Relief for Adani, TATA & Essar as Gujarat Govt. approves power tariff hike

After a long-pending petition by Adani & Others over power tariff hike, the Gujarat government has given a decision. These power projects will be allowed the power tariff hike by amending their PPAs with Gujarat Urja Vikas Nigam Limited (GUVNL). The ordeal which was ongoing since 2010 has now come to a deciding point and the troubled power projects are given relief.

However, the increase in the tariff will be directly passed on to the consumers at an approximate rate of INR 40 paisa/unit.

TATA & Adani had earlier approached CERC seeking higher tariff on the grounds of their cost going up due to the “Change in Law” in Indonesia in 2010, following a regulation passed by South-East Asia Nation.

However, in 2013 CERC rejected their plea of force majeure and “change in law”, but constituted a committee to suggest payment of compensatory tariff to the power company.

The apex court’s directive was followed by recommendations of a committee constituted by the Gujarat government to look into the possibility of “contribution by each stakeholder, including banks, project developers and procurers, by way of concessions for mitigating hardship”.

Power Tariff peaks a decade-high in the spot Day-Ahead Market

The power tariff on Sunday the 30th of September 2018 touched a decade -high due to low hydro and wind energy production and coal shortage at thermal plants. The spot power price for supply touched 17.61/unit in spot trading on IEX on Sunday. The average spot power price was also high at INR 7.64/unit at the stock exchange on the same day. The power price has seen an upward trend in the day-ahead market (DAM) with 14.09/unit last week. A total of 271 MU (million units) were sold for supply on Monday. In the DAM trading session which concluded on Sunday at IEX, there were buy bids for 306 MU against sell bids for 357 MU.

The average spot price MCP trend for the past week is as below:

The upward trend of the power tariff suggests that the prices discovered on the exchange has taken an uphill and buyers now are residing to other options than exchanges for power purchase.  Notably, there has also been a coal shortage in the power plants and the power minister of the country has asked the state power generators to strengthen their coal mining wing.

Parliamentary panel worries about the power sector post RBI’s revised framework on NPA’s

Reserve bank of India recently issued a revised framework for the resolution of stressed/non-performing assets. A Lok-Sabha committee was called to discuss the consequences of the framework on the electricity sector. The committee was of the opinion that the electricity sector has been forced towards Non-Performing Assets post the revised framework. As per the guidelines, one of the objectives of the revised framework is to ensure prompt action to provide relief to the stress in a borrower’s account as soon as the default takes place. However, the committee was of the opinion that a solution was indeed necessary but not at the cost of affecting the electricity sector majorly. A  37th report of the standing committee on energy on the subjects of stressed/Non Performing Assets in the electricity sector was presented post extensive discussion in order to resolve the issue of NPA in the electricity sector as per the extant RBI guidelines and other legal/ financial/ statutory provisions applicable at that time.

The Committee focussed on 34 coal-based thermal power plants which were categorized as ‘stressed’ due to issues such as:

  • Non-availability of Fuel:

– Cancellation of coal block.

– Projects set up without Linkage.

  • Lack of enough PPA by states
  • The inability of the Promoter to infuse the equity and working capital
  • Contractual/Tariff related disputes
  • Issues related to Banks/Financial Institutions (FIs).
  • Delay in project implementations leading to cost overrun.
  • Aggressive bidding by developers in PPA.

As per the Revised Framework, the extant instructions on resolution of stressed assets such as Framework for Revitalizing Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) were withdrawn. The Joint Lenders’ Forum (JLF) as an institutional mechanism for resolution of stressed accounts has also been discontinued. Now, all accounts, including such accounts where any of the schemes have been invoked but not yet implemented, shall be governed by the revised framework.

Although the new guidelines have been termed as ‘harmonized’ and ‘simplified’ generic framework, yet they are far from being so. Prior to these guidelines, an asset was classified as NPA if a loan or an advance where interest or installment of principal remains overdue for a period of 90 days in respect of term loan. Similarly, stressed assets were accounts where there has been a delay in payment of interest and/or payment as against the repayment schedule on account of the financial difficulties of the borrower. Under the previous framework, failure of an asset to serve its debt obligation within the prescribed time was taken to be indicative of a developing stress of potential NPA and consequently, corrective measures of various grades i.e. rectification, restructuring, and recovery were the options keeping in view the totality of the situation.

However, the new regime has let go with all such measures and any failure beyond the duration of SMA (Special Mention Accounts) is supposed to directly and immediately invoke the provisions of a resolution plan, making the revival extremely difficult. The committee, therefore, recommended that in the interest of the economy in general and the Electricity Sector in particular, the revised guidelines should be “harmonized and simplified” in the real sense.

 

HPERC DETERMINES GENERIC LEVELLISED TARIFF FOR SOLAR PV PROJECTS

Himachal Pradesh Electricity Regulatory Commission (HPERC) has determined the regulations for determination of generic levelised tariff for solar PV projects. The tariff has been determined in parts.

 

  • Tariff determined for the Solar PV projects applicable from 01.04.2017 to 30.09.2017 is as follows:

The capital cost has been determined at Rs 446 lakh/ MW and the tariff determined is:

 
  • Tariff determined for the Solar PV projects applicable from 01.10.2017 to 31.03.2017 is as follows:

The capital cost considered for solar projects is 446 Lakh/ MW for projects above 1 MW to 5 MW and 452.70 lakh/ MW for projects over 1 MW capacity. The tariff determined is as follows:

In comparison to the tariff of previous years, there has been a steady decrease of 17%. The following graph shall make this clearer:
 
The order can be accessed here.

