NTPC seeks long-term pricing comfort from Petronet LNG for its Kayamkulam power plant in Kerala

With four state governments conveying their unwillingness to sign power purchase agreements (PPAs) with NTPC Ltd for its Kayamkulam power plant in Kerala, the biggest power generator in the country has sought long-term pricing comfort from Petronet LNG Ltd.

NTPC has told the LNG importer it cannot sign a gas sales purchase agreement (GSPA), since the cost of power works out to be high and states are unwilling to sign PPAs at that rate.

Signing of a GSPA with NTPC is crucial for PLL’s Kochi regasification terminal, some 120 km away from the power plant, since it provides a surety of offtake to the marketers of regasified LNG (RLNG). “Discussions are still going on, since a larger part of regasified LNG is likely to go to power plants in that area. GAIL is putting up pipelines,” PLL managing director A K Balyan told Business Standard.Besides Puducherry, NTPC had approached Tamil Nadu, Andhra Pradesh, Kerala and Karnataka for selling power from its 1,030-Mw, Stage II of the project. “We have some understanding with GAIL (the marketer of RLNG) and PLL to get us gas for Kayamkulam but this will become effective once we are able to sign PPAs. We have not signed (GSPA) because at that very high rate of LNG, that for power is coming to Rs 8 a unit. Beneficiary states do not want to buy power at that price,” said NTPC chairman and managing director Arup Roy Choudhury.

NTPC has also offered RasGas of Qatar a stake in the power plant with the hope of getting an assured supply. Balyan said Indian customers were keen on a long-term contract but Qatar was trying to hold on, to see that the phase of global over-capacity of LNG was over to ensure a better price.PLL has a long-term supply contract with RasGas for supply of 7.5 million tonnes LNG annually. This gas is currently being received at its Dahej terminal in Gujarat. For Kochi, 1.4 mt LNG supply is expected to start in 2014 from the Gorgon field in Australia.

NTPC buys around 15.5 million standard cubic metres a day (mscmd) of gas, of which 4-5 mscmd is RLNG and the remaining domestic gas. At an average cost of around $7 per mBtu, the power rate works out at Rs 5 a unit. NTPC is currently buying RLNG at $10-16 per mBtu from PLL’s Dahej terminal, depending on whether it is spot or long-term LNG. The delivered price of Gorgon LNG would work out to be almost double the current RLNG price.