BGR, Kalinga En­ergy fol­low Tata Power, shelve ther­mal projects in Odisha

DE­VEL­OP­ERS BACK OUT DUE TO POOR FUEL LINK­AGE; STATE TO LOSE `10,000 CR IN­VEST­MENTS, 2,320 MW POWER CA­PAC­ITY

Resource Digest - - CONTENTS -

Ther­mal power projects are grad­u­ally los­ing trac­tion in Odisha with a clutch of de­vel­op­ers de­cid­ing to shelve their planned projects. Af­ter Tata Power, BGR En­ergy Sys­tems Ltd and Kalinga En­ergy & Power have com­mu­ni­cated their in­tent to scrap their pro­posed coal-fired projects in the state.

Chen­nai-based BGR En­ergy Sys­tems had pro­posed to set up a 1,320 mw coal-based power sta­tion at Bha­pur in Odisha's Naya­garh district, com­mit­ting an in­vest­ment of Rs 6,287.93 crore. Kalinga En­ergy & Power Ltd, an Odisha-based de­vel­oper, had sought to de­velop a 1,000 mw power project at a cost of Rs 4261.27 crore. It signed a mem­o­ran­dum of un­der­stand­ing (MOU) with the Odisha govern­ment in Fe­bru­ary 2009.

"Both BGR En­ergy and Kalinga En­ergy have writ­ten to the state govern­ment with an in­tent to shelve their projects. Without coal blocks or firm link­ages, ther­mal power pro­duc­ers are find­ing it tough to com­mis­sion their projects. Also, the sce­nario is shift­ing in favour of re­new­able power with tar­iffs get­ting more com­pet­i­tive,” said a state govern­ment of­fi­cial.

On its own, the state govern­ment has not re­newed the lapsed pacts of Es­sar Power and Vi­jay Ferro Power over their lack of in­ter­est to im­ple­ment projects.

The walk­ing away of ther­mal pro­duc­ers from their projects has posed a threat to Odisha's po­ten­tial to emerge as a ther­mal power hub. Weak power de­mand, lack of coal block or firm link­ages, de­lay in land ac­qui­si­tion and dif­fi­cul­ties in rais­ing credit have prompted the pro­mot­ers to draw back their plans. Be­tween 2000 and 2014, Odisha signed Mous with 30 IPPS, with a to­tal gen­er­a­tion ca­pac­ity of 37,000 mw. The state govern­ment went on an MOU sign­ing spree to se­cure long-term power se­cu­rity.

Al­though Odisha was al­ready a power sur­plus state, the idea be­hind chas­ing coal-based power projects was to get power at com­pet­i­tive rates from the In­de­pen­dent Power Pro­duc­ers (IPPS) and sell ex­cess power through its trad­ing agency Gridco. The sale of sur­plus power by Gridco ei­ther to the spot ex­changes or to states with deficits through bi­lat­eral pacts was seen as a strat­egy to shore up its stressed fi­nances. But the strat­egy fell through as the IPPS strug­gled to se­cure coal blocks even with the state govern­ment's rec­om­men­da­tions. Later, Odisha lost its dis­cre­tionary ad­van­tage to rec­om­mend award of coal blocks with the be­gin­ning of the sys­tem of trans­par­ent auc­tions. Some de­vel­op­ers like Mon­net Power, which man­aged to win a coal block af­ter tough bid­ding, found the coal block un­sus­tain­able.

In the Mous that the state govern­ment signed with the IPPS, it was en­ti­tled to a 14 per cent power share if a coal block was al­lo­cated to the de­vel­oper. If no coal block was al­loted, the state could still get 12 per cent of the power gen­er­ated at vari­able cost.

"For IPPS, there is no coal block or the guar­an­tee of a firm link­age in Odisha. This, to­gether with the trou­ble in land ac­qui­si­tion and longer break-even pe­ri­ods due to cost and time over­runs, do not make ther­mal power projects a safe bet,” said a se­nior ex­ec­u­tive with a power com­pany.

To this date, mmost of the Mou-bound power projects in Odisha have re­mained non-starters. The ones that have com­menced op­er­a­tions are Vedanta-owned Ster­lite En­ergy, Ind-barath (En­ergy) Utkal Ltd, GMR En­ergy and B C Jin­dalowned Jin­dal In­dia Ther­mal Power Ltd (JITPL).

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