Why Tamil Nadu’s solar tender failed to attract more bidders

M. Ramesh Chennai | Updated on February 26, 2019

Concerns regarding payment security and availability of grid seem to have deterred developers from bidding in large numbers for Tamil Nadu's power purchase tender for 1,000 MW of solar capacity.

That the Tamil Nadu solar tender attracted bids for about half of the 1,000 MW capacity tendered for should come as no surprise to those who have been following the process. The pity is the State could have easily got more than 1,000 MW if only the bidding process was handled in a manner that inspired confidence in the bidders.

There were two major doubts in the minds of developers — (a) payment security given that the buyer of the power, TANGEDCO, is almost bankrupt (b) availability of grid, because wind power people in the recent past have been unable to sell their power because the grid was not made available to them. Neither issue was addressed adequately by TANGEDCO.

Take payment security. TANGEDCO’s repeated refrain has been that since there was a revolving letter of credit facility, the developers’ fears that they may not get paid was not well founded. The draft Power Purchase Agreement says: “The payment shall be made on 30th day from the date of receipt of passed bill (Invoice) at LC opener’s bank.”

However, developers have pointed out that since TANGEDCO would control when the invoice/ bill was passed this was not a commitment for payment within a time frame.

The draft PPA was seen as a non-bankable document.

On grid availability, the draft PPA did little to inspire confidence. “Grid availability shall be subject to the restriction and control as per the orders of the State Load Dispatch Centre and as per the Tamil Nadu Electricity Grid Code,” it said.

Further, it said the State Load Despatch Centre would instruct the solar power generator to schedule the power. "Accordingly, the Unscheduled Interchange (UI) commercial mechanism will be extended to the solar power generator. Such scheduling, UI mechanism, etc, will be governed by orders issued by the (Tamil Nadu Electricity Regulatory) Commission from time to time."

Even on several other issues, TANGEDCO did not clarify doubts adequately. For instance, a solar developer (SunEdison) asked: "Clause 5 of the tender document also mentions that the bid can be cancelled or rejected without stating any reasons thereof. This is a risk factor for us. Can the conditions under which such cancellation is done be clearly specified?"

TANGEDCO’s reply: "As per specifications"

Experts also point out that the PPA offers no 'change of law' protection. Since it says that "both parties shall comply with the policies and guidelines issued by the Government of India and the Government of Tamil Nadu from time to time," the PPA was seen as a risky document.


Published on January 05, 2013

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