Aggressive bidding for LNG subsidy to stranded plants

Aggressive bidding for LNG subsidy to stranded plants

Major gas-based power developers, including RGPPL (Dhabhol), Lanco Power, Torrent Energy and GMR Energy, with a combined capacity of nearly 4,500 MW, on Tuesday put in aggressive bids for the subsidised R-LNG imports meant to run their stranded units at a plant-load factor of 35%.

Out of the total stranded capacity 14,305 MW, only 8,109 MW qualifies in the technical round completed on Monday. The financial bid round is based on the principle of reverse bidding — where the firm seeking the lowest amount of subsidy per unit of power would come on top — with 8.9 mmscmd of imported RLNG on offer.

The developers are required to bid below the ceiling price, which is the government support available to developers running their plants at 35% PLF. The maximum government support available is Rs 1.74 per unit. The available gas is sufficient only for running about 6, 000 MW of capacity at the designated PLF.

At the time of going to press, the developers in contention had put in bids in the range of Rs 1.44-1.45 per unit of government support.

On Wednesday, the plants that receive domestic gas, but are running sub-optimally, will slug it out for 1.1 mmscmd of gas, which will help them operate at 30% of PLF.

The government in March approved the scheme for importing gas for nearly 24,000-MW capacity, which includes 14,300 MW of stranded capacity and 9,800-MW capacity running sub-optimally on domestic gas. The scheme would see stakeholders, including GAIL, power developers, state governments and Central government, foregoing certain charges to make power affordable for stressed distribution companies.

Rating agency Crisil said the success of the scheme would depend on the ability of procurers to buy power, as at the predetermined rate of Rs 5.50 per unit, the price could be higher than discoms can afford.

“The success of the scheme will hinge on the ability of power plants that are allocated the imported RLNG to find buyers for their electricity. That’s because, as per the scheme, the net sale price of electricity to discoms has been fixed in the Rs.4.7 to Rs.5.5 per unit band, well above current average prices in a market plagued by low demand. It is also higher than the average Rs. 3.5 to Rs 4.5 per unit that discoms paid last fiscal,” Crisil said in its release.

This scheme seeks to salvage an investment of over Rs 60,000 crore, which is at the threshold of becoming non-performing assets represented by the stranded capacity. The balance capacity of 9,845 MW, involving an investment of over Rs 40,000 crore, is also working at a sub-optimal level.

The monetary support for the scheme will come from from the Power System Development Fund. This will be disbursed — based on a reverse-auction mechanism — to stranded gas-based power plants first and, then, to plants already receiving domestic gas. Between June and September 2015, PSDF support equivalent to Rs 844 crore has been allotted for this mechanism.

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