Published On:March 5 2014
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New norms may lead to higher tariffs for upcoming UMPPs: India Ratings.

Tariffs for the Tamil Nadu and Odisha Ultra Mega Power Projects (UMPPs), currently under bidding, will be substantially higher mainly because the risk matrix in the new guidelines has shifted from fuel to capacity charge risk, India Ratings said recently.

According to the guidelines, bidding will be done on capacity charge, which comprises return on equity, interest on loan capital, depreciation, interest on working capital, operation and maintenance cost, cost of secondary fuel and special allowances in case of renovation and modernisation of a thermal power plant.

'The risk matrix in the new guidelines has shifted from fuel risk to capacity charge risk. The risk on fuel charge has reduced by fuel cost pass-through. However, risk on capacity charge (fixed cost) has increased by a possibility of cash- flow mismatches as developers would now have to quote a single base year tariff only,' the rating agency said.

India Ratings and Research believes tariffs for the Tamil Nadu and Odisha projects will be substantially higher than the previous round of UMPP bidding.

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