NTPC to buy stressed power units via reverse bidding

NTPC, the largest thermal power generating company in the country, might be the white knight the languishing power sector has been looking for. The state-owned power company has issued a tender to buy stressed units via reverse bidding. 

Power units on sale will bid for tariffs below NTPC’s rate last year, which was Rs 3.18 per unit. Officials said the tariff would indicate the cost of the plant at which it is ready to sell-off. “At this capped tariff, the cost turns out to be Rs 3-4 crore per megawatt (Mw). Bidders would quote below it,” said an official.

The bidding is open for units above 500 Mw, which were commissioned 2014 onwards and are capable of running at 100 per cent domestic coal. Coal availability either through mine or linkages should be within a 500-km range of the plant. Those with no fuel linkage should have a coal source within 500 km, said the tender details. Officials said proximity to source of coal would help avoid washing cost. 

“If the units which don’t have any PPA (power purchase agreement), qualify in all other criteria, we are open to selling power from those units in the merchant market. Merchant power at current rates gives higher returns than regulated tariff, which is a win-win for NTPC,” said another official.

The central government earlier this year had already initiated the exercise to resolve the issues close to 25,000 Mw of stressed power units, which are on the verge of converting to non-performing assets (NPAs). This was mostly due to lack of PPAs or fuel linkages and in some cases because of financial issues faced by the promoter. In some cases, the banks have taken over the assets or are evaluating to take over. Therefore, principal lenders, financial institutions and banks are also open to participate in the bidding, said the tender document.

This move comes months after the recent decision by the government to convert stressed assets into “national assets”. In a meeting in June, then power minister Piyush Goyal had said NTPC had offered to operate the stressed power-generating assets, which the bank agreed to take over. He, however, had confirmed that NTPC would not purchase them.

The last date of submitting the request for proposal is January 5, 2018. The bidding would have two rounds — techno-commercial, wherein the units should match all the criteria as specified in the tender document and the second round would be price bids. 

Business Standard had reported thermal power units worth 25,000-Mw capacity were on sale, which were failing to find buyers. Most promoter companies of the projects — some operational and others still under development — seek to exit to lighten their debt.

In the past five years, except two state distribution companies, none have floated tenders for additional power procurement. To add to the woes of power generators, banks are concerned about rising NPAs. As lack of power demand has hit most of the projects, experts said new private investment was unlikely till 2022.