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Power companies bagging captive mines are unlikely to resolve the power crisis in the country, as about 75 per cent of power capacity tied to these blocks do not have power purchase agreements (PPA) with any state. These companies, which haven’t tied up with any state, are likely to suffer losses and feared to turn into non-profitable assets.
Including the power plants with captive mines, about 29,000 Mw of total thermal power generation capacity, is lying stranded, as states are not issuing any new tender for long-term power purchase. This includes commissioned 7,878 Mw and about to be commissioned 12,399 Mw at the end of 12th Plan. “In case, PPAs are not signed, looking at the payouts, they would probably be staring at bankruptcy. Consequently, these projects will become non-profitable assets (NPAs) for the banks,” said a senior power company executive.
Sector experts said many projects, with untied power sales, have won coal blocks would now mine coal without any visible buyer. The successful bidder would pay to the mine bearing state – mining cost, premium payable to the government and royalty, taxes and levies, etc. If the coal block owner produces six million tonne annually, the payout on these counts would be Rs 1,500 crore every year. “Since these developers have won the block at negative price bid, they would bear the additional cost along with debt service for the power plant,” said the executive. Since they will charge coal at the price on which they had bid for the block, rather than market price to Coal India. This will harm their profits.
States are not tying up additional power. Apart from tender by the Kerala State Electricity Board (KSEB), there has been no major power purchase tender since March 2013.
KSEB called for bids for 400 Mw in two tranches and received bids in the range of Rs 3.6 per unit to Rs 7.29 per unit - the highest in the past two years.
“Such bids reflect the future course of power prices. Andhra Pradesh is also planning to issue a tender but that also will take two years. The pipeline of states signing purchase pacts is empty. The government has bailed out generation by providing assured coal supply but needs to address grass root level by strengthening power distribution,” said a Delhi-based power sector expert.
Distribution companies across the country are financially distressed, incapable of buying expensive power. ICRA has estimated aggregate unrecovered revenue gap at Rs 253 billion as per tariff petitions filed by the distribution utilities in 11 states.
LOST IN GENERATION
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Around 29,000 Mw of power generation capacity is without PPA
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75% of projects winning captive mines in coal auction don’t have any PPA
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Power companies to suffer losses on power production
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These firms also have to pay for the aggressive bidding
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Discoms not in a financial position to buy additional power
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No state issuing any new power purchase tender
