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The Central Electricity Regulatory Commission (CERC) has notified the Tariff Regulations, 2019

The Central Electricity Regulatory Commission (CERC) has notified the Tariff Regulations, 2019

Reforms and Regulations

The Central Electricity Regulatory Commission (CERC) has notified the Tariff Regulations, 2019. The regulations will come into force from April 1, 2019 and remain effective for five years up to March 31, 2024. The commission has continued the 15.5 per cent regulated return on equity (RoE) for generation and transmission companies as proposed in the draft regulations, despite a reduction in the benchmark interest rates. The norms for working capital have also been tightened with days receivables reduced to 45 days from 60 days earlier, among other changes.

Central Sector

The Cabinet Committee on Economic Affairs (CCEA) has approved the Ministry of Power’s (MoP) proposal to include large hydro power projects (above 25 MW) under the aegis of renewable energy. Separate hydropower purchase obligation (HPO) for large hydro projects commissioned after the notification of measures to promote hydro power will be issued. As per existing practice, only hydropower projects less than 25 MW were categorised as renewable energy. Moreover, tariff rationalisation measures including providing flexibility to the developers to determine tariff by back-loading of tariff after increasing project life to 40 years, increasing debt repayment period to 18 years, and introducing escalating tariff of 2 per cent will be implemented.

The CCEA has approved recommendations of the Group of Ministers (GoM) for resolution of stressed assets including the grant of linkage coal for short-term power purchase agreements (PPA). The CCEA has also approved the use of existing coal linkages in case of termination of PPAs due to payment default by discoms and procurement of bulk power by a nodal agency against pre-declared linkages. The central/state gencos may act as an aggregator of power. Approval has also been accorded to the increase in quantity of coal for special forward e-auction for power sector, coal linkage auctions to be held at regular intervals, non-lapsing of short supplies of coal, annual contract quantity (ACQ) to be determined based on efficiency, mandatory payment of late payment surcharge (LPS), non-cancellation of PPA/fuel supply agreement (FSA)/long term open access (LTOA) post NCLT scenario and non-cancellation of PPA for noncompliance of commercial operation date (COD). The MoP has also issued a memo in line with the CCEA’s decision.

The CCEA has approved investment in four power projects worth Rs 310 billion located at Buxar (Bihar), Khurja (Uttar Pradesh), Kishtwar (Jammu & Kashmir) and Sirwani (Sikkim). In Jammu & Kashmir, the cabinet has approved the investment sanction for the construction of the 624 MW Kiru Hydro Electric Project (HEP) by Chenab Valley Power Projects Private Limited. The project will be implemented at an estimated cost of Rs 42.87 billion (at July 2018 price level). In Sikkim, the investment sanction has been approved for acquisition of Lanco Teesta Hydro Power Limited and execution of balance work of the 500 MW Teesta Stage-Vl HEP by NHPC Limited. The project will be implemented at an estimated cost of Rs 57.48 billion (at July 2018 price level). Further, the CCEA has approved the investment sanction for the 1,320 MW Buxar Thermal Power Project (TPP) in Bihar at an estimated cost of Rs 104.39 billion which is being implemented by SJVN Thermal Private Limited, a wholly owned subsidiary of SJVN Limited. Lastly, the CCEA has approved the investment sanction for the 1,320 MW Khurja Super Thermal Power Plant (STPP) in Bulandshahar, Uttar Pradesh at an estimated cost of Rs 110.89 billion and Amelia Coal Mine in Singraulli, Madhya Pradesh. The projects will be implemented by THDC India Limited. Both TPPs will be based on supercritical technology with two units of capacity 660 MW each and equipped with latest emission control technology to protect the environment.

The MoP has notified the draft guidelines for the short-term sale of power by generating companies and distribution licensees through the tariff-based bidding process. Competitive sale of short-term power to discoms and open access consumers is expected to lower the cost of power purchase. The guidelines provide for the sale of short-term power via the e-tendering process. The ministry has sought comments from stakeholders by March 21, 2019. The MoP as also released the guidelines and model bidding documents (MBDs) for long-term procurement of electricity from thermal power stations set up on design, build, finance, own and operate (DBFOO) basis and sourcing fuel as provided under MBDs including allocation of coal under revised provisions of SHAKTI policy.

Bharat Heavy Electricals Limited (BHEL) has installed the first solar electric vehicle (EV) charging station on Delhi-Chandigarh highway. BHEL has also developed a central monitoring system for EV chargers with a user-friendly mobile application. The project is covered under the Faster Adoption and Manufacturing of (Hybrid) & Electric Vehicles in India (FAME) scheme of the Department of Heavy Industries (DHI).

State Sector

The Delhi government has inaugurated a 220 kV substation at RK Puram and a 100 MVA power transformer at Masjid Moth established by Delhi Transco Limited (DTL). The substation has been established using gas insulated switchgear (GIS) with an investment of Rs 1.10 billion and has 520 MVA transmission capacity. This is planned to be linked with 400 kV substations at Bamnauli, Maharani Bagh, and Tugalkabad. The 100 MVA power transformer, on the other hand, has been added at an existing substation to enhance its transformation capacity.

The Uttarakhand government has launched a project to lay underground power cables in the Kumbh area of Haridwar, Uttarakhand. The first such project is being implemented in Kashi city, Uttar Pradesh. The project will be implemented under the Integrated Power Development Scheme (IPDS) at a cost of Rs 3.88 billion. The project is slated to be completed by 2021.

Private Sector

Azure Power has received a letter of award for a 300 MW solar power project through an auction conducted by Solar Energy Corporation of India (SECI). Azure Power expects to sign a 25-year PPA with SECI to supply power at a tariff of Rs 2.58 per kWh, which is 5.7 per cent higher than the lowest bid in the market. The project can be developed outside a solar park anywhere in India and is expected to be commissioned by 2020. With this win, Azure has 1.2 GW of interstate transmission system-connected sovereign credit off-take projects in the pipeline.

Debt and Equity

NTPC Limited is planning to acquire only those stressed power projects which are undergoing insolvency proceedings in the National Company Law Tribunal (NCLT) in order to get better deals. Earlier the company had also evinced interest in acquiring the projects through negotiations with project developers. So far, the insolvency deals in the NCLT have got discounts of up to 70 per cent or even more from secured creditors. NTPC has decided to go slow on the expansion of its capacity addition through acquisition of stressed power assets.

ReNew Power Limited has completed a green bond issue of $ 375 million. The five-year non-call two notes were offered at a yield of 6.67 per cent per annum. The capital raised through the green bond issue will be utilised for refinancing of outstanding external commercial borrowings and as capex in green projects. The USD denominated bonds received a good response and were fully subscribed by leading fund managers/asset managers, banks and pension/life funds from across the U.S., Europe, and Asia. The issue was opened for subscription on March 5, 2019, and closed on the same day. The bond offer has been rated as BB by Fitch Ratings.

IDBI Bank’s process advisor Deloitte Touche Tohmatsu India has invited expressions of interest (EoIs) for the sale of a 30 MW solar power project in Patan, Gujarat, owned and operated by Lanco Solar Gujarat Private Limited (LSGPL). The plant’s total debt outstanding as on October 8, 2018, stood at Rs 3.46 billion. IDBI is the only lender to the project. LSGPL is a fully-owned subsidiary of Lanco Infratech, which is being liquidated under the corporate insolvency resolution process. Lanco Infratech had been referred to the insolvency tribunal by IDBI Bank after the Reserve Bank of India (RBI) in 2017 named it among the 12 largest non-performing assets (NPAs).

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