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With much fanfare, TANGEDCO conducted the pre-bid meeting for potential bidders for the 1000 MW solar power purchase by the utility.

The Big Question

The real question at the end of the pre-bid meeting at TANGEDCO on 19th Dec was – how many will really bid for the tender and how much will they bid in total?

To answer that question, one needs to consider the key aspects that might deter some serious prospects from bidding:

  1. Land identification – identifying large tracts of land in suitable areas is an important factor, and this selection is constrained by the substation capacity limits. Given that there are hardly a couple of weeks for companies to submit a bid and only a few further weeks for them to prove land ownership, companies keen on bidding for large capacities but which do not own land in the state are going to consider this a bit risky. To that extent, there might be lots of 5 MW and 10 MW bids rather than a handful of 100 MW bids
  2. Time available to submit bids – a company from Italy stated that Italy is closed from 21st of Dec until 7th of Jan 2013. And this will mean they cant submit the bid. While TANGEDCO maintains that there is enough time for enough companies to bid to satisfy 1000 MW of capacity, the point is that such a short timeframe is likely to make some serious players  (especially from abroad) not to bid as well. In the end, TANGEDCO is the loser, because it does not want 1000 MW of power purchase alone, it wants it at the best possible price. How will it be sure it is getting the best possible price if all the best possible companies are not able to bid?

To me, the above two factors pretty much highlight the key weaknesses I see in the tender process, and both of them, as you will observe, have to do with time.

And that should not be surprising! More the time, less the uncertainty in a domain that has scarcity of intelligence. Given an optimal amount of time under such a scenario, players can make wiser decisions. I, along with many of the attendees yesterday, don’t think enough time has been provided throughout the process. The argument that enough players would still bid is logical but sub-optimal. Do you want good enough players to bid, or do you want enough good players to bid?

Frankly, I don’t understand the reason for the hurry. What if the entire process gets completed in Feb 2014 instead of Dec 2013? More important, which is more critical? Artificial deadlines set according to the whims of those in power, or an optimal timeframe estimate that is required to complete a project with high quality standards? For strange reason, TANGEDCO seems to have chosen the former over the latter.

I only hope TANGEDCO listens to the voices that were clearly heard by everyone yesterday. And these were opinions from companies such as Tata Solar and Welspun, who know much better than TANGEDCO about solar power plants, each having put up tens of MW of such plants. Their voices should have been given more respect that was given yesterday.

The rest of what happened at yesterday’s pre-bid meeting was just commentary. All the same, some stuff you might want to have from the commentary: (I scribbled down most of these, and my handwriting being what it is, quite likely there are some errors over here…will be glad to correct them if they are pointed out)

