New Delhi: India is initiating the bidding process for a 4,000MW power project in Cheyyur, though promoters already awarded similar large projects are finding it difficult to find funds.
Power Finance Corp. Ltd plans to call for qualification bids for the project in Tamil Nadu in May and price bids in October. The state-owned firm will manage the bidding on behalf of the government, which expects to award the project by December.
The ruling United Progressive Alliance has an ultra-mega power project, or UMPP, scheme which envisages building several large power plants, each with a capacity of 4,000MW and costing between Rs16,000 crore and Rs20,000 crore. To encourage private sector firms bid for these projects, the government sets up a company for each project, acquires land, identifies and allots coal mines in some cases to ensure fuel supply, and then, transfers this company to the successful bidder.
It has till date awarded three such projects—Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh to Reliance Power Ltd, a company of Reliance Anil Dhirubhai Ambani Group, and Mundra in Gujarat to Tata Power Ltd.
A letter of intent for a similar project in Tilaiya, Jharkhand, is slated to be awarded to Reliance Power on Thursday.
To be sure, companies are finding it difficult to raise money to build these power plants in the current gloomy economic scenario.
“Given the current financial downturn in the global economy, financial closure of the UMPPs has become a major concern,” a government official said on condition of anonymity, referring to the Sasan and Krishnapatnam projects.
Reliance Power, however, denied this. “We have received term-loan sanctions from banks and institutions for over Rs11,500 crore (at least 80% of the debt required) for the Sasan UMPP and the balance funding will be tied up by end of this month,” a company spokesperson said in an emailed response. “Krishnapatnam UMPP is being appraised by domestic and international banks and institutions. The company will achieve financial closure of both these projects within the timelines specified in the power purchase agreements signed by us with the procurers.”
The Cheyyur project in Kanchipuram district will be fuelled by imported coal brought to a nearby port.
“While the site has been finalized, the land is under acquisition,” the government official close to the matter said.
India has a power generation capacity of 147,000MW. It plans to add 78,577MW to this by March 2012, requiring at current estimates, about Rs10.31 trillion in investments.
Anish De, chief executive at Mercados Asia, an energy consulting firm, said: “No bid process sees the commitment spread of the developer that leads to the stretching of balance sheet...the bid qualification criteria needs to be refined. The developers should be required to declare how much investments they have committed for projects either through self or group companies, whose financial strengths are being relied upon to meet the bid qualification criteria.”