‘New bidding norms may not boost power capex’
The latest norms governing the bidding for mega power projects is unlikely to revive investments in the power sector, says Credit Suisse India Research.
“We expect limited bids to be floated on this model in the near-term as domestic coal deficits would restrict bidding based on linkage coal, and the pass-through norms for captive coal are stringent and cost of power generation from imported coal based projects is high,” said Amish Shah and Abhishek Bansal, analysts at Credit Suisse India Research.
Despite the Government mandating procurement of equipment from domestic players under the new case-II norms, we do not expect any meaningful revival in the order-flow outlook for players such as BHEL and maintain our negative view, they said in their report on Tuesday.
The developer quoting the lowest capacity charge would win the bid under these norms. Of this, 40 per cent of charges are expected to be operation and maintenance costs and escalate at wholesale price index.
About 60 per cent of capacity charge (towards depreciation, interest expense and RoE) will remain fixed for project life, indicating back-ended returns for developers.