TRADE RESULTS OF ESCERTS FOR WEEK 15

The fifteenth trading session of ESCerts took place today.

 

BEE (Bureau of Energy Efficiency), in its circular dated 02.01.2018 has announced an extension of the last date for compliance of PAT Cycle – 1 to 19th January 2018 from 31st December 2017. No change in the timings of trading have been proposed by BEE.

This extension has been granted since out of 384 DCs, application for 33 are still under approval process by the registry.

 

In total, there was a demand for 145,150 ESCerts, a decrease of nearly 60.34% from last week. This demand was against a total supply of 777,567 ESCerts (decrease of 28.96% since last week).  Market clearing price was determined at Rs 500/ ESCert (the price determined last week was Rs 899 per ESCert), with 28,983 ESCerts sold (value traded decreased by 92.7%; the total traded value was Rs 1.45 crore).

The trading data provided by IEX on their website can be accessed here.

 

 

Source: IEX

TRADE RESULTS OF ESCERTS FOR WEEK 14

The fourteenth trading session of ESCerts took place today.

 

In total, there was a demand for 365,980 ESCerts, a decrease of nearly 50% from last week. This demand was against a total supply of 1,094,568 ESCerts (increase of 31.68% since last week).  Market clearing price was determined at Rs 899/ ESCert (the price determined last week was Rs 1,000 per ESCert), with 2,20,791 ESCerts sold (value traded decreased by 55.87%; the total traded value was Rs 19.85 crore).

 

This was the last trading session for compliance under PAT cycle I. In total 10.85 lakh ESCerts have been purchased till date, compared to an estimated demand of about 14.25 lakhs ESCerts. The following graph illustrates the total demand as compared to the total ESCerts traded.

 

Companies that have failed to purchased ESCerts in compliance with their PAT Cycle I requirements will be required to now pay penalty at the rate of Rs 10,968. It will be upto BEE to levy and collect the penalty.

 

Based on the experience so far in the RPO markets, there are hardly any instances of imposition of penalty. However, if the BEE extends the deadline or fails to impose the penalty in a timely manner, it will set a very poor precedent for PAT Cycle II.

The trading data provided by IEX on their website can be accessed here.

Source: IEX

Regards,

Team REConnect

TRADE RESULTS OF ESCERTS FOR WEEK 9

The ninth trading session of ESCerts took place today.

In total, there was a demand for 10,963 ESCerts, a decrease of 10.44% from last week. This demand was against a total supply of 336,121 ESCerts (increase of 5.10% since last week).  Market clearing price was determined at Rs 200/ ESCert (same as last week), with 7513 ESCerts sold (value traded reduced by 38%; the total traded value was Rs 0.15 crore). REConnect’s market share in this trade session was 72%.

 

 

Source: IEX

 

 

TRADE RESULTS OF ESCERTS FOR WEEK 8

The eighth trading session of ESCerts took place today.

 

In total, there was a demand for 12,241 ESCerts, an increase of  of 6.25% from last week. This demand was against a total supply of 3,19,810 ESCerts (decrease of 26.7% since last week).  Market clearing price was determined at Rs 200/ ESCert (compared to Rs 350 last week), with 12,125 ESCerts sold (value traded reduced by 33%; the total traded value was Rs 0.24 crore).  The price of ESCerts has reduced to nearly 1/6th from where it started.

 
Source: IEX
A circular has been released by the Bureau of Energy Efficiency (BEE) instructing all the Designated Consumers (DCs) which had not achieved their energy saving targets to comply to their obligations as per PAT cycle-1 through purchase of ESCerts. The circular also mentions the penalty for non compliance as maximum Rs 10 lakh and the additional penalty to be incurred.

TRADE RESULTS OF ESCERTS FOR WEEK 7

The seventh trading session of ESCerts took place today.

In total, there was a demand for 11,521 ESCerts, a decrease of 45.23% from last week. This demand was against a total supply of 4,36,394 ESCerts (increase of 13.83% since last week).  Market clearing price was determined at Rs350/ ESCert (compared to Rs 500 last week), with 10,351 ESCerts sold (value traded reduced by 62%; the total traded value  was Rs 0.36 crore).  The price of ESCerts has reduced to nearly 1/4th from where it started.

 

 

 

Source: IEX

MAJOR REFORMS EXPECTED IN THE ENERGY SECTOR, SAYS POWER MINISTER

In an article in  Financial Express, the power minister, Mr RK Singh, declared that huge reforms are to be expected in the power sector in the near future. Few of such reforms mentioned were PPAs for all the electricity requirement being made mandatory in all Indian states, cross subsidy in tariff being limited, compensation of low agriculture tariff  by increasing the industrial and commercial tariff and introduction of Direct Benefit Transfer (DBT). Also, introduction of a penalty provision  to those not meeting their RPO targets. This is in line with the Draft National Electricity Policy released by Niti Ayog in June 2017. The Union Minister also added that carriage and content shall be separated by his ministry which shall give the end user the flexibility to where they want to procure electricity from.

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