New PPA after 5 years: Madhya Pradesh approves pact with Adani Power

After a hiatus of five years, a new long-term power purchase agreement (PPA) for thermal power has been finalised, with the regulator of Madhya Pradhesh approving the 25-year contract signed between Pench Thermal Energy (MP), a unit of Adani Power.

After a hiatus of five years, a new long-term power purchase agreement (PPA) for thermal power has been finalised, with the regulator of Madhya Pradhesh approving the 25-year contract signed between Pench Thermal Energy (MP), a unit of Adani Power, and MP Power Management Company (MPMCL), the state electricity board.

According to sources, Adani Power quoted the lowest bid of Rs 4.79/unit (Rs 2.90/unit as fixed charge and Rs 1.89/unit variable charge), outbidding JSW Energy and MB Power.

In September 2019, MPMCL had invited tenders to procure electricity on a long-term basis from a new 1,320 MW power station to be set up in the state through public-private partnership.

Adani Power will have to build the new plant in Pench and start supplying power within 54 months from the appointed date. For this project, it will receive coal from Coal India’s Western Coalfields under the central government’s Shakti scheme.

After the last long-term PPA was concluded in Kerala in 2015, a number of such bids were postponed or cancelled. Uttar Pradesh’s invitation for 3,800 MW, Gujarat’s 3,000 MW and Delhi’s 400 MW are among those that did not fructify. Long-term PPAs currently constitute 90% share of the power procurement portfolio of discoms. The remaining 10% is traded through traders, direct bilateral between discoms and through the power exchanges.

As many 34 projects, totalling 40,130 MW are currently stressed in the country, out of which 21,614 MW is without any PPA. “The government of MP for optimising the cost of power procured has decided to set up a new plant in the state,” MPPMCL had said when investors requested it to consider taking power from already commissioned plants. The investment of around Rs 12,000 crore, tax revenues, ancillary businesses, job creation and savings from inter-state transmission charges were also cited as reasons for building a new plant.

Including renewable — which are intermittent in nature — the state has tied up about 21,000 MW through long-term PPAs. In FY20, its peak demand was 14,886 MW, but the state believes it is in need of long-term power from FY27 onwards.