A fairly hectic consultation meeting happened yesterday at TANGEDCO (TNEB) for bidding for 1000 MW of solar projects in TN.
Crowd was amazing, something along the lines of what one would have expected at a top-line movie premiere (sans the pretty women, it was a men’s show alright). Such was the crowd that the hospitable folks at TANGEDCO had to arrange for two sessions instead of one, as originally planned.
(The minutes of the meeting are now available on the TEDA web site as well – this is the official version, and has some more specifics mentioned – See here . Also given are Solar Radiation Data for TN & Indicative Power Evacuation Facilities Available in Various TN Districts)
Update Dec 6 2012: Tender document released, see here for more (AP 1000 MW tender document from here) Also: (Excerpts from the Pre-bid Consultative Meeting for AP Solar Policy 1000 MW Power Purchase Held on Dec 14 in Hyderabad)
1. Tender for bidding for 1000 MW will be out in a week
2. 360 days from the time of tender , they are looking at 1000 MW being operational.
3. Minimum 1 MW, no upper limit (NO UPPER LIMIT? Yep, that’s what the TANGEDCO CMD re-re-repeated)
4. 20 year PPA (and not 25?)
5. A rather interesting way to bid. You bid for a price that will be increased by 5% every (compounded) year until the 10th year. The price will remain the same as the 10th year price for years 11-20.
Everyone bids, and based on the lowest bid price, TANGEDCO will fix a common price for all allottees.
(A bit confusing over here on what that actual price will be – will it be the lowest price or an average? Also, the exact process of allotment is not clear, will it be a 2-step process, if TANGEDCO fixes the price based on first bids? Isn’t there a chance that I would like to back out if the price TANGEDCO fixes after the bids were submitted is lower than what I had bid for and I don’t wish to go lower? How does this process accommodate this?)
An update on bid prices & process: I understand that the way it is planned is as follows. All the prospects bid. Based on the lowest bid (L1), TANGEDCO asks all (other than the lowest bidder presumably) to match L1. Whoever matches will be allotted. This is the intended process. Of course, there are complexities here. What happens if not enough people are willing to match L1? What happens if too many people (beyond 1000 MW) are willing to match L1? TANGEDCO has prepared answers for these questions, from what I understand. Perhaps they will clarify all these in the pre-bid meeting.
6. Payment security through a revolving Letter of Credit (this should bring a sigh of relief from most folks alleviating revenue uncertainty)
7. TANGEDCO will ensure that evacuation facilities are not a problem – in fact, he read out the additional capacities available in each TN district and it came to 1110 MW, so I presume that is the math they are working with. (Those who wish to know the evacuation capacities available in the various districts can get these data from Chief Engineer, Non Conventional Sources, TANGEDCO)
8. Minimum net worth for bidder – 1 Cr/MW
9. Identifying land and putting up a dedicated feeder line are the responsibilities of the developer. TANGEDCO can put up the dedicated line, but the cost is to the developer.
10. There will be a pre-bid meeting soon after the tender is released.
OK, the above were the salient points.
A picture of the audience for one of the two sessions for the consultation meeting – overflowing interest?
Other points of interest
- Release of Tender Bid Document – Day 0 – Time A (0 from start)
- Submission of Bids – Day 30 – Time B (30 from start)
- Qualification of Eligible Bidders and LoI – Time C = Time B + 30 days (60 from start)
- Completion of Load Flow Studies – Time D = Time C + 30 (90 days from start)
- Financial Closure – Time E = Time D + 30 (120 days from start, 60 days from LoI)
- Project Completion – Time F = Time E + 240 (360 days from start, so you get 8 months for implementation)
SPO Solar Tariff and Its Relation to Bid Price
What will be the solar tariff for all those wishing to buy solar power from TANGEDCO to meet their SPO? This price will be determined, by the TNERC, based on the final contract price offered by TANGEDCO (which in turn will depend on the bid prices) and to this will be added transmission charges and other applicable costs to arrive at a final solar tariff.
Division of responsibilities between TANGEDCO & TEDA
TANGEDCO will do the following:
- Signing of PPA (buying and paying for the power)
- Ensure payment to generators through Letter of Credit
- Provide evacuation infrastructure
- Undertake load flow studies
Rest will be taken care of by TEDA.
Some key questions/concerns I and some others had in mind
- Lack of upper limit - doesn’t sound like a great idea – seems to go against the spirit of ensuring that a large number of aspirants participate
- One price for all - this is different from the reverse bidding seen in other states, where I get the price I bid for. Thus, not sure how exactly the process will work.
- Net worth requirement - The net worth requirement mentioned was Rs 1 crore/MW, quite liberal in my opinion (most other states have specified Rs 3 crore/MW as the requirement), something that wouldn’t sit well with lenders. While this does encourage participation from a wider range of investors, it increases the risk for the lender as parties with much lower creditworthiness could be applying for loans. This feeling of insecurity among lenders is something that the sector could do without at this point, since securing debt financing is hardly a walk in the park. One might argue that this should not matter for pure project financing, as then only the merits of the project, and not that of the lender, is critical for repayment-worthiness. But from what we have seen, there have not been too many cases of pure project finance (without recourse) in renewable energy projects.
Other than these, the powers-that-be appear to have thought things out quite well. It was nice to see them addressing the key pain points very well, viz
- Payment security
- Evacuation concerns
- Transparency of the entire process
But they surely had not thought out one point - the crowd that would gather for this. They had estimated 100, it would have been more like 400. Sign of things to come?
Wish to comment or have questions?
Do you have questions on this? Please drop these in the comments. I will make sure I will consolidate them and send it to TANGEDCO & TEDA. No, I don’t work for TEDA or TANGEDCO, but I presume they might prefer if someone consolidates and sends all the questions. So, let’s say this is only an attempt at being nice