The Hindu Business Line : TN private power producers find going tough

IN 2004-05, PPN Power Generating Company Ltd, which operates a 330.5-MW power plant in Tamil Nadu, fed 466.11 million units (MU) into the State's grid, which is just 40 per cent of the 1,199.85 MU it was programmed to sell to the grid.

Information on the Central Electricity Authority's Web site shows that three other liquid fuel projects in Tamil Nadu - the 200-MW Basin Bridge project of GMR Vasavi Power Corporation, the 105.70-MW Samalpatti Power Company and the 105.70-MW Madurai Power Corporation - were better off than PPN Power Generating Company Ltd.

The GMR project sold 774.80 MU against the programmed 1,059.94 MU (73 per cent), the Samalpatti project sold 357.78 MU against the targeted 489.99 MU (73 per cent) and the Samayanallur project 345.55 MU against the scheduled 489.99 MU (70 per cent).

Of the five private power projects in Tamil Nadu, lignite-based ST-CMS Electric Power Company was the best off in terms of the power sold. It sold 1,338.80 MU against the scheduled 1,430.03 MU (93 per cent).

PPN Power's combined cycle gas turbine project at Pillaiperumalnallur was to have run on gas with the Gas Authority of India Ltd supplying gas on a fallback basis. However, it got gas for only 45 per cent of its capacity for a few months and was run on a mixture of gas and naphtha.

Since December 2003, the plant is being run entirely on naphtha. With naphtha prices increasing over the last few months, the cost for a unit of power generated by the plant works out to about Rs 5.20, according to sources.

This, according to the sources, is the reason for the Tamil Nadu Electricity Board (TNEB) not purchasing more electricity from PPN Power. The three other liquid fuel projects in the State are run on LSHS (Low Sulphur Heavy Stock).

According to the sources, TNEB follows a merit order ranking - buying the cheapest power first.

The electricity board, according to sources, continues to make only part-payment of the bills - a fixed amount of Rs 2.25 or Rs 2.50 a unit, whereas the actual tariff might be much higher.

The private power producers have been able to service their debt obligations, pay for operation and maintenance and the investors get "a part" of the 16-per cent return on equity that they were assured as part of the agreements they signed with the State Government, as per the prevailing policy then.

Power sector experts point out that the sector has undergone a vast change, especially after the Electricity Act, 2003 was notified. With merit order despatch being followed by the electricity boards, there is no scope for costly liquid-fuel based power.

Therefore, plants operating on liquid fuel have to look for alternative cheaper fuels such as gas. Also, the days of assured return on equity are long over and the private power producers have to re-work their agreements, the experts say.

The 2003-04 annual report of ST-CMS Electric Co Pvt Ltd and the 2002-03 annual report of PPN Power Generating Co Ltd refer to the payment problems they have been having with TNEB.

Apart from not operationalising the escrow within the specified timeframe, TNEB "is continuing to make part-payments against invoices that has resulted in certain defaults in terms of financing documents," says ST-CMS's annual report which adds that the company is pursuing these issues with the electricity board.

PPN Power's annual report states that the electricity board has not been effecting payments to the company in accordance with the power purchase agreement. Despite the company's constant follow-up, there has been no significant improvement in the position.

The large receivables together with the long-pending reconciliation of accounts between TNEB and the company are causing great concern, according to the annual report.

PPN Power has been pursuing with GAIL for entering into a contract for supply of natural gas from the offshore PY-1 well, according to the annual report.

HOEC in talks for gas sales pact

Hindustan Oil Exploration Company Ltd (HOEC), which has a 100-per cent operating interest in the PY-1 gas field in the Cauvery basin, is in discussion for a gas sales agreement and price, the company informed stock exchanges earlier this month.

Gas from the PY-1 field will be supplied to PPN Power Generating Power Co Ltd.

The gas development plan that has been approved by the Union Government for the PY-1 block aims to produce gas by the end of 2006.

The gas from the PY-1 offshore field will be transported through offshore and onshore pipelines considering landfall point at Porto-nova to PPN Power's plant. The pipeline consists of a 20-km offshore section and a 70-km onshore section, with a capacity of 2.5 million metric standard cubic metres per day, according to information on GAIL's Web site.

According to information on HOEC's Web site, the Directorate General of Hydrocarbons has approved the company's revised plan of development and the initial plateau production rate has been considered at 45 million standard cubic feet of gas per day. The company targets gas commencement by October 1, 2006.

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