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'Merchant power plants' given four years for commissioning

T. Ramakrishnan
The Hindu
17 September 2007

Two plants have been proposed in Tuticorin district

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One each is likely to come up in Cuddalore and Nagapattinam districts

All of them will be coal-based thermal power plants

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CHENNAI: Four 6,000-megawatt (MW) projects, proposed for the first time in the State as "merchant power plants," have been given a four-year time-limit for commissioning.

The State Government early this week sent a communication to promoters of the projects, according to a senior official.

[Unlike traditional utilities, merchant power plants compete for customers and absorb the full market risk. There are no guarantees that they have a minimum off-take of their output. The risk of a merchant power plant is carried on the balance sheet of the promoter concerned].

While two plants have been proposed in Tuticorin district by Chennai-based companies, one each is likely to come up in Cuddalore and Nagapattinam districts.

A New Delhi-based entity and a Bangalore-based company are behind the two projects. All of them will be coal-based thermal power plants and the fuel will be imported.

Explaining the rationale behind allowing the merchant power plants, the official says that the State experiences power shortage particularly during summer. In such times, the Tamil Nadu Electricity Board buys power from States such as Haryana. The cost of power from the merchant power plants is expected to be cheaper than that of power from a plant in Haryana.

While the Board will be under no compulsion to buy power from the proposed plants, the Government has conveyed to the promoters that 25 per cent of power produced by the plants will have to be sold to the Board if the State requires it. In such a case, the TNEB will float bids and opt for the cheaper power. Eventually, the transaction between the Board and the merchant power plant promoters will be subject to the Tamil Nadu Electricity Regulatory Commission's approval.

When the merchant power plant promoters offer the power, the Board will also have the right of first refusal.

The official says that the promoters can sell the remaining 75 per cent of their power to customers in other States/regions if the Board buys 25 per cent.

The State Government will help the promoters secure land and obtain environmental clearance and other approvals.

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