As the TANGEDCO bids for 1000 MW (499 MW bid submitted) are unfolding, I get this rather difficult to believe number – Rs 5.97 per kWh – as the price from Mohan Breweries. (Courtesy & More details at Madhavan’s blog)
I had expected sub-7 bids, but sub-6?! (A brave EAI Member Saravana from Coimbatore had predicted 5.75-6 in response to an earlier post), but otherwise, most were in the mid-6s. My guess was 6.43).
5.97 – Sounds a bit crazy? That apparently is the price they have quoted – though full confirmation is awaited.
Update: Yes, 5.97 is confirmed. There a few who told me that 5.97 is not as low as I paint it to be, given that there is a 5% escalation clause. Perhaps. The price at the end of year 10 comes to Rs 9.72/kWh. With NPV etc. considered, I guess you can say that the 5.97 will perhaps be equivalent to about Rs 6.5 if there were no escalation. Not sure if 6.5 is an acceptable number at no escalation – I hear it is more like 7.5, what do you reckon?
I have a hunch that for Mohan Breweries, it makes sense more from an accelerated depreciation perspective than from any pure project economics…
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And wait, by the way. I hear TANGEDCO has declared that 5.97 is (or may be) NOT the L1 and that they will revert in 20 days on what indeed is L1.
If I were TANGEDCO, I’d also require some time, to gather my wits and inject a sense of reality. Declaring 5.97 as the L1 will essentially ensure that no one would come forward to re-quote at this price, meaning the total bid MW will be just 10 (Mohan Breweries’ capacity). They will then have resort to arduous steps like trying the same process for L2 and so on. Cumbersome stuff, you will surely agree.
Makes sense to arrive at a number that is more “acceptable” to all, something that makes SPV projects more feasible and brings the bidding/selection process to a quick close.
But this “negotiated” and “acceptable” price also begs the question – why have a bidding at all? Why not work out what is a reasonable FiT based on acceptable RoIs, benchmark costs and negotiate around that number? By the way, this was what was done in the original-original NVVN offer – Rs 17.91 /kWh, take it or leave it. Many times, the simplest solution is the best solution.
But TANGEDCO could claim that a mix of market discovery of prices plus negotiations/calculations is better than either one alone. I am sure you have heard this before – gather of bunch of economists in a room and present them with ANY problem, the only thing you can be sure at the end is that no one agrees with any one else’s solution. You get the idea…
Yo-ho-ho and a bottle of rum.
Tell me what you think…comment here or send a note to narsi at eai.in and I will post it here…
The following are some of the bid prices that my colleague Venugopal had the patience to SMS me and those I scavenged from Madhavan’s blog and the rest (all in Rs/kWh):
Some interesting points that can be observed from the data:
1. It is not as if Mohan Breweries’ bid was weird. There are at least two more companies that have bid fairly close to what MB had done.
2. The concern that many of us had, that the large bidders would easily outbid those bidding for smaller capacities has not been borne out by the data. The second lowest bidder, for instance, has bid only 5 MW, and the fifth, seventh, eighth and ninth bidders have bid less than 5 MW each. In fact, heavy hitters like Sun Edison (SEI) appear much later!
3. Assuming that companies will not go for L1 if L1 were lower than their original bid by over Re 1, only bids totalling 55 MW would have been put in for an L1 of 5.97 (add the MW until it reaches Rs 6.97 ). No wonder TANGEDCO said, “Hold your horses” before declaring the L1.
4. Heavy hitters such as Lanco (Rs 8.2) and Welspun (Rs 8.56) appear to have decided they will play very safe. Did these folks know something others didn’t, or were these guys essentially wanting to wait for the L1 and then take a call? Most likely the latter.
5. RK Biotech, who had bid for 50 MW, had quoted 13.41. What exactly is his game – Just having fun? In a similar vein, what about Aditya Housing & Yaasin Impex?
