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Change in business model for mega power projects proposed

The Ministry of Power, based on the recommendations of a high-level panel, has proposed setting up of two special purpose vehicles, one for operations and the other for infrastructure, in order to set up ultra mega power projects.

To overhaul the existing system which has failed to attract developers, the Government had decided the review the norms under a committee headed by the former Chief Vigilance Commissioner Pratyush Sinha.

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The recommendations of the committee have now been shared for public comments, which are expected by September 1.

The recommendations propose that the nodal agency handling the bidding for the UMPPs will set up an operating SPV, through which the successful bidder will develop the project and an infrastructure SPV, which will be handed over to the state distribution utility.

The captive coal block along with the mining rights and land required for construction of the power station will be under the infrastructure SPV. The infrastructure SPV will lease the coal block, mining rights, and land to the operating SPV.

Both the SPVs are required to be incorporated before the issuance of the request for qualification by the nodal agency, which till now has been Power Finance Corporation.

Prior to the RFQ, land requirement for the captive coal block will need to be identified and procured by the infrastructure SPV. The land should be enough to source coal for the power station for a period of five years from the commissioning of the first unit.

The next stage of land acquisition would be prior to the issuance of the request for proposal. Here, the land required for the project will be acquired and transferred in the name of the infrastructure SPV. Statutory green clearances for the power station will also be obtained at this stage.

Prior to the signing of the power purchase agreement or transfer of the operating SPV to the winning bidder, whichever is later, the infrastructure SPV shall transfer the critical land for the power station on a lease basis.

Further, all responsibilities related to acquisition of the critical land from here on in shall be the responsibility of the operating SPV. The remaining land will also be acquired and leased to the operating SPV in the same manner.

Similarly, the critical land for the coal block – enough land source coal to enable the power station to operate for five years — will be transferred to the operating SPV prior to signing of the power purchase agreement.

Requirement of critical land for both the coal block and the power station will be determined by the state electricity distribution utility.


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