In December 2012, Tamil Nadu had announced a bidding process for a capacity allocation of 1,000 MW. Issues such as low bankability of the Power Purchase Agreement (PPA), limited time available for planning and commissioning and the need for developers to meet the lowest quoted tariff for successful allocation caused the allocations to be undersubscribed (refer).

• Developers asked to meet a ‘workable’ tariff of INR 6.48/kWh with an escalation of 5% per year for 10 years
• TANGEDCO gets proposals for a cumulative of 690MW on extending deadline for developers to 31st May 2013
• A new response on deadline extension was seen because of more available time for developers to scout for evacuation capacity, to plan and commission projects

Bids were received for only 499 MW. Developers were subsequently asked to meet the lowest submitted tariff which came out at INR 5.97/kWh with an escalation of 5% per year for 10 years – an unattractive tariff for most developers. To avoid a complete failure of the process, the state decided to offer a ‘workable’ tariff of INR 6.48/kWh with an escalation of 5% per year for 10 years (read BRIDGE TO INDIA’s April edition of the India Solar Compass to read more). Even at this tariff, initially, interest was limited. In February 2013, Tamil Nadu Generation and Distribution Corporation (TANGEDCO) cleared proposals for the first batch of bidders with a cumulative capacity of 226 MW.

Seeing the low response, TANGEDCO provided additional time until 31st May 2013 to developers who originally chose not to accept the offered tariff and PPA being offered. Apart from this, new interests were also invited through a public advertisement. All new interests were to be made to the Chief Engineer (CE) at TANGEDCO. The new interests had to initially show the company’s financial strength to undertake the project and the availability of land and evacuation. Apart from this, they were supposed to submit a detailed project report. By the end of the deadline, proposals for a cumulative capacity of 690 MW have been submitted. According to unconfirmed reports, the key projects that now make up for the new capacity addition are a 110 MW project by Raasi Green Energy, a 100 MW project by L&T and a 40 MW project by Reliance.

None of these larger projects were a part of the initial bidding process. Of this, Raasi Green Energy had signed a Memorandum of Understanding (MoU) for a 100 MW project with Tamil Nadu Industrial Development Corporation (TIDCO) back in December 2012 but had also not participated in the bidding process.

Apart from this capacity of 690 MW, a 100 MW project by a Korean company, Shinsung , is expected to be awaiting final approval from the developers who are trying to narrow down on a low cost financing options before making the commitment.

No specific changes have been made to the PPA or any other term for agreement that make these projects more bankable than it was earlier. Under the bidding process, the maximum capacity for project size was limited by the evacuation capacity listed for each district in a list put out by Tamil Nadu Energy Development Authority (TEDA). Based on that, most projects were planned for a capacity between 1 MW and 10 MW with just one project that was as large as 50 MW. However, the newer projects had enough time to scout for evacuation capacity on their own. The larger capacity has potentially made these projects financially feasible for the developers. Other key reasons for the new response could be availability of more planning and commissioning time and no uncertainty with regards to tariff determination through a bidding process.

A capacity for 350 MW has been tied up for in Andhra Pradesh as well. Look out for a brief analysis on the same on our blog during this week.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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