Five major operational issues were announced just this month amongst players.
Examples of coal-plant cancellations and stranded-asset realizations are coming thick and fast, according to the Institute of Energy Economics and Financial Analysis (IEEFA), as just this month, India has seen five major announcements:
The state of Uttar Pradesh cancelled bids for 3.8GW of coal-fired power priced at Rs4.16/kWh due to surplus power supply. In an illustration of the rate of change evident across India, these tenders were only raised in September 2016. Essar Power put its 2GW Gujarat power plant in for a debt recast plan, citing unviability of its import-coal-fired power plant.
The state of Gujarat formally cancelled plans for a 4-GW import-coal-fired power plant on the Kathiawar peninsula. 2.3GW of coal-fired power plants in Odisha planned by BGR Energy Systems and Kalinga Energy & Power were cancelled.
A 2,400 MW coal-based power plant proposed by Odisha Thermal Power Corporation Ltd stalled after its coal supply plan fell over as uncompetitive. That followed the cancellation of a 2-GW import-coal-fired power plant by Tata Power in Odisha in January 2017.
Here's more from IEEFA:
This month, the state of Gujarat has seen curtailed supply of electricity from various coal-fired power plants, including from Adani Power due to its unviable imported coal scheme. While the state government is worried about a possible supply shortage, one of the growing strengths of India’s electricity system is surplus power, and Gujarat has been able to buy into lower-cost traded supply.
IEEFA acknowledges that with investment already sunk and with the long-life nature of energy system infrastructure, coal will be used for decades to come. But we see a rate of growth now that will be nothing like previously forecast.
Transition will not be painless. As management warns that Adani Power’s 4.6GW Mundra import coal-fired power plant is no longer competitive, similar risk is being faced by Tata Power’s 4.0GW Mundra plant. These plants will curtail production rather than lose money with every unit of production. But beyond the write-off of some US$600m of contingent profits the Supreme Court of India has ruled that Adani Power is no longer entitled to, IEEFA would point to the likely conclusion that a US$1-2 billion writedown of the the US$5bn plant is in the cards. A written-down plant can be reconfigured to be viable, particularly if cheap (US$20/t) domestic coal can be procured without exorbitant rail freight costs. This is a plan the Government of India is working toward.
It is telling that the Bhadla Phase IV solar park in Rajasthan is developed by Adani Renewable Energy, a division of Adani Enterprises Ltd, the owner of the Carmichael proposal and sister company to Adani Power, owner of the potentially stranded 4.6GW Mundra imported coal-fired power plant.
Adani Renewables has newly emerged as one of the leading solar and wind developers in India, as well as one of the largest solar module manufacturers. The Adani Group is evolving its strategy to align with the new realities, albeit with inevitable collateral damage along the way in a story similar to those that have unfolded around European power utilities like E.ON and RWE.
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