Lapsed MoUs impede progress of power projects

Developers unable to raise funds due to non-extension of pacts

The non-extension of memorandum of understanding (MoU) signed with 19 independent power producers (IPPs) has posed a fresh hurdle to the progress of their projects in Odisha. Due to the expiry of MoUs, financial institutions are reluctant to provide funds to the developers, impeding the projects.

"The IPPs have informed us they are finding it tough to raise funds for their projects as financial institutions are not keen to lend for projects whose MoUs have lapsed. The extension of MoUs has hit a delay because of issues like water conservation fund and provision for offering free power to the state grid”, said an energy department source.

 

The IPPs whose MoUs are awaiting extension include Tata Power, GMR Kamalanga Energy Ltd, Navabharat Power Ltd, Visa Power, Sterlite Energy Ltd, Lanco Power and KVK Neelachal Power to name a few. Sterlite Energy is the only IPP to have commissioned its 2400 Mw power plant at Burkhamunda near Jharsuguda.

Eight more IPPs- GMR Kamalanga Energy Ltd, Jindal India Thermal Power Ltd (JITPL), Monnet Power Company Ltd, Lanco Babandh Power Ltd, KVK Nilachal Pvt Ltd, Ind-Barath Energy (Utkal) Ltd, Maa Durga Thermal Power Company Ltd and Nava Bharat Power Pvt Ltd are expected to go on stream by 2013-14 .

While IPPs had broadly agreed to pay an upfront fee of Rs 2.5 crore per cusec of water towards water conservation fund, none of the developers was keen to provide free power.The power producers argued that since they have achieved financial closure and already tied up power sale agreements, they would not be in a position to provide free power.

"We have not agreed to the state government's for free power. With input costs escalating, the promoters of power plants are making limited profits. No project proponent will agree to offer free power as it will render the power project unviable”, a senior official of Ind-Barath Energy Utkal Ltd (IBEUL) had told Business Standard recently.

The state government's letters to IPPs, seeking their commitment on supplying free power has also drawn a blank. This has prompted the state government to revisit its comprehensive thermal power policy on the pipeline.

"Since the IPPs are unwilling to offer free power, we are mulling to make the 'free power' demand applicable only to prospective developers and not to companies that have already signed MoUs with the state government”, the source added.

Concerned over the nominal advantage accrued to the host state due tothe implementation of coal-based power projects, the state government had urged the Centre to allocate 25 per cent free power from IPPs and 33 per cent free power from power plants based on coal washery rejects. Later, the state government scaled down its demand for free power from power plants based on coal washery rejects to 13 per cent as the original demand was deemed unreasonable.