The price discovery for power through the recent e-auction mechanism has been lower than the bilateral power trade prices, thus pushing down reference prices for short-term power tariffs, India Ratings and Research said today.
"Bilateral markets are a playing ground for large power traders and they provided a reference price for majority of the short to medium term price assumptions. Ind-Ra believes that in the event the e-auction platform emerges as the most efficient mechanism for price discovery, bilateral trade prices may track the e-auction prices," India Ratings and Research said in a statement.
Ind-Ra added that the decline in bilateral power prices can impact the credit profiles of independent power producers (IPPs) with untied capacities which were trading through the bilateral route earlier, the statement said.
The other critical aspect of the e-auction tariff is that it is quoted by the IPPs at the delivery point of the respective state periphery of the procurer and hence includes the costs that the IPP will have to bear, including intra-state open access charges, transmission charges, point of connection injection charges and losses.
Therefore, the net realisation to the IPP will be lower, which highlights the fact that the power market continues to be a procurers market and low net realisation for the IPPs can impact their cash flows. In fact, leveraged IPPs may need to look for refinancing of debt, it added.