- Mohan Breweries – 5.97 – 10 MW
- Sai Maithili 6.15 – 5 MW
- RETHINK Energy – 6.20 – 15 MW
- Omicron Bio Genesis 6.48 – 10 MW
- Vasathi Housing 6.66 – 3 MW
- GRT – 6.75, 6.89, 7.11 – 5 MW, 5 MW
- Finlay Energy – 6.93 – 2 MW
- VVD Sons – 6.99 – 1 MW
- Raasi Green – 7 – 1 MW
- Alex Green – 7.17 – 10 MW
- Eagle Press 7.2 – 2 MW
- Eagle Press 7.2 – 1 MW
- Madras Security Printers – 7.2 – 2 MW
- Madras Security Printers – 7.2 – 1 MW
- D Arumugam 7.23 – 1 MW
- A Sivasankaran 7.23 – 5 MW
- SEI Adisaya Sakthi – 7.23 – 10 MW
- TGH Ashok Kumar – 7.25 – 1 MW
- Chennai Radha Engg Works 7.25, 7.3, 7.35
- SEI Suryalaab 7.39
- SWELECT – 7.4
- Swiss Park Vanijya 7.4 to 7.59
- Indira Industries 7.43
- ILFS TN Power Company – 7.43
- BEE Solar Energy 7.45
- ILFS Renewable – 7.48
- ILFS – 7.97
- SEI Jyothimangal – 7.43
- SEI Jyothi – 7.43
- SEI Sun Cells – 7.47
- Krishan Power – 7.5
- Brics Solar Pvt Ltd – 7.51
- KGB Solar 7.57
- Crescent Power – 7.74
- United Telecom – 7.74
- Bhuvan Navidas – 7.89
- Agni Estate 7.9
- AMTEX – 7.9
- SPI Power Ops 7.92
- IL&FS Renewable – 7.97
- Agni Estate – 7.97
- MS Green Energy 7.99
- Emami – 8
- Supreme Hitech 8.05
- SAR Capital – 8.19
- Lanco – 8.2 (pasiphie)
- Deccan Solar Park – 8.25 & 9.5
- Pradhin Energy Pvt – 8.26
- RR Industries – 8.26
- Vaibhav Jyoti Utility Services – 8.35
- OEG Solar Energy Pvt 8.35
- Amber Solutions – 8.4
- Ecogrid Energies – 8.45 at four locations
- Satec Engg – 8.5
- Green Line – 8.5
- Welspun – 8.56
- Muthupappa Green Energies – 8.75, 8.75, 8.75, 8.5 at four different locations
- GPR Power – 8.9
- Enerco – 8.9
- Waaree Energy 8.91
- Sakthi Ferro Alloys India 9
- Sree Sastha Grinders 9.1
- Arunachala Impex 9.15
- Crescendo – 9.5
- Hero Fashion 9.5
- Adiv – 9.5
- Muthukrishnan – 9.5
- Bekae Properties Pvt Ltd 9.5
- Mahima – 9.55
- Varadharajan 9.7
- Pramila Exports – 9.75
- Sri Saravana Engg Bhavani Ltd – 9.9
- GPR Power Solutions 9.9
- Madurai Power – 9.99 and 8.98
- Land Marvel Homes – 9.99
- Best Corp. Pvt. Ltd – 9.99
- Ind Eco Ventures 10
- Voltech – 10 & 12
- Pahupathy Enclave – 10.55
- VTV Infra 10.8
- Hanma Infra & Properties – 11
- Assetz – 11
- Uniqe micro computers – 11.12
- Olympia Infratech – 11
- V Subramanian & Co – 12
- RK Biotech – 13.41
- Aditya Housing – 17.23
- Yaasin Impec – 17.95
Not known/disqualified
- Lespirit Mkt/Velankanni Enggs
- R Asokan
- Moothedath Industries
- Jaitech Powerhouse Ltd
- Power Enterprises – ?
- Avenir Repower Systems – Disqualified
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Narsi,
Rs.5.97 sure is a very low price and an unbelievable one too. However, isn’t escalation at play here? If we go by the 10 year escalation of 5% and a constant tariff thereafter, the Rs.5.97 converts to an average of Rs.8.38 over 20 years. Considering discounting factors (courtesy of Madhavan), this should be somewhere around Rs.7.7 per unit for 20 years which is still higher than the the lowest bid till date in Orissa (Rs.7-7.2). Again, I am certainly sure that this Rs.7.7 may not be viable in itself considering the risks involved in TANGEDCO’s payment track record and other issues.
Let me know if I am missing something.
Thanks.
Pradeep Palelli
EfficientCarbon
But again, I surely share your enthusiasm in the price of Rs.5.97 per unit because, escalation or not, Solar power will be sold at Rs.5.97 for the first time in India atleast for an year.
Pradeep Palelli
EfficientCarbon