ICRA: Amendments Approved To Bidding Guidelines Positive For Wind Power Developers
The Ministry of Power, Government of India has recently notified amendments to the guidelines for award of wind power projects through tariff based competitive bidding process, relaxing the timeline for land acquisition to 18 months (in line with the commissioning timeline) from 7 months earlier. This is a positive for wind power developers who are experiencing significant delays in project execution due to issues like delays in land acquisition and securing transmission connectivity.
Giving more insights on this, Mr. Sabyasachi Majumdar, Group Head - Corporate ratings, ICRA Ltd, says, “This augers well for the developers, given the large delays witnessed in completing land acquisition in many of the recently awarded projects. Further, the other amendments such as providing additional time for revising annual capacity utilisation factor (CUF), lowering the penalty rate for shortfall in generation to 50% of the quoted tariff from 75% of the quoted tariff and allowing sale of power from part commissioned capacity at quoted tariff against 75% of the quoted tariff earlier are also positives for the developers.”
This move by the Government was in view of the significant delays seen in recent past in the execution of projects due to land acquisition issues. Thus, as against more than 12 GW capacity awarded over the past 2.5 years, the actual execution on the ground has been slow with only 2.3 GW commissioned between April 2018 to June 2019. The amendments also provide for commissioning the projects within 18 months from the date of execution of power purchase agreement (PPA) or power sale agreement (PSA), whichever is later, against linkage with only PPA execution date earlier. Further, the Government initiated measures to resolve the issues faced by the developers related to land acquisition and transmission connectivity, by offering incentives in the form of facilitation charge to state governments providing support for land acquisition and fast-tracking projects towards augmenting inter-state transmission infrastructure.
ICRA expects wind power capacity addition to increase to about 3.5 – 4.0 GW in FY2020, supported by the large project awards by the nodal agencies and measures being taken to address some of the key challenges. However, the sector continues to face challenges related to weak counter-party credit profile reflected from deteriorating receivable position in a few states, viability of the bid tariffs at less than Rs. 3 per unit and securing financing in a timely manner for under-construction projects.