Amid concerns expressed by short-listed bidders over the ongoing financial crisis, the bids for the 4,000-Mw Tilaiya Ultra Mega Power Project in Jharkhand will be opened on December 29. "The bidding will take place as announced," said Power Secretary Anil Razdan.
The bids for the Tilaiya UMPP were originally slated to be opened on November 4. This was subsequently deferred to December 1. Later, the last date was again postponed to December 29 as many short-listed bidders asked for more time even as the pre-project work was running behind schedule.
Analysts expect aggressive bidding for the proposed power project, which requires an investment to the tune of Rs 16,000 crore-Rs 18,000 crore (Rs 160-180 billion), due to surplus availability of coal near the project site and also due to fall in cost of power equipment. But tight credit availability could prove to be damper.
Lower bids placed by companies scouting for the UMPP will mean that the electricity generated from the plant will be available to consumers at a lower rate.
"The bids to be put for the project will largely depend on the bidder's strategy of utilisation of excess coal available from its coal block as this may pull down the overall cost estimate," said a senior analyst at an accounting and consultancy firm.
Coal for the project is to be sourced from the North Karanpura coalfields, which are 70 km away from the project site. While the total capacity of the block is around 600 million tones - enough to run a standard super-critical power plant for 30 years - Tilaiya will consume only about 20 MT of coal annually, leaving a surplus of unutilised fuel.
Also, the input costs of raw materials like cement, steel and basic plant machinery, which have decreased by 15-20 per cent in the past one year, will lead investors to scale down their cost estimates.
"The tariff can't go more than Rs 2 per unit in a pithead project like Tilaiya. But it is estimated to be higher than the bid for Sasan," said another analyst. Sasan UMPP, the bids for which were received in December 2006, was also a pithead project. It was bagged by Reliance Power after quoting a price bid of Rs 1.19 per unit.
"Higher interest costs, lower debt-equity ratio and tightened availability of foreign loans are some of the reasons why the bids for Tilaiya are expected to be higher than Sasan," said the same analyst.
"While power projects in India have been traditionally financed on a debt-equity ratio of 70:30, a lower debt-equity ratio will lead to higher equity return expectations from projects," he added.
Some bidders still want more time: When asked whether the project developers were ready this time to go ahead with the bidding process for the multi-crore project in view of the ongoing financial crisis, Razdan said the government had decided to carry on the process, even as some bidders were still unwilling to participate. "Some (bidders) still don't want to (put their bids). But PFC has assessed the situation and bidding will take place," he added.
The nine companies that have qualified to bid for the thermal power project include Tata Power, Reliance Power, Essar Power, L&T, Jindal Steel and Power Ltd and Sterlite Industries. "The markets are still tough. But we will be able to raise funds. The situation has comparatively eased now," said one of the bidders.
According to the original schedule, the successful bidder was to have been selected over 16 months ago - in July last year. Tilaiya will be the fourth ultra mega power project to come up in the country on a public-private-partnership basis through tariff-based competitive bidding. Reliance Power has bagged two of these UMPPs - at Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh, while Tata Power has bagged the Mundra UMPP in Gujarat.
The project is a part of the government's UMPP scheme under which it proposes to set up 13 UMPPs to increase India's power capacity by above 50,000 Mw by the end of 2017 in order to fill the power demand and supply gap in the country.