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The use of RLNG has the potential to light up about 9000 MW of stranded power plants in the country, according to a Crisil report.
The e-auction for allocation of imported re-gasified liquefied natural gas (RLNG) under the Ministry of Power’s scheme for gas-based power plants can help plants service interest obligations.
At the prevailing gas prices, this can potentially enable 9,000 MW of the 14,300 MW of currently stranded gas-based power plants to operate at a plant load factor of 25-30 per cent, good enough to service their interest obligations for about two years.
The scheme makes available imported RLNG at a reduced price, and there will also be a tariff subsidy that will be determined through reverse auction. However, it requires companies to forgo their return on equity.
The success of the scheme will hinge on the ability of power plants that are allocated the imported RLNG to find buyers for their electricity. Under the scheme, the net sale price of electricity to discoms has been fixed in the Rs 4.7 -Rs 5.5 per unit band, well above current average prices in a market, plagued by low demand. It is also higher than the average Rs 3.5 to Rs 4.5 per unit that discoms paid last fiscal.
The success will also depend on whether players can get a moratorium on principal payments from lenders for the next two years.
The scheme targets 9,845 MW of plants that already receive domestic gas but operated at sub-optimal levels last fiscal. However, these plants are unlikely to show significant interest at the auction because the amount of gas allocated to them is limited, and they enjoy an availability-based tariff structure that facilitates cost recovery.
The scheme provides for a per-unit tariff subsidy from the Power System Development Fund. Further, the delivered price of the e-bid RLNG is estimated to be around $3 per mmbtu lower than spot RLNG prices due to support from various stakeholders in the form of reduced marketing margins, re-gasification charges, and transportation charges, apart from customs and sales tax waivers.
While the e-auction will provide some respite, Crisil believes long-term viability and credit quality of these power plants will ultimately depend on increased availability of domestic gas.
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