Projects with 30,000 MW capacity face uncertainty due to lack of FSA

Developers urge ministries of power and coal for an early policy directive

Power producers with 30,000 Mw have approached the Union ministries of power and coal for an early signing of fuel supply agreement (FSA) to remove uncertainty and bring in clarity. These 43 projects were not covered in the list of 78,000 Mw of capacity for FSA by a Presidential directive issued after the Cabinet Committee of Economic Affairs’ (CCEA) nod during the UPA rule.

Of these 30,000-Mw projects, 3,920-Mw projects are expected to be commissioned in 2015-16 and 2016-17. Nearly 1,700 Mw of these projects have concluded a power purchase agreement (PPA) but fuel supply uncertainty puts a question mark on their obligation under PPA.

According to industry sources, the lenders are reluctant to disburse funds to these projects. Besides, the uncertainty is also affecting the ability of these projects to participate in the upcoming power procurement tenders since the execution of FSA is a condition precedent as per the model bidding documents.

Sources said many of the affected developers have already met Coal India (CIL) but it has expressed inability to provide any assurance due to lack of policy guidelines for signing of FSA with linkage-based projects beyond the list of 78,000 Mw covered by the Presidential directive.

Association of Power Producers Director General Ashok Khurana told Business Standard, “CIL’s reluctance to sign FSAs for projects with valid linkages, which should be done in normal course of business, has led to uncertainty and unease among developers and bankers. Looking at the increased production of coal, it is inexplicable as to what is holding back the signing of these FSAs. To remove uncertainty, a policy directive is required urgently regarding signing of FSAs for projects which were not covered by earlier Presidential directives (as they were slated for commissioning beyond March 31, 2015) as long as they have met their milestones under letter of assurance.”

POWER PLAY

• These 43 projects were not covered in the list of 78,000 Mw of capacity for FSA by a Presidential directive issued after CCEA nod during UPA rule
• Of these 30,000-Mw projects, 3,920-Mw  projects are expected to be commissioned in 2015-16 and 2016-17
• Nearly 1,700 Mw of these projects have concluded a power purchase agreement; fuel supply uncertainty puts a question mark on their obligation under PPA