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RE bids: Coal India marks entry in solar; NTPC remains competitive; JSW Energy wins big in wind

In the latest round of auctions conducted by GUVNL (Gujarat discom) to set up 500MW grid-connected solar PV projects, Coal India (CIL) made a surprise entry. Out of nine participants, the winners included NTPC, Sprng Energy, CIL and Tata Power Saurya quoting Rs2.2/kWh for a cumulative total of 430MW, and SJVN quoting Rs2.21/kWh for 70MW. With CIL’s entry in the renewables auction space, the competitive environment around bids, especially those conducted by financially sound discoms, is expected to heat up further. The latest bids witnessed higher tariff compared to the historic low of Rs1.99/kWh reached during GUVNL’s bids in Dec’20, due to increase in module / panel as well as commodity prices. Further, in the recent SECI-conducted wind auctions, JSW Energy won LoA for 450MW at Rs2.78/kWh and Adani Green for 300MW at Rs2.77/kWh. We remain positive on NTPC and CIL.

* GUVNL’s solar auction witnesses large participation: Five developers were declared successful in the latest round of bidding conducted by GUVNL for its 500MW Phase XII grid-connected solar PV projects in Gujarat: Sprng Energy (120MW at Rs2.2/kWh), NTPC (150MW at Rs2.2/kWh), Coal India (100MW at Rs2.2/kWh), Tata Power Saurya (60MW at Rs2.2/kWh) and SJVN (70MW at Rs2.21/kWh). Other participants included Aljomiah Energy, Ayana, Renew, and Juniper Green.

* Tariff increases due to levy of BCD on module imports from Apr’22 and higher commodity prices: In order to scale up domestic manufacturing and reduce India’s dependence on imports, MNRE’s proposal to impose 40% basic customs duty (BCD) on imported solar modules and 25% BCD on solar cells w.e.f. 1 st Apr’22 (without grandfathering bid-out projects till 9th Mar’21) was accepted by the ministry of finance. The impact of this development on module pricing by suppliers, as well as the recent rally in metal prices globally, has resulted in 10% rise in solar tariffs, which had hit the lows of Rs1.99/kWh during GUVNL’s Dec’20 auctions.

* Wind bidding restarts after SECI successfully conducts 1.2GW auctions; JSWEL wins big: JSW Future Energy, a wholly-owned subsidiary of JSW Energy, has received LoA to set up 450MW wind capacity in SECI’s 1,200MW ISTS-connected wind power projects (tranche-X). The cost of the project is estimated at Rs25bn-26bn at an expected IRR of ~13%. JSW’s bid at Rs2.78/kWh was among the four successful bids, the other three being: Adani Renewables at Rs2.77/kWh for 300MW, Ayana RE (300MW) and Evergreen Power Mauritius (150MW) at Rs2.78/kWh. PPA is in progress with Rajasthan.

* NTPC’s strength continues to aid its competitiveness: With the latest success, NTPC has won 1,510MW of solar bids in FY21 – 350MW in Gujarat, 470MW in Rajasthan, 90MW in Kerala, and 600MW in Andhra Pradesh (currently stayed by HC). It has also signed MoUs with five states for setting up 17GW at UMREPPs [Gujarat (4.75GW) and Maharashtra (2.64GW) already signed]. NTPC’s balance sheet strength continues to drive its competitiveness in RE bids.

* CIL’s entry marks its stated decarbonisation intent; may compete on a similar scale as NTPC: During recent investor interactions, CIL indicated its intent to diversify with an aim at decarbonisation. With this foray, CIL has converted its intent into action. Further, with similar balance sheet strength to NTPC, CIL is expected to be a strong competitor in solar auctions going forward.

* RE space to heat up further: We expect the 5GW IREDA CPSU scheme auctions to be conducted before the end of Mar’21. The Standing Committee on Energy in its 17th report on ‘Action Plan for Achievement of 175 GW Renewable Energy Target' submitted to the Lok Sabha on 19th Mar’21 has asked MNRE to work on mission mode to achieve the target successfully and made several recommendations to achieve the same. We expect this to stir up and expedite the RE auction landscape in the near term.

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