Coal news and updates

Post coal auction worries for power sector

The winning of captive coal mines by power generation companies in the recent auction might even stoke the sector's fund problem, given the large-scale lack of power purchase agreements (PPAs) with state governments.

The fear is that the price to be now paid for the blocks won in the auction will, with the lack of supply agreement, lead to losses. Around 75 per cent of projects which won captive mines in the auction don't have any PPA. The capacity affected is about 10,000 Mw.

Around 29,000 Mw of total thermal power generation capacity is estimated as stranded, since states are not issuing any new tender for long-term purchase. "In case PPAs are not signed, looking at the (auction) payouts, they (companies) would probably be staring at bankruptcy. Consequently, these projects will become non-performing assets for the banks (involved)," said a senior power company executive.

The calculation is that a six million tonne a year coal consumption would mean a payout in the first year of Rs 1,541 crore for the winners in the recent auction, including repayment of debt amount, yearly loss and the project cost.

Sector experts are concerned at the many projects with untied power sales which have won coal blocks. "As these developers have won the block at a negative price bid, they would bear the additional cost, along with debt service for the power plant," said the executive.

Apart from a tender by Kerala State Electricity Board (KSEB), there has been no major power purchase contract bid call since March 2013. KSEB called for bids for 400 Mw in two tranches and received bids in the range of Rs 3.6-7.29 a unit.

"Such bids reflect the future course of power prices. Andhra Pradesh is also planning to issue a tender but that will take two years. The pipeline of states signing purchase pacts is empty. The government has bailed out generation by providing assured coal supply but needs to strengthen power distribution," said a Delhi-based expert.

Distribution companies across the country are financially distressed, incapable of buying expensive power. ICRA, the ratings agency, has estimated the aggregate unrecovered revenue gap at Rs 25,300 crore from rate petitions filed by distribution utilities in 11 states.
Guidelines issued for disposal of Schedule-II coal mines' stocks

The ministry of coal has issued guidelines for disposal of the stock of Schedule-II coal mines, which were operational when cancelled by the 2013 Supreme Court order.

If the prior allottee fails to remove the stock within seven days from this Wednesday, the successful allottee can dispose of the stock. The proceeds would be divided between the new owner and the government. Only the cost incurred by the successful bidder or allottee for the removal, storage and sale of the stock would be paid to them. The rest would go to the 'nominated authority'

The 18 operational blocks in the first phase of auction have total extractable coal reserves of 90 million tonnes and have end-use infrastructure attached.

source: http://www.business-standard.com