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Govt prepares to auction coal to stressed power plants

The auctions, likely to start by February next year, will be reserved for non-captive power plants which do not have power purchase agreements (PPAs) for more than half their capacity, according to the bid guidelines released by the power ministry.

, ET Bureau|
Nov 30, 2019, 11.44 AM IST
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Agencies
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The plan has been finalised eight months after the Union Cabinet on Mar 7 approved granting coal supply to power plants holding short-term power purchase agreements.
New Delhi: The government is preparing to auction supply of coal to stressed power plants, which must sell the electricity produced using this fuel on the spot market.

The auctions, likely to start by February next year, will be reserved for non-captive power plants which do not have power purchase agreements (PPAs) for more than half their capacity, according to the bid guidelines released by the power ministry. Power minister RK Singh told ET that the move allowing coal supply for short-term electricity trade would help revive stressed power assets.

“So far, coal was allocated for long-term and medium-term PPA holders. With this, stressed power stations may be revived,” the minister said, adding that this would also enable deepening of the power market as the electricity would be traded through the power exchange.

However, industry officials said the upcoming coal auctions were not different from the special forward coal auctions held by Coal India for the power sector. They said the new auctions had many restrictive clauses, too.

According to the guidelines issued by the ministry on Wednesday, the power generated through use of this coal must be sold on the power exchanges or shortterm market through bidding on the power ministry’s DEEP portal.

Also, the net surplus proceeds generated in this manner, after meeting operating expenses, shall be entirely used for servicing debt. “The power ministry will work out in consultation with the Department of Financial Services a mechanism to ensure this,” it said.

The plan has been finalised eight months after the Union Cabinet on March 7 approved granting coal supply to power plants holding short-term power purchase agreements.

According to the rules, Coal India and Singareni Collieries Company will earmark mines for coal supply for these auctions. The quality and quantum of the coal, period for which it will be available and the schedule for the supply to start will be indicated to the bidders. Based on these facts, bidders can offer a premium on coal in the auctions.

“Auctions for coal linkage under this methodology shall be carried out every quarter to cater to the dynamic requirements and demand variations in shortterm and day-ahead markets. An annual calendar shall be published on coal companies’ website showing the months in which the auctions will be held,” the methodology said.

Sources said a dozen of the 34 stressed power plants were likely to become standard, with the steps taken by the government and resolution processes adopted outside insolvency by their lenders. The government’s coal supply auction scheme — Shakti, launched in May 2017 — and the two rounds of PPA auctions have helped ease the stress of many power plants, they said.

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