India's Thermal Plants May Become Economically Unviable


NEW DELHI: India’s ultra thermal plants, designed to run on foreign coal, may no longer afford to do so economically in the future, says a top financial analyst with a leading U.S.-based institute. This can be seen in the case of India’s two largest thermal power projects in Gujarat’s port town of Mundra — Adani Power’s 4.6 GW and Tata Power’s 4 GW plants. Both are no longer competitive owing to nearly doubled price rise of coal from Indonesia since their planning and incapability to hike tariffs, says Tim Buckley, Director of Energy Finance Studies Australasia with the Institute for Energy Economics and Financial Analysis (IEEFA).

Adanis’ Mundra plant has previously been disclosed to be operating with 100 pct imported coal from Indonesia while Adani Power has been operating at a net loss, and has been doing so for the last seven years, Buckley told IANS in an email interview.

The Mundra plant is by far Adani Power’s largest and is the intended destination for the majority of its thermal coal imports from the Carmichael proposal in Australia under Adani’s “pit to plug” strategy. After an adverse Supreme Court ruling disallowing any tariff revision to compensate for higher cost of imported coal, Adani Power discontinued 1,250 MW of power supply from Mundra due to unviability of running these units on imported coal.

“These plants will curtail production rather than lose money with every unit of production. It is a likely conclusion that a $1-2 billion write down of Adani Power’s $5bn plant is on the cards. As it stands, this plant is a clear stranded asset,” said Buckley.

Adani Power has approached state-run Gujarat Urja Vikas Nigam (GUVNL) to bail out its Mundra plant. According to reports, one option for GUVNL is to take a majority stake in the plant post a write-down of equity. Likewise, Tata Power has written to the central government proposing to sell 51 pct equity of its ailing asset for a nominal fee of Re 1, citing challenges faced by the company since Indonesian coal prices doubled.

Read Also:
Nasscom Identifies Key Job Roles In Big Data Analytics
Indian-Americans Gear Up To Welcome PM Modi

Source: IANS