Power Pipeline: Over 20,000 MW of projects face an uncertain future

Power Pipeline: Over 20,000 MW of projects face an uncertain future
23/02/2018 , by , in ALLIED

Lower-than-expected growth in demand for electricity, coupled with the overcapacity of installed power projects, has precipitated a situation where more than 20,000 MW of under-construction coal-based power projects in the private sector are staring at an uncertain future. Out of the 25,185 MW such capacity under construction, only projects with 5,085 MW have announced the commissioning date, while others are listed by the Central Electricity Authority (CEA) as “uncertain”. Most of these ‘uncertain’ projects are among the stressed power plants identified by the government. The cost of the under-construction private sector power projects now stands at more than Rs 1,85,000 crore, up from original estimate of Rs 1,45,000 crore. Bankers are reluctant to release the sanctioned loans to most of these projects. Till December 2017, independent power producers had spent more than Rs 63,000 crore on these uncertain projects. At the same time, the Centre and state governments, with easier electricity offtake and coal supply assurances, are busy augmenting thermal power capacity creation in the public sector, making it more difficult for private players to implement announced projects.

According to informed sources who did not wish to be identified, the project delays were mainly due to delays in land acquisition, procuring environmental and other regulatory clearances. Private industry players complained that state power plants are putting up their own power plants and getting state electricity regulators approve power purchase agreements (PPAs) without going through competitive bidding. These measures do not provide a level playing field for independent power companies. Most of the uncertain under-construction private power projects were awarded letters of allocation between 2009-11.

Research firm India Ratings recently said that new and under-construction thermal power projects, in the absence of long-term PPAs, might be unable to refinance their construction loans if the demand scenario does not improve. Going by the power demand estimates by the CEA, existing PPAs are sufficient to meet electricity demand till FY22. In the five-year plan period FY13-17, private power players had commissioned 53,660 MW of thermal generating units, 22% more than the original target of 43,540 MW.


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