Its 26% unit RKM Poweregen Pte Ltd could face difficulties securing coal supply for its four 360MW coal fired power plants in India due to be operational by end 2012. This is despite media reports that Coal India Ltd recently agreed to sign fuel supply agreements with power producers in India including RKM Powergen. The subsequent three power plants will commence operations on a three month interval, with all four operational by 2014.
CIL’s board of directors had finally agreed to sign the FSA after PM Manmohan issued a directive to CIL to ensure an adequate supply of coal for the power supply. While the announcements by Manmohan may seem like a positive development as it shows the Indian government to resolve the issue, market observers view it as being deceptively positive. The FSAs have nearly wiped off all the liabilities that CIL will have to bear arising from the potential default in case of a coal supply shortfall. To further aggravate matters, the penalty clause would only be triggered after three years from the date of signing the FSAs, which is a disadvantage to power producers in India .
Concerned are that RKM Powergen would have to import coal from international market should local supply fall short. Another key risk is the imposition of a ceiling price on short term tariff rates.
Some quarters have raised concerns over a potential disruption in coal supply to the coal fired IPPs following the Indian government’s directives that CIL must sign fuel supply agreements with new power projects that come on stream by end 2012.
Under the FSAs, should CIL fail to supply 80% of the contracted coal to the new power stations, it would only have to pay 0.01% of the value of the shortfall as a penalty as opposed to the 10% stipulated previously. Te clause will come into effect three years after the signing of the FSAs.
Apart from the FSAs, CIL is also facing pressure from the opposition which claims that the huge discount attached to the priced of coal contracted to the IPPs translates into a loss of huge national income.
CIL, 90% owned by the government, is the largest coal producer in the world in terms of capacity and contributes to some 90% of coal production in India .
Mudajaya’s officials said that there is not need to be concerned about the huge provisions for Powergen as the project is on track to come on stream by end 2012. Based on its latest annual report, Mudajaya has invested some rm446 million in Powergen.
Apart from the coal supply from CIL, Powergen has a coalmine concession, which can supply up to 100 million tones of coal.
The stakes are too high for power projects like Powergen’s to fall through, more so when the Indian government has an interest in the IPPs.
The first phase of the Powergeb IPP project, which consists of one 360 MW plant, will be commissioned by end 2012. Cash flow will be recognized phase by phase in 2013 and will see the full impact by 2014.
Powergen entered into a 20 year Power Purchase Agreement with the Chhattisagarg State Electricity Board for the IPP project, commencing from the day the first power generating unit begins commercial operations.
It has also signed a PPA with FTC India Ltd for its second and third power generating units for a 12 year contracted supply of 700MW, round the clock electric power output.
The fourth unit will fall under merchant agreements, where power will be supplied at market rates under spot arrangements instead of a long term agreement.
Powergen would be a good source of cash flow for Mudajaya which has over rm4 billion worth on contracts in its order book.
Still concerns expressed by some are warranted due to the flip flop by India ’s administration.
CIL’s board of directors had finally agreed to sign the FSA after PM Manmohan issued a directive to CIL to ensure an adequate supply of coal for the power supply. While the announcements by Manmohan may seem like a positive development as it shows the Indian government to resolve the issue, market observers view it as being deceptively positive. The FSAs have nearly wiped off all the liabilities that CIL will have to bear arising from the potential default in case of a coal supply shortfall. To further aggravate matters, the penalty clause would only be triggered after three years from the date of signing the FSAs, which is a disadvantage to power producers in India .
Concerned are that RKM Powergen would have to import coal from international market should local supply fall short. Another key risk is the imposition of a ceiling price on short term tariff rates.
Some quarters have raised concerns over a potential disruption in coal supply to the coal fired IPPs following the Indian government’s directives that CIL must sign fuel supply agreements with new power projects that come on stream by end 2012.
Under the FSAs, should CIL fail to supply 80% of the contracted coal to the new power stations, it would only have to pay 0.01% of the value of the shortfall as a penalty as opposed to the 10% stipulated previously. Te clause will come into effect three years after the signing of the FSAs.
Apart from the FSAs, CIL is also facing pressure from the opposition which claims that the huge discount attached to the priced of coal contracted to the IPPs translates into a loss of huge national income.
CIL, 90% owned by the government, is the largest coal producer in the world in terms of capacity and contributes to some 90% of coal production in India .
Mudajaya’s officials said that there is not need to be concerned about the huge provisions for Powergen as the project is on track to come on stream by end 2012. Based on its latest annual report, Mudajaya has invested some rm446 million in Powergen.
Apart from the coal supply from CIL, Powergen has a coalmine concession, which can supply up to 100 million tones of coal.
The stakes are too high for power projects like Powergen’s to fall through, more so when the Indian government has an interest in the IPPs.
The first phase of the Powergeb IPP project, which consists of one 360 MW plant, will be commissioned by end 2012. Cash flow will be recognized phase by phase in 2013 and will see the full impact by 2014.
Powergen entered into a 20 year Power Purchase Agreement with the Chhattisagarg State Electricity Board for the IPP project, commencing from the day the first power generating unit begins commercial operations.
It has also signed a PPA with FTC India Ltd for its second and third power generating units for a 12 year contracted supply of 700MW, round the clock electric power output.
The fourth unit will fall under merchant agreements, where power will be supplied at market rates under spot arrangements instead of a long term agreement.
Powergen would be a good source of cash flow for Mudajaya which has over rm4 billion worth on contracts in its order book.
Still concerns expressed by some are warranted due to the flip flop by India ’s administration.
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