Power - Coal Auction Guidelines on Expected Lines :: Edelweiss, link

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The Ministry of Coal has notified the approach paper detailing guidelines for preparation of the tender document to auction coal mines as per Coal Mines (Special Provisions) Ordinance, 2014, for public consultation and seeking comments. A couple of key conditions entailed in the approach paper for bidding are: (1) a bidder cannot bid for a coal mine more than 150% of his requirement either individually or via JVs; and (2) any surplus coal extracted beyond the annual requirement will be sold to Coal India (CIL) at the bid price or CIL notified price, as the case may be. The document expects the entire allotment of all coal mines to be completed within 4 months. The government has solicited comments on the approach paper till December 22, 2014. The terms and conditions are a step in the right direction and largely in line with the government’s intent.

Draft guidelines for auction process

As expected, the 2 stage (technical and financial) e-auction process will be different for power and non-power (steel, cement and other captive) end user plants-forward bidding for non-power where the bidders quote price higher than floor price (highest bid price is the winner); reverse bidding for power where bidders quote price lower than ceiling price (lowest bid price is the winner) to ensure minimum impact on power tariffs. Only the top 50% of qualified bidders in the technical stage (descending and ascending orders for non-power and power, respectively) will be allowed to participate in financial bids. Non-power to pay 10% of the intrinsic value of the mine (calculated on NPV of cash flows) upfront. Floor price is to be calculated by dividing rest of NPV value across annual payments over extractable coal in INR/t (not less than INR150/t).

• For cost plus PPA, the bid price to be used as new fuel price for the energy cost in the tariff.
• For case-1 bids, energy charge to be changed to reflect the bid price (provided it is lower than current energy charge in the tariff) under change in law clause of the PPA.
• For untied capacity, only 20% to be allowed on merchant; however, at additional reserve price (to be calculated based on intrinsic value not lower than INR150/t).

Further, any future revision in CIL prices will not impact bid prices of blocks already auctioned since escalation is already provided for in existing guidelines. To ensure seriousness of participants and timely development of blocks, guidelines require companies to furnish bid security of 2% of intrinsic value of coal mine and performance security (if selected) of 14% of peak capacity x bid price of year. Finally, surplus coal in excess of annual requirement, if mined, to be sold to CIL at the bid price or prevailing notified CIL price.

LINK
https://www.edelweiss.in/research/EdelFlash-Power--Coal-Auction-Guidelines-on-Expected-Lines/27856.html