Power Generators Risk Coal Supply Deals By Skipping Auctions

Power Generators Risk Coal Supply Deals By Skipping Auctions

Independent power generators that do not participate in the announced auction for coal supply or do not offer any discounts on existing tariffs will not get another chance to secure long term coal supply contracts from Coal India, the company has decided.

Coal India will hold two separate auctions to ensure coal supplies for independent power producers. One would be for those with power purchase agreements, estimated to be around 13,000 MW, in which producers would bid on the basis of discounts they offer.

The other would be for producers without a PPA. It would be an e-auction on the basis of the highest bid. Coal would be made available to them once they sign power purchase agreements.

Coal India is likely to fix a minimum discount on existing tariffs, which would act as the floor for discounts under reverse auction. Companies will have to bid for additional discounts on the basis of which they would be supplied about 75% of their coal requirements.

According to sources in know of the development, this ceiling for discount is likely to be around 3-4 paise per unit.

The discounts committed by the power producers would be deducted by the utilities buying this power at the end of every billing cycle. Power producers are free to offer different discounts for each year under the auction, but for the purpose of evaluation of successful bidders, an average levellised discount rate is likely to be considered.
After shortlisting of power companies, and looking at total quantum of power purchase agreement they have signed, Coal India would be in a position to finalise demand for coal. Based on this estimate, it will decide on the volume of coal that would be offered at the auction.

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“While applicants have been given time till August 7 to register. Shortlisting and finalisation of the quantum of coal to be offered would take a week’s time and we hope to hold the auction by the third week of August,” said a senior Coal India executive.

“Discounts offered on existing tariffs would mean, utilities buying power at lower costs which is likely to be passed on to consumers. This will also ensure that power companies would get assured supply of coal which would help them generate revenue and service their loans,” said a Coal India executive.

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