Power Ministry issues draft tender for stranded gas power plants

Plants with 14,305 MW capacity will be eligible for support under Power System Development Fund

The Union power ministry has issued a draft tender document for selection of bidder for providing the power system development fund (PSDF)’s support to eligible gas-based plants.

The document, issued on April 24, mentions that stranded gas-based plants, which were categorised in the Centre's office memorandum, will only be eligible for the support. Those plants that received no supply of domestic gas during the period of April 2014 to January 2015 will be entitled for support.

Of the present gas-based power generation capacity of 27,123 Mw, the capacity of stranded gas-based plants is 14,305 Mw and the capacity of plants receiving limited domestic gas is 9,845 Mw. The list of eligible plants include Ratnagiri Gas & Power Private Limited (RGPPL (1967 Mw), Samalkot (2,400 Mw), Pragati (750 Mw), Pipavah (702 Mw), DGEN (1,200 Mw), GMR Vemagiri expansion (768 Mw), Kondapali expansion station III.

The ministry has classified gas-based plants into two categories — plants receiving domestic gas and stranded gas-based plants. The scheme envisages supply of “e-bid RLNG” (re-gasified LNG) to the stranded gas-based plants and the plants receiving domestic gas, up to the target plant load factor (PLF) selected through a reverse e-bidding process. The scheme also envisages sacrifices to be made collectively by all stakeholders of gas power plants and support from the PSDF. State-run GAIL will be the only agency for the procurement and supply of e-bid RLNG. The PSDF support to the successful bidders owning the eligible gas based plants pursuant to the tender document has been fixed at Rs 724 crore for the relevant period corresponding to the available e-bid RLNG.

The e-bid RLNG will be allocated strictly for the purposes of generation of power by the eligible gas-based plants of the successful bidders  in accordance with the government decision of March 27.

Power companies seeking lowest support from PSDF, after considering an electricity tariff of Rs 5.50 per unit, will get the first right over LNG, whose delivered price, too, will be slightly reduced by asking importer and transporter to take a hair cut in marketing and operational cost.

IDFC Securities in its research report said assuming landed RLNG cost of $10 per million British thermal unit (mBtu) for east coast (Andhra Pradesh) based power plants, the total operating cost (fuel + O&M) is likely to be Rs 5 per unit for newer plants and Rs 5.5 per unit for older plants. At 30 per cent plant load factor (PLF), for newer plants, the net tariff needed will be Rs 8 per unit (including subsidy) to be able to cover fuel and operating costs and service debt.

For older gas-based plants, wherein debt has been repaid or is being serviced out of existing cash flows (from regulated power purchase agreements (PPAs), a tariff of Rs 5.5 per unit would cover the operating costs. ''We note that the approved mechanism does not permit developers to generate RoE (return on equity) on the power supplied under this arrangement. As a result, only the newer plants, which are also more efficient, are likely to bid for supplying power under this mechanism,'' IDFC Securities said in its report.

With most of the independent power producers (IPP) gas plants being shut currently, any incremental operating cash surplus will contribute towards debt servicing. As such, this mechanism is positive for gas-based IPPs. “While this arrangement does provide an interim relief, an increase in availability of domestic gas would be needed for ensuring long-term sustainability of these plants,” says IDFC Securities.