Hinduja Vizag Projects Fuel Risks To Be Shared
The high-powered board on private investment in the power sector has turned down the Andhra Pradesh governments offer to take on the fuel risk for the 1,040 mega watts (mw) Visakhapatnam thermal power project. The project is being promoted by Hinduja National Power Corporation Ltd (HNPCL).
The state government had made the offer at the last meeting of the board here on February 20. The state energy secretary had said that since the delayed resolution of issues concerning the coal supply and transport agreement was jeopardising the project, the state government was willing to take on the entire fuel risk.
The board, however, pointed out that it was contrary to commercial practice for a party that has no control over the risk factors to take on the entire risk. Instead, it was more logical to spread the risk of negligence to cover the fuel transporters and suppliers in order to improve their performance and reduce the likelihood of failure or closure of a power station.
The board stated that allowing the state government to take on the entire fuel risk would be a reversal of healthy precedents. At the same time, in view of the governments monopolistic control over the fuel supply, transportation and power consumption, this need not be insisted upon, even though it is commercially a better alternative.
HNPCL has entered into an agreement with Mahanadi Coalfields Ltd for the supply of coal to the power plant. The railways will carry the coal from the pit-head to the power station.
The board also refused to re-open the issue of risk premium, which was fixed at 5 per cent on the coal price at its last meeting on February 5. The board pointed out that keeping in mind the past track-record, the possibility of generation falling below 68.5 per cent plant load factor due to fuel disruption was almost non-existent.
In order to kick-start the private power policy, which is only being discussed in different ministries without the much-needed investment actually flowing in, it is felt that the government of India must keep the premium on performance low, the board stated.
Accordingly, a premium of five per cent has been finalised in this perspective and need not be re-opened, the statement concluded.