  • Grid failure – what about deemed generation? – An important question, the answer to which was a bit muddled. If one were persistent enough to try figure out the most likely answer – there will be no deemed generation
  • Why 20 years and not a 25 year PPA that has been the norm elsewhere? Answer: They had considered it and decided that a 20 year PPA was good enough; that is, if things work out well for 20 years, it should not matter for them to extend it by aonther 5 years. Hmmm…
  • Tangedco has already provided a breakup of SS-wise evacuation facilities. The data is available on the TANGEDCO web site. The utility will also provide details of the voltage of these evacuation facilities voltage levels . They just mentioned that these belong to the 11/33/110 KV categories, Southern TN typically has more 11 KV and Western TN more of 22 KV
  • There were many blokes who asked about the PLF and what is the tolerance limit provided if the energy generated was much higher (or lower) than what a 1 MW could generate (essentially, what was the acceptable band for PLF. The people on the stage were persistent and determined to misunderstand the question every time it was asked. Funny, it was fairly clear that these folks were bright and knew what they were talking about (at least most of the time), but they simply refused to see the point on this one.
  • What would the two main qualification criteria? Do you have the requisite net worth/ What is the location you wish to put up the power plant?
  • Quite a few questions on evacuations. TANGEDCO was very confident every time a question on this topic was asked – they said “trust us, we will help you out on whatever evacuation problem you have” In fact, the CMD of TANGEDCO went to the extent of saying if someone were putting up a huge solar park that required a 400 KV substation, TANGEDCO will consider helping him out.
  • Repeated requests for extension of timelines, especially for bid submission. Repeated assertions from TANGEDCO that all was well and timelines were not a problem at all.
  • A question from a Solaire Direct representative, in which he cited a Rajasthan case to say that the central govt had to pass a guideline for the PPA to be valid. As this was not passed, he said Rajasthan had trouble. Tangedco did not agree with this viewpoint and said they had taken all the relevant people including TNERC on board
  • Are imported modules allowed? Yes. TANGEDCO will not just be technology neutral, it will also be country neutral. Sweet words for a neighbouring country we all know so well.
  • To questions on the evaluation criteria, TANGEDCO CMD said, “I am interested in only substantially important tender parameters” and he was quite clear that he was willing to overlook / place less weightage on trivial parameters (such as the need for a service tax number etc). Fair enough.
  • There was a good question from a company that was already putting up a 5 MW SPV plant under the REC scheme. The gentleman asked if he could use the substation for this bid as well. I don’t think the folks on stage understood the question well enough, as a result there was no clear answer.
  • Question: After signing PPA, we will need much more than a month to identify land. 1 month is too little. Answer: I am sure you guys can do it within a month (one land broker used the problem of land identification as an opportunity and creatively marketed his land banks right there!)
  • Question: Has this PPA been approved by TNERC? Ans: Yes, TNERC has been taken on board
  • To a question on whether they will consider the bids with trackers separately, the answer was No, they were technology neutral, and all they needed from you was a number for the purchase price.
  • Draft of PPA – to be uploaded shortly
  • Draft of the LC – The draft of the LC will be provided; This will be as per banking regulations as followed by banks
  • There was also an observation from TANGEDCO that the Tirunelveli substations might not be able to evacuate much from solar, as thermal and wind have already fully loaded the system.
  • There were some trivial questions on whether the EMD could be in the form of banker’s guarantee instead of in the form of DD/Bankers draft/cheque? The answer, as expected, was a No (By the way, the EMD can be converted into security deposit)
  • Questions once again on land acquisition, and the answer once again was the same. Nopes, the govt will not be able to do much (But they mentioned there are companies planning for solar parks, so blokes could contact them perhaps?)
  • Question: Acc to the tender, 50% of the 20 year maintenance costs for bay extension need to be paid upfront. To some, this sounded unfair. Why 50% upfront when it is going to be spent over a long period of 20 years? Life’s like that, appeared to be the answer.
  • Question: Can we change the land location later (guess within the district)? Answer: Yes, but load flow needs to be done again.
  • Question: Can we exit without forfeiting the EMD? Yes. You will forfeit only if you back out after having been awarded the allocation
  • Question: Can I connect to a substation that has been constructed for wind? Yes, depending on availability of capacity
  • Question: What should be mentioned for the land identification in the bid? Village taluk and district should be mentioned
  • Question: Can I pump in a 5 MW into a 11 KV line?
  • Answer: This is how things go: 3 MW needs a 11 KV line, 3-5 MW require a 22 KV line, a  10 MW requires a 33 KV line; 10 MW + requires a 10 and above – 110 KV line.
  • Someone had a qn on hybrid generator, Tangedco said it was tech neutral. I doubt they meant it, because this gentleman was asking obviously about solar/wind hybrid!
  • Why only 1 crore net worth required per MW? “We have taken a pro developer attitude and thus NW requirement of just 1 crore”. Point taken, but just scratching my head whether they also expect a no-upper-limit clause to be a pro developer attitude when it could pit a 1 MW bid price against a 100 MW bid price.
  • Cost of bay extension work – how much? Will this be communicated? There were more than one chap who asked this question. TANGEDCO will soon provide this detail.
  • How much time will it take to pass the bill submitted to TANGEDCO (to the bank)? TANGEDCO appeared to be prepared for this question – or they had good presence of mind. The answer? Approx 1 week from the time the bill is delivered to TANGEDCO.
  • To a question on import duty concessions available, the (obvious) answer was that it was beyond the scope of this tender. Since when was a state government responsible for import duties anyway?
  • There were other minor questions on the financial relationship (in terms of extent of stakeholding) that is required between the parent & bidding company – these are details that will be provided soon

Update: The Solaire Direct representative sent clarifications on the exact legal issue he was talking about in the Rajasthan context:

“1.      The Rajasthan Electricity Regulatory Commission (RERC) had tried to bring in regulations for RE based Power Projects for competitive bidding. The Commission backed out on this front as it was in conflict with the provisions of Electricity Act, 2003, Section 63 which is as given below. You may have a look at the RERC website for the order issued by the RERC  on this issue.
Section 63 – Notwithstanding anything contained in Section 62, the Appropriate Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with guidelines issued by the Central Government.
2.      Under Section 61 of EA, 2003, The Commission creates the Regulations for Tariff and draws power from these Regulations Under Section 62 and awards Tariffs as per Regulations.
3.      In case of Competitive Bidding derived Tariffs, the Commission only endorses the Tariffs derived through bidding process, provided the process is derived based on competitive bidding guidelines Under Section 63.
4.      In case of Renewables, the Central Government has yet to issue the Guidelines and whenever issued those have to be followed appropriately if the tariffs have to be derived through competitive bidding.
5.      Till date, the Central Government has not issued any guidelines. Hence, the whole process may not stand on legal ground.
6.      The Central Government has approached the Court of Law and the matter is subjudiced.
7.      In Rajasthan, RRECL, the State Nodal Agency, has taken a Trading License and will sign the PPA with the Developers and will sign PSA with the State Discoms as an escape route from the above provisions. To make the process successful, you may have to follow that route.”