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After the fiasco over bidding for new ultra mega power projects (UMPPs) and power projects based on domestic coal supply, the ministry of power has come out with new standard/model bidding documents, request for qualification (RFQ), request for proposal (RFP), power purchase agreement (PPA) and guidelines. These will be applicable for power projects to be developed on a build-own-operate (BOO) basis. The ministry has sought views from stakeholders till September 1.
According to the bid documents and guidelines, the RFQ will be issued in 75 days, submission of RFP to be done in 225 days, and evaluation of bids and issue of letter of approval (LOA) in 240 days. Two special purpose vehicles (SPVs), namely the operating SPV and the infrastructure SPV, will be incorporated by the nodal agency.
In 300 days, there will be transfer of infra SPV to procurers and execution of share purchase agreement, default escrow agreement and the agreement to hypothecate-cum-deed of hypothecation, land lease agreement for critical land and land lease agreement.
Deloitte Touche Tohmatsu India’s senior director (consulting) Debasish Mishra told Business Standard, “These bid documents have given the flexibility to the bidder to quote fixed costs for each year of the contract period, and variable cost for the first year would be escalated according to the inflationary index published by the regulator. This is good system of balancing risk on the fuel side and reward efficiency in project execution and financing.”
CRISIL Ratings director Manish Gupta said the removal of mandatory requirement of open capacity will be beneficial. However, higher costs, in terms of procurement of land for coal production beyond five years, may result in higher cost of production.
“The revised guidelines have partly addressed industry concerns on transfer of assets to state utilities after completion of the concession period. Guidelines prescribe reverting to the BOO model wherein plant ownership after concession period will continue to vest with the developer. However, critical project elements — captive coal block and land for power station —will be owned by the discom, which may pose a regulatory risk vis-à-vis renewal of lease,” said Gupta.
According to the new bid document and guidelines, the infrastructure SPV will transfer critical land for the power station on a lease basis to the operating SPV. Further, the infrastructure SPV will transfer land that is sufficient to enable the operating SPV/seller to source coal required to operate the power station at normative availability for a period of at least five years from the COD of the first unit on a lease basis.
DOING A POWER OF GOOD
75 days-RFQ will be issued
225 days-Submission of RFP to be done
240 days-Evaluation of bids and issue of letter of approval
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