Sasan Power Ltd.

Abstract

Sasan Power project was part of Governments bold new program of adding 50000 MwH generation capacity by means of setting up 12 new Ultra Mega Power Plants to meet the increasing energy demands of the economy. Initially Sasan Power Ltd was incorporated as a Special Purpose Company (SPC), wholly owned by the Power Finance Corporation (PFC). The SPL was responsible for activities like site selection, obtaining coalmines wherever applicable, acquiring land, obtaining various clearances & approvals to expedite the developments. Located at Pithead, the coal-fired plant would have capacity of 4000 MwH using super critical technology. The PFC carried out an International Competitive Bidding process and awarded SPL to the Reliance Power who quoted the lowest levelised tariff of Rs. 1.19 per unit. Subsequently Reliance Power had built and commissioned Sasan Power Plant and would supply electricity as per the long term Power Purchase Agreement with 14 procurers. In UMPP program, the Ministry of Power recognized the need to move away from cost plus approach for tariff determination to further encourage private sector investment. The program had many distinctive advantages as compared to traditional Independent Power Plants using subcritical technology in terms the scale, efficiency, consultative process used for development of the plants. However the UMPP dream have soured in more then one-way ranging with the tariff determination, rising fuel cost, delays, cost escalations, environmental clearances for mining, fuel procurement and so on. The case provides opportunities for understanding the development in power sector and the issues the Sponsors and the regulators faced in implementing the ambitious Sasan Ultra Mega Power plant. The case illustrates the unique opportunities created in the Indian power industry by changes in regulations; technology and structure of power plants. The formations of shell companies that would transferred to private parties to built own and operate ultra mega power plants strategically located at ports or pithead. Long term Power Purchase Agreements with multiple utilities would be signed. The program marked a new era of use of super critical technology, ultra mega scale to significantly lower the cost of energy resulting in to very competitive fixed levelised tariffs as against the cost plus tariff used traditionally. The issue is to estimate the value – attractiveness of the investment and associated opportunities and why did the program fail?