PSEB engineers association to CM-consider all aspects before acquiring L&T power plant

PSEB engineers association to CM-consider all aspects before acquiring L&T power plant

Kanwar Inder Singh/ royalpatiala.in/ Chandigarh

In a representation given to the chief minister of Punjab, Punjab state electricity board engineers association (PSEBEA) has requested to consider all the technical, financial aspects to the proposal given by L&T to sell its 2X700 MW thermal plant Nabha Power Limited (NPL) at Rajpura in district Patiala to PSPCL, keeping Punjab’s interest in mind.

Association president Jasvir Singh Dhiman said, “at the outset we welcome this development. PSEB Engineers’ Association during the last 15 years or so, has been forewarning regarding the adverse effects of privatisation of the Power sector including Generation. To ensure the right mix and competition of state and private sector in power generation to provide reliable, quality and cheap power to the people of Punjab, Association had given its professional advice to the State Government to develop at least one power plant in the state sector instead of  offering  both the new thermal plants at Talwandi and Rajpura  to the private sector. However, the state govt. in its own wisdom overlooked the professional advice. In fulfillment of our bounden duty, through this letter, we explicitly articulate our assessment of this offer.”

He added that “acquiring the power plant would be beneficial to the state only if the value at which it is acquired is diligently evaluated considering all the  present and the future costs.  For this, comprehensive understanding of all the costs involved and hard negotiations are required to be carried out with M/s L&T so that PSPCL/Punjab consumers are not  at disadvantage as had happened earlier at the time of signing of PPAs  with IPPs at Rajpura and Talwandi Sabo.”

Dhiman further said that “it is pertinent to mention that the firm has claimed an exaggerated initial cost of Rs 10,000 Cr for 1400 MW capacity thermal plant and moreover after having received Rs 8000 Cr on account of capacity charges (known as fixed cost in common parlance) from PSPCL since commissioning in 2014, ironically the claimed amount is still Rs 9690 Cr (Rs. 2688 Cr as equity and Rs. 7002 Cr as outstanding debt as on 30.6.2020). If Rajpura Thermal is acquired at above offered value then considering 9% annual interest on loan, the estimated additional burden  to PSPCL over the balance period of PPA is likely to be Rs 7000 Cr to Rs 7500 Cr. vis-a vis fixed cost to be paid as per PPA. This additional burden will further increase if annual interest on loan is more than 9%.”

PSEB engineers association to CM-consider all aspects before acquiring L&T power plant
PSEB Engineers Association

Association general secretary Ajay pal Singh Atwal requested the chief minister” to watch the interests of the consumers, following points need to be considered for finalisation of the proposal:

  1. The investment cost of over Rs 7 Cr/MW claimed by L&T is very much on the higher side. The IPP in its letter has written that equity value is Rs. 2688 Cr and outstanding debt is Rs. 7002 Cr as on 30.6.2020 meaning that the depreciated cost per MW is Rs. 6.92 Cr which is also irrationally higher. Sir, the contemporary plants in other states were built with much less cost. Rajiv Gandhi Thermal Power Project (RGTPP), Khedar, Hisar (2×600 MW) awarded in 2005 for an estimated cost of Rs. 4512 Cr. @ Rs. 3.19 Cr per MW, CLP Jhajjar (2x600MW) was awarded at a cost of ₨. 5700 Cr i.e. @ Rs.4.32 Cr per MW during contemporary time when L&T was awarded Rajpura Thermal Plant whose per MW cost ought to be lower being a higher capacity unit of 700 MW each. The plant is in operation for more than  6 years and a substantial part of capital cost has also been recovered. Thus keeping above in view, a reasonable depreciated value of this plant needs to be considered.
  2. In future, due to more availability of cheaper solar power, coal based plants are going to be at lower merit and running of thermal plant at 85 % Plant Load Factor (PLF) will only be a remote possibility. NPL recovers its full annual fixed cost only at 85% Plant Availability Factor (PAF) and not PLF. PLF during 2019-20 was only 72% although PAF was 86%. PLF of thermal plants would reduce further with availability of more RE power in future. Discounting of lower PLF of Nabha Power Plant in future must also be taken into account.
  3. The Nabha power plant has been awarded at a quoted net Station Heat Rate (SHR) of 2268 kCal/ kWH at busbar. However, from the inputs we got from our sources,  IPP is not able to achieve the quoted heat rate and the net SHR of the plant is above 2300 kCal/ kWH. As even minor variation in SHR has huge monetary implications so exact value of present SHR needs to be ascertained. For this SHR test should be carried out from a reputed third party and price should be suitably reduced if tested net SHR at bus bar is more than 2268 kCal/ kWH. The actual heat rate at part load also needs to be kept in view as the plant shall run on partial load due to wide variation in state power demand between day and night particularly during non paddy season of about 8 months.
  4. The units have already run for more than six years and to rule out the possibility of unusual wear and tear of the equipment, the present health of the equipment and residual life need to be evaluated and considered accordingly.
  5. The fixed cost being paid to IPP covers various expenses such as ROE/ debt servicing/ depreciation/ establishment/ O&M charges, A&G charges, fuel oil costs & CSR etc. and all such items need to be accounted for with due diligence.
  6. The benefit/ advantage of lower fuel cost due to use of better quality coal of the State’s Pachhwara coal mine should be passed on to the consumers of Punjab only and in no way be passed on to the IPP.

PSEB engineers association to CM-consider all aspects before acquiring L&T power plant.The association said “we fervently hope that this time the above views of this professional body shall be kept in view while deciding this matter in the best interest of power consumers of Punjab by acquiring the 2×700 MW Rajpura thermal at reasonable price from M/s. L&T. “