Competitive bidding in the Power Sector: Is it working or not?
Competitive Bidding in Power Sector – is it working or not?- Presented by R R Mehta
Power Procurement – Competitive Bidding Process Bid Evaluation The bids are evaluated for each escalable and non-escalable components of capacity charge, energy charge and transportation charges The levelised tariff of each bidders are compared incorporating the transmission charges from the point of injection to point of supply, accordingly, the bidders need to adjust their escalable and non-escalable components as part of their winning strategiesConfidential Slide 2
Power Procurement – Competitive Bidding Process Key Aspects of PPA Risk allocation between parties Land Acquisition Fuel Supply Technical requirements on minimum load condition Assured off take levels Force majeure clauses as per industry standards Change in Law in state/country or cross country level Lead times for scheduling of power Default conditions and cure thereof, and penalties Payment security proposed to be offered by the procurerConfidential Slide 3
Case I bidding: Observed tariff ranges… Evolution of weighted average Case I bids Weighted Average Case I Tariffs (Rs./kWh) 5 4.5 4 Rs/kWh 3.5 3 2.5 2 Sept Dec Dec Nov Nov Feb Dec Aug Aug Jan Jan Jan Mar Sept Oct Oct Dec Dec 2006 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2010 2010 2010 2010 2010 2010 2010 Bids have observed a linear growth trend owing to: o Increased costs of fuel and financing o Higher risk perception on fuel availability and payment frontConfidential Slide 4
Long Term Bid Process - Tariff Quotes Capacity Offered Levellized Tariff Rank Name of Bidder and Project (MW) (Rs./kWh) L1 RPG Group - Dhariwal Infrastructure Ltd. 200 3.513 L2 Reliance Power Ltd. 1000 4.311 L3 Vandana Vidyut Ltd. 150 4.493 L4 PTC - MB Power MP 200 4.590 L5 RKM PowerGen Pvt. Ltd. 300 4.670 L6 Indiabulls Power Limited 490 4.800 L7 PTC - DB Power 150 5.593 Result of Financial Bid Opening held on 09-Dec-11Confidential Slide 5
Power Procurement – Medium Term Tariff Components for Medium Term Power tied-up from FY12 to FY14 PPA Date: 16-Jun-10, MTPP PPA Date: 04-Jun-10 PPA Date: 04-Aug-10 Addendum: 21-Jan-11* KSK-WPCL (260MW) Abhijeet (55MW) VIPL (134MW) FY-11-12 FY-12-13 FY-13-14 FY-11-12 FY-12-13 FY-13-14 FY-12-13 FY-13-14 Fixed Cost (FC) 4.00 3.90 3.00 3.414 3.001 2.47 3.194 2.945 Variable Cost (VC) 1.465 1.02 1.025 1.75 1.811 1.875 0.989 0.989 Total 5.465 4.92 4.025 5.164 4.812 4.345 4.183 3.934 Fixed Cost - % age 73% 79% 75% 66% 62% 57% 76% 75% Low Variable Component poses risk of DTPS backing downConfidential Slide 7
Success or Failure – Probably limited success –WHY? GENERATOR: Fuel Availability and price uncertainity Project Execution risk – Land/Environment/logistics etc Assured off take levels Inability to get financing at fixed cost matching with the PPA term (Limited access to Development Banking resources) Payment Security DISTRIBUTION LICENSEE: Cost reflective timely tariff and Fuel cost variation recovery Freedom to change consumption by consumer and consequential losses (under recovery of fixed cost for lower off take or loss on alternate disposal/sale) Low collection efficiency due inability to pay or due to unwillingness to pay (Socio- political issues)Confidential Slide 8