Stranded gas-based power projects set to get breather
Beleaguered private players with stranded gas-based power capacity are all set to get a breather as the government looks to roll out the scheme announced last week to virtually subsidise imported gas for such developers till end-FY17.
The developers are required to bid for the promised government support in a reverse auction. Private companies like Lanco Group, Essar Energy, Torrent Power, Reliance Power and GMR Energy among others with no gas availability could be among the first to bid for the promised sop. Further, the subsidy on imported gas will also be available for those developers that are running their plants at less than 30% plant load factor (PLF) on domestic gas. GVK Power and Infrastructure, Lanco Group and Torrent Power among others are in this category.
As per government estimates, stranded gas-based power plants and those running at sub-optimal level (<30% PLF) belonging to the private sector represent an investment of more than Rs 50,000 crore. The scheme is aimed at saving these assets from becoming non-performing assets.
The government, according to sources, has earmarked a sum of Rs 3,500 crore to be disbursed as support to the developers under the scheme for FY16. There will be two different streams of bidding: one for stranded plants and another for units that receive domestic gas but run at less than 30% PLF.
The subsidy amount has also been apportioned for these two categories with Rs 3,000 crore being made available for the former and Rs 5,00 crore for the latter. For FY 17, the total amount will be Rs 4,000 crore, split into Rs 3,500 crore for first category and Rs 5,00 crore for the second. The subsidy support will come from the power system development fund (PSDF).
For the stranded plants that bids for subsidy support, the tariff will be capped at Rs 5.50 per unit while it will be capped at Rs 4.19 per unit for those running at domestic gas currently. These developers will have to quote a per unit price as subsidy support in reverse bidding. For the current fiscal, the ceiling price for stranded plants will be Rs 0.94 paise per unit and Rs 1.26 per unit for plants receiving domestic gas. The bidders will have to quote lower support from the ceiling price.
“In this reverse auction, the bidding will cease once the entire amount earmarked for support gets exhausted. Those companies who have bid for the lowest support amount (in Rs per unit) will be selected for the scheme. However, if the developers stop bidding even before the entire support amount has been claimed, then we will raise the cap on PLF or bring down the tariff cap and start the auction afresh to encourage participants to fully utilize the amount ,” power secretary P.K Sinha told FE. He added that the bidding would also be open to those plants that do not have any power purchase agreements.
The government has finalised the details of how payment towards power producer will work. As per the office memorandum put out by the power ministry, an empowered pool management committee (EPMC) will oversee the auction process and release the subsidy support to the discoms buying power from successful bidders. The discoms, in turn, will pay the gross value of purchased power (including the amount received from PSDF). The lead banker to the developer will control a trust and retention account (TRA) which will oversee payment to the firm.
The banker thus chosen will ensure that payment made to developer is only towards debt servicing, cost incurred in operations and maintenance and not towards any return on equity.