Package deal for four mega power projects

SPVs to complete all groundwork before sale to IPPs.

The Centre is in the process of setting up four special purpose vehicles (SPVs) to pilot four mega power projects with initial capacities of 800 Mw each.

These SPVs""in consultation with commercial banks and financial institutions""will prepare the project reports, sign power purchase agreements (PPAs) with respective state governments where the projects will be located, establish coal linkages, and put in place environment clearances before selling the projects to independent power producers (IPPs) through an international bidding process.

In other words, the prospective buyers will get a package deal with all possible clearances and PPAs in place. This is the first instance of the central government negotiating for PPAs and other relevant clearances for power projects to be managed by private players.

According to sources, the Cabinet has already cleared the proposal and the inter-institutional group endorsed it last Friday.

The proposal was discussed threadbare at a high power meeting of banks and financial institutions last week attended by the senior executives of State Bank of India, Housing Development Finance Corporation, IDBI Bank, ICICI Bank and Citibank.

The government is planning to set up two of the projects at Champa (Chhattisgarh) and Singaroli (Madhya Pradesh). The other two locations could be Karwar in Karnataka and Surat in Gujarat. The government is also looking at Maharashtra and Andhra Pradesh.

Members of each of the SPVs will comprise a representative of the Power Finance Corporation (PFC) and two bureaucrats.

Initially, these projects will have a capacity of 800 Mw each that will be increased later.

The projects, all coal-based, will be set up at coal pit-heads and along the coastline. The government has already initiated talks with the coal ministry to tie up fuel linkages.

The mega power projects will help the country reach the targeted 650,000 Mw of installed capacity by the 14th Plan (2026-27). The power ministry has been looking at a generation growth of 8 per cent per annum to reach this target.

The 11th Plan is expected to generate 60,000 Mw of additional power while the 10th Plan will add 35,000 Mw against the targeted 40,000 Mw. The shortfall is expected to be bridged by expanding and bringing in the captive generation capacity in the country into the power grid.

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Mega venture

Steps involved

Preparing project reports

Signing power purchase agreements with state governments

Establishing coal linkages

Taking environment clearances

Selling the projects to independent power producers through international bidding

Possible project locations

Champa (Chhattisgarh), Singaroli (Madhya Pradesh), Karwar (Karnataka), Surat (Gujarat)