechanism for 10 stranded gas-based projects was concluded on Wednesday. This involves government support of Rs 7,200 crore from the Power System Development Fund.
Reliance Securities in a research report said the higher generation during peak time would help improve grid stability. “We believe this is beneficial for state electricity boards... The impact on power developers is limited to fixed cost recovery of interest and depreciation cost, while they have to forgo return on equity.”
Shankar K, associate director at Edelweiss Securities, said stranded gas-based power developers would be able to meet their interest costs in the interim even when finer details like logistics, tenure and other modalities are awaited. However, he said, a more sustainable solution would be higher supply of domestic gas.
“Power supply to the extent of 5,000 Mw could incrementally flow into the system (largely in Andhra Pradesh and Maharashtra). Since the pressure on further restructuring of loans will ebb, power producers like Lanco Infra and GMR Infra could benefit from the move,” he opined.
Ashok Khurana, director general, Association of Power Producers, said it was a very good beginning. “Due to the incremental rise in plant load factor of these stranded projects, an additional 5.7 billion units will be generated. Power producers will be able to pay interest and part of debt servicing.”
He however, said scheduling of power generated from these plants appear to be a risk. But he added that considering rising demand in southern and western it will be scheduled.
They believe this would trigger positive chain reactions for project developers and the sector in general. The first phase of reverse bidding under the new mechanism for 10 stranded gas-based projects was concluded on Wednesday. This involves government support of Rs 7,200 crore from the Power System Development Fund.
Reliance Securities in a research report said the higher generation during peak time would help improve grid stability. “We believe this is beneficial for state electricity boards... The impact on power developers is limited to fixed cost recovery of interest and depreciation cost, while they have to forgo return on equity.”
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According to Rupesh Sankhe, research analyst at Reliance Securities, the government decision is positive for Torrent Power, Lanco Infra, GVK and GMR. Many of the gas-based power projects, he said, were located in the high-deficit southern region and this would help reduce the shortage.
Shankar K, associate director at Edelweiss Securities, said stranded gas-based power developers would be able to meet their interest costs in the interim even when finer details like logistics, tenure and other modalities are awaited. However, he said, a more sustainable solution would be higher supply of domestic gas.
“Power supply to the extent of 5,000 Mw could incrementally flow into the system (largely in Andhra Pradesh and Maharashtra). Since the pressure on further restructuring of loans will ebb, power producers like Lanco Infra and GMR Infra could benefit from the move,” he opined.
Ashok Khurana, director general, Association of Power Producers, said it was a very good beginning. “Due to the incremental rise in plant load factor of these stranded projects, an additional 5.7 billion units will be generated. Power producers will be able to pay interest and part of debt servicing.”
He however, said scheduling of power generated from these plants appear to be a risk. But he added that considering rising demand in southern and western it will be scheduled.