Finance, Other, solar

Tamil Nadu solar bid: Developers express apprehension

According to reports, that the Tamil Nadu solar tender attracted bids for about half of the 1,000 MW capacity tendered for should come as no surprise to those who had been following the process. In contrast, in the Phase I Batch I of the National Solar Mission, just 150 MW was tendered out, but the response was for over 5,000 MW.

The pity is, Tamil Nadu could have easily got more than 1,000 MW if only the bidding process had been handled a manner that inspired confidence in the bidders.

There were two major doubts in the minds of developers — (a) payment security, given that the buyer of the power Tangedco is almost bankrupt, (b) availability of grid, because the wind power producers have, in the recent past, been unable to sell their power because the grid was not made available to them. Neither issue was addressed adequately by Tangedco.

Take payment security. Tangedco’s repeated refrain was that since there was a revolving letter of credit facility, the developers’ fear that they may not get paid was not well founded. The draft Power Purchase Agreement says: “The payment shall be made on 30th day from the date of receipt of passed bill (Invoice) at LC opener’s bank.”

However, developers have pointed out that since Tangedco controls when the invoice/bill will be passed this is not a commitment for payment within a time frame.

On the grid availability, the draft PPA says that the “grid availability shall be subject to the restriction and control as per the orders of the State Load Dispatch Centre and as per Tamil Nadu Electricity Grid Code,” it said.

Further, it said that the State Load Despatch Centre would instruct the solar power generator to schedule the power. “Accordingly, the Unscheduled Interchange (UI) commercial mechanism will be extended to the solar power generator. Such scheduling, UI mechanism, etc. will be governed by the orders issued by the (Tamil Nadu Electricity Regulatory) Commission from time to time.”

Experts also point out that the PPA offers no ‘change of law’ protection. Since it says that “both parties shall comply with the policies and guidelines issued by the Government of India and the Government of Tamil Nadu from time to time,” the PPA was seen as a risky document.

Now that the response has been poor, the bidders are in no mood to negotiate the tariff.

Tangedco, following a TN Tender Transparency Act, had said it would negotiate with second-best and the following bids, asking them to match the best bid.

But now that the response to the tender has been poor, developers seem to be adopting a take-it-or-leave-it stance.

For instance, SunEdison, which has bid for 50 MW says it may not bring down the prices much.

“I don’t see us changing our bid price appreciably,” said the Managing Director of the company, Pasupathy Gopalan.

Enquiries reveal that a number of developers have bid at rather high prices — Rs 9 and above — hoping for an opportunistic windfall. Now, the poor response to the tender provides them with just such an opportunity.

It remains to be seen whether Tangedco would reject the high-priced opportunistic bids.

If it does, the State Government will have to pay a high price for solar power, especially because the developers are promised a 5 per cent tariff escalation for the first ten of the 20-year power purchase period.

If it doesn’t, it would be a loss of face for Tangedco if it finally comes up with something like 100-150 MW, against a 1,000 MW tender.



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