As many as 19 gigawatt (GW) capacity out of the 40 GW identified as stressed power assets can participate in the second phase of the government's Scheme for Harnessing and Allocating Koyala (coal) Transparently in India (SHAKTI) programme, according to Crisil.
The Lok Sabha's standing committee on energy has identified 34 power plants with a cumulative capacity of 40 GW as stressed assets due to lack of adequate fuel supply, absence of power purchase agreements (PPAs), weak financials of promoters, among others.
"Our assessment of the 34 power plants suggests 19 GW of the 40 GW capacities do not have medium or long term PPAs, and hence, can participate in SHAKTIII provided they meet other eligibility criteria set by Coal India for participation in the auction," the rating agency said in a note Monday.
However, it noted that successful bidders under SHAKTI-II may find it difficult to secure long-term PPAs, given the high fixed cost of many of these projects.
According to Crisil, of the 19 GW, about 10.3 GW of untied capacity has incurred overall investment of more than Rs 6 crore per megawatt (MW) whereas the typical coal-based power plant costs Rs 4-5 crore per MW.
"This indicates huge cost overruns, leading to escalation in fixed costs, which makes these plants unattractive for medium/ long-term power procurers such as discoms and even traders. Given the cost overruns and the issues around signing of PPAs, SHAKTI-II may be of little help to these assets," it said.
A further 6.4 GW of untied capacity with overall investment of Rs 4-6 crore per MW have relatively better chances of resolution if they manage to secure fuel supply at competitive rates, according to the agency.
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"However, lack of fresh PPAs from discoms, and ambiguity over logistics costs which is a deciding factor in overall cost of generation may impact the players' ability to bid in auction as they may still fail to sell power in the market due to high cost of generation on account higher landed cost of linkage coal and lower preference in merit order dispatch," it said.
Crisil further noted that of the 6.4 GW, only the 2.6 GW commissioned capacity has a good chance of resolution provided these plants secure linkage through SHAKTI-II and sign long-term PPAs, while 3.8 GW of under-construction/ partially commissioned capacity may find it difficult to get any support from SHAKTI-II as these are unlikely to commission due to financial problems faced by promoters.
The remaining around 2 GW of untied under-construction capacity may not commission at all, according to the agency, given the over-supply in the system and suspension of work at site due to lack of financing.
"Consequently, we expect only 2.6 GW out of the estimated 19 GW of untied stressed capacities eligible to participate in auctions under SHAKTI-II to benefit from the scheme and get resolved," it said.
In case of the remaining capacities, Crisil said lack of clarity over bidding parameters, scarcity of fresh PPAs in the market and escalation in project costs will adversely impact resolution.