Surprise! SECI’s ISTS Tender for 1200 MW Gets Bids at Rs 2.54/unit

The tender for the ISTS (Inter-State Transmission System) tranche IV solar projects, that came out in February 2019, has concluded with surprisingly low rates for SECI.  The projects are spread across India and come with the added assurance of SECI ensuring grid connectivity. The tariff ceiling for this tender was set at Rs 2.65/KwH.

As we had reported earlier, the tender had been oversubscribed by 900 MW.

The (L1) tariff of ₹2.54 /kWh was quoted by Ayana Renewables to develop 300 MW of projects.  It was joined by Renew Power, Azure Power and Mahindra Susten with bids at the same rate, although Mahindra Susten bid for 250 MW. Avaada Energy, with a bid at Rs 2.55/kwH for 350 MW, will get only 50 MW following the backfilling approach favoured for this tender.

Thus, despite all the talk of slowdown and cost pressures, not to mention financing pressures, this tender actually beat the previous bid rate of Rs 2.55 for SECI’s last 1.2GW auction.

As reported earlier, a huge factor is the shifting of the risk exposure of power generators to SECI, rather than the state discoms, which seems to have made them a lot more willing to bid at low rates. There is also the waiver of ISTS charges, which would have been worth 10-12 paise in costs per unit.

The success of the tender clearly demonstrates the strong appetite for projects at even low competitive rates, provided critical stress points like payment mechanisms, grid connectivity and land acquisition are taken care of.

More importantly, as some key suppliers in Shanghai SNEC pointed out, orders for equipment etc will only be placed next year for tenders won from now on, by which time, safeguard duty would have expired or be at 15% levels, based on the schedule. With projected further price drops of between 2-3% by then,  developers seem to be confident of sourcing low.