PTC India eyes more medium-term power pacts

Electricity trader PTC India is eyeing increasing the number of medium-term power purchase agreements with power generators and utilities.

This is because transmission constraints are hurting short-term trades while numerous litigations have made long-term (25 year) power purchase agreements unattractive.

“According to our understanding, power projects, which are almost complete but don’t have purchase tie-ups are preferring medium-term agreements. We are trying to sell this to the utility customers also as it is a quick win solution in a situation of uncertainty,” a senior official of the company said.

The official added that such contracts range from three to seven years but the optimal time frame is five years.

“The advantage of medium-term agreements over short-term sales is that the former enjoys the same priority as long term agreements in terms of transmission capacity,” the official said.

Transmission constraints have hampered PTC India’s short-term sales which have reflected in the company’s declining sales volumes. Volumes dropped 17 per cent in the fourth quarter of fiscal 2014-15.

Around half of PTC India’s trading volumes depend on short term trades. Brokerage firm ICICI Securities said in June that the transactions for short term trades is weak and may not improve quickly.

Another advantage pointed out by the official is that even if generators get the pricing and the customer wrong at the beginning, it can be corrected after the first five years.

“Five years is enough time to find out whether a state electricity board is doing well or is struggling. Lenders too can take a call from the fourth year onwards on what is the way forward,” the official said.

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