Latha: Is this something which will affect all the power companies that have bid below the reserve price or bid negative or will it be a variable impact?
A: We have done an average computation for all the bids that have happened, of course the impact will be different depending on what is the price you bid depending on the location of the mine, cost of mining which varies from player to player and mine to mine.
Latha: Some of them already have power purchase agreement (PPAs); some of them don’t have PPAs. Those who are going to enter into PPAs obviously it is going to be competitive bidding or you can factor in something in terms of your fixed cost. Do you think that they can get away with redesigning their PPA?
A: Given that there are significant amount of untied capacities. As per our analysis we are looking at close to 22-25 gigawatts of untied capacity that are there into the system and all the capacities which are actually working with domestic coal be it linkages as well as captive coal, they would need to have 85 percent of their tie-up through the PPA route and only 15 percent under the merchant route. So given that backdrop there is a significant amount of player who want to tie-up for PPA and given that on the PPA supply front you are not likely to see a very large chunk going forward, so effectively whatever is going to be there in the market, you are likely to see quite aggressive bidding over there given that 22-25 gigawatts of capacity is yet to be tied up.
Sonia: Have you done any specific analysis on individual companies. Can you tell us exactly what the impact would be on a company like Jindal Steel and Power (JSPL) whose bid was very aggressive?
A: We will not want to go into individual companies right now.
Latha: As you are saying all these companies which have bid for coal at negative prices will desperately want to get into PPAs. Most of the discoms are still in taters as far as their finances are concerned. So are we going to be in a situation where they will have the coal but no one is buying their power?
A: It is going to be quite challenging and that’s why we have said given that the kind of cost structure that is there, you would need to at least load 65 paise per unit on your fixed cost on an average for the bidders here, so given that backdrop unless you are able to tie that up you are going to face difficulty on your financial front.
Latha: You are not naming names but do you think that in such a scenario you are very much on the verge of downgrading the debt of some of these companies?
A: The economics of the projects and the whole background and the tie-ups will have to be seen, so it depends on what players are actually able to get in terms of the PPAs. So post that the scenario will be clear.
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