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JAN 11 2017

JSW Energy's long-term power purchase tender for Karnataka expires

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 11th JAN 2017

JSW Energy Ltd's awaited long-term power purchase agreement with the Karnataka government has fallen through, forcing the company to look for short-term options, according to people with direct knowledge of the development.

JSW Energy had won a tender to supply 750-megawatt power to the Karnataka state electricity board (SEB) in July at Rs 4.38 per unit on a three-year contract. However, the tender never materialised into a long-term power purchase agreement.

"The tender was to expire in November, however, in the absence of PPA (power purchase agreement) signed, it has now fallen off," said a person familiar with the development. A second person with direct knowledge confirmed the expiry of the contract.

An email query sent to JSW Energy on the status of the contract remained unanswered. JSW Energy last week announced it had won a short-term order to supply 650-megawatt power to Power Company of Karnataka Ltd up to May 2017.

The company did not disclose the rates at which this order was won. "The short-term contract would be at rates lower than the long-term contract which expired. I expect the company would be able to sign another six-month contract once the first one ends in May, which should help delay the pain for another 10-12 months," said one of the two people quoted in the story earlier.

The long-term contract for JSW Energy was stuck in regulatory delays and government approvals, which several analysts attribute to the availability of cheaper power in the spot market.

Analysts expect long-term contracts for power capacity in the country to take longer to fructify as the spot market offers a cheaper option to the financially stressed SEB sector. On the Indian energy exchange (IEX), power for the southern market at present is trading at Rs 3.10 per unit, lower than the rates at which JSW Energy's long-term contract was to be signed.

"How things will pan out for the company once the short-term contract ends also depends on the monsoon and other power capacities' commissioning schedule in the state. Monsoon is crucial as Karnataka meets a large chunk of its power needs through hydel power," one of the people quoted earlier said.

The company's September quarter net profit was 59 per cent less than the Rs 534 crore in the same period a year earlier. In its result statement to BSE, the company said the decrease in turnover was primarily on account of lower generation and realisation at the Vijaynagar and Ratnagiri units, partly offset by increased generation at its recently acquired hydropower plants in Himachal Pradesh. Generation at Vijayanagar was lower owing to the delay in the long-term contract, tender for which has expired. The hit has been offset with the short-term contract signed up to May 2017.

Tags

Himachal Pradesh DIRECT India Energy Exchange Ltd. Karnataka JSW Steel Ltd. India Energy Exchange JSW Energy Ltd Power Company of Karnataka Ltd Power Purchase Agreement Energy State Electricity Board Vijaynagar Power IEX Hydropower Trading Electricity

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