A Good Start: Results of the first auction under SHAKTI

Results of the first auction under SHAKTI

The maiden auction under the coal linkage auction policy, Scheme for Harnessing Koyla (Coal) Transparently in India (SHAKTI), was a major success with the entire quantity of coal on offer being sold out. The first auction was conducted in September 2017 for independent power producers (IPPs) with power purchase agreements (PPAs) but without a long-term coal linkage. These IPPs were mostly obtaining coal through Coal India Limited’s (CIL) e-auctions, wherein prices and volumes vary on a regular basis.

A cumulative quantity of 27.18 million tonnes per annum (mtpa) of coal was booked in the auction. A total of 9,000 MW of thermal generation capacity received coal under the auction. The major players that participated in the auction included Adani Power Limited, GVK Power & Infrastructure Limited, the Bajaj Group, the GMR Group, Reliance Power Limited, and KSK Mahanadi Power. These IPPs have secured a firm linkage that will meet 70-80 per cent of their coal demand for a period of 25 years. This round of auction is expected to result in generation of over 47 BUs per annum and a saving in tariff of about Rs 1.25 billion per year for a period of up to 25 years.

Auction details

The process for the first auction round began in August this year with CIL inviting expressions of interest from potential bidders by August 19, 2017. It received a total of 31 applications, which were scrutinised by the Central Electricity Authority (CEA). Following this, 14 bidders were found eligible to participate in the auction on September 11-12, 2017. Of the eligible bidders, 10 bidders with a cumulative installed capacity of 9,044 MW participated in the auction.

As per the bidding methodology, the IPPs were required to provide a discount over the PPA-determined tariffs to secure coal. The bidder offering the highest discount on the existing tariff had priority in choosing the coal supply source. Coal grades from G4 to G13 were offered.

Of the total coal quantity secured by the bidders (27.18 mtpa), about 6 mtpa was bid at a discount of 4 paise per unit, 9.07 mtpa at a discount of 3 paise per unit, 9.22 mtpa at a discount of 2 paise per unit and the remaining quantity was bid at a discount of 1 paisa per unit.

Adani Power was the biggest beneficiary in the auction with two of its subsidiaries, Adani Power Maharashtra Limited and Adani Power Rajasthan Limited, together securing over one-third or 9.9 mtpa of the coal quantity on offer. The subsidiaries operate the 3,300 MW Tiroda thermal power plant (TPP) and the 1,320 MW Kawai TPP respectively. The companies secured coal from South Eastern Coalfields Limited (SECL), Mahanadi Coalfields Limited (MCL), Western Coalfields Limited and Northern Coalfields Limited (NCL).

KSK Mahanadi Power Company Limited, which operates a 3,600 MW TPP in Chhattisgarh, was another major beneficiary, securing about 6.8 mtpa of coal from SECL’s Korba, Mand Raigarh and Korea Rewa mines, and MCL’s Ib Valley and Basundhara mines. Meanwhile, Lalitpur Power Generation Company Limited, which operates the 1,980 MW Lalitpur TPP in Uttar Pradesh, secured about 5.6 mtpa of coal from SECL (Korea Rewa), NCL, Central Coalfields Limited, MCL (Talcher, Ib Valley and Basundhara mines) and Eastern Coalfields Limited.

Other winners included GMR Kamlanga Energy (1.5 mtpa of coal), GVK Power (1.7 mtpa), ACB India (200,000 tonnes per annum), Inland Power (67,400 tpa) and Sai Lilagar Power Generation (376,200 tpa).

The way forward

The first auction of coal linkages under SHAKTI was a win-win affair for both IPPs and discoms. While the IPPs have benefited through an assured supply of coal at fixed prices, the discoms have secured power supply at lower tariffs.

In the coming months, the Ministry of Coal is expected to announce an auction for IPPs without PPAs. The ministry issued a notice on October 6, 2017, stating that all such power producers (with or without commissioned capacities) can participate in the proposed auction, wherein IPPs would be required to bid at a premium above the notified price of coal. The detailed timelines are expected to be announced soon.