New power bidding provision trips bankers lending plan

The bidding norms for ultra mega power plants, has run into fresh hurdle with lenders. Banks have written to the power ministry expressing their concerns over proposed provision which they say will disincentivise lenders from investing in the power sector, reports Sumit Jha of CNBC-TV18.

 

Bidding norms for the Ultra Mega Power Project (UMPP) have hit a fresh hurdle and this time with the lenders. Banks like ICICI Bank and State Bank of India (SBI) have written to the ministry expressing concerns of the new proposed norms will dissuade and dis-incentivise these lenders to take part in this sector.

 

The problem area for the bank is, according to new proposed norms the developer and the power producer will not have the ownership of the land on which the plant is located. The distribution companies, who have long-term power purchase agreements (PPAs) with these power producers, will have the ownership of the land. The banks say that this does not provide them with enough security to lend to these developers.

 

The banks want the power ministry to stick to the current standard bidding documents (SBD) norms and do not make any change to it because this would be instrumental in making these lenders both domestic and foreign not take part in the sector.

 

Although the power minister said that SBD bidding norms have been finalized and will be brought before the cabinet but with hurdle will result in more passage of time. Close to 16000 megawatt of capacity addition rides on these documents, on these bidding norms.