BGR and Kalinga Energy shelve thermal projects
Thermal power projects are gradually losing traction in Odisha with a clutch of developers deciding to shelve their plans. After Tata Power, BGR Energy Systems Ltd and Kalinga Energy and 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 coalbased power station at Bhapur in Nayagarh district, committing an investment of ~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 ~4,261.27 crore. It signed a memorandum of understanding (MoU) with the state 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 block 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.
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 difficulty in raising credit has 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 a MoU signing spree to secure long-term power security.
Though 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 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 who managed to win a coal block after tough bidding found the coal block unsustainable.