Cheyyur UMPP: financial plan will make electricity unaffordable

In early January 2015 the Ministry of Power, Government of India (GoI) terminated the bid process for the proposed 4000 MW Ultra Mega Power Plant (UMPP) in Cheyyur, Tamil Nadu. The project is referred to as Plant Cheyyur in this report. The bid process was terminated because seven out of eight applicants, including Indian and international private power companies, pulled out of the competition citing unfavorable bidding rules and their inability to secure bank financing. According to published reports, the Ministry of Power has elected to rework the bid specifications and rebid the project in late 2015. Based on a detailed analysis of Plant Cheyyur’s business assumptions, this paper concludes that the power plant will place an upward push on tariff rates. Additional reworking of the bid documents may make the project more attractive for investors, but will make it even more financially fraught for consumers and cash strapped utilities. Any new program design must either pass along greater costs to the residential, industrial and agricultural users or necessitate greater governmental costs (subsidies).