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Home News Power Sector News Adani Power to move Supreme Court against APTEL order

Adani Power to move Supreme Court against APTEL order

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Supreme CourtIn what may become a test case for tariff of Tata Power's Mundra and Reliance Power's Krishnapatnam ultra-mega power projects caught in a contractual bind due to the increase in the international coal price, Adani Power plans to move the Supreme Court soon against the Appellate Tribunal for Electricity's  recent judgment declaring illegal the private developer's move to unilaterally terminate power purchase agreement (PPA) signed with the Gujarat Urja Vikas Nigam (GUVNL).

The GUVNL has the mandate to buy bulk power on behalf of government-owned power distribution companies in Gujarat. Sources said that Adani Power is preparing to file a petition in the Apex court soon to challenge GERC's order. "Our legal division is seized of the matter and will take a call soon," a senior executive of Adani Power said.

The private developer has decided to approach the civil court after its appeal was recently rejected by the apex electricity regulator, Appellate Tribunal for Electricity. Adani signed PPA with GUVNL in 2007 to supply 1,000 mw power from its Mundra power project where coal cost is non-escalable. The developer had quoted fuel cost for the project on the basis of a long-term contract signed by it for supply of coal from Indonesia. But later the Indonesian government revised its coal pricing methodology in 2010, sending haywire the developer's fuel cost calculations for the project.

As much as 14,000 mw imported coal-based capacity being developed through tariff bidding route is facing the prospect of the default on power supply contract after key coal exporting countries like Indonesia and Australia made changes in their coal pricing methodology and taxation.

Of this, about 7,000 mw capacity, which also includes Tata Power's Mundra UMPP and JSW Energy's Ratnagiri, is at operational stage, according to Association of Power Producers, a representative body of private power project developers.

The developers are not in position to honour their power purchase contracts, which do not allow passing on increase in fuel cost to electricity buyers, without taking a big hit on their bottom lines.

"We had secured ourselves by tying up the coal from Indonesia, mirrored against what we had bid, with a 55% fixed price portion and 45% that could be escalated," says Anil Sardana, MD, Tata Power. To ensure returns, the tariff would have to be R2.9 per unit compared with R2.33 per unit currently, the company has said in a letter sent to the power ministry recently.

"Changes in Indonesian regulations on coal exports and its impact on Indian projects affects the entire power industry," Reliance Power spokesperson told FE.

The union power ministry has tried to wash its hands off the issue by saying this is a matter between developers and electricity buying states. However, states like Gujarat, where assembly polls are due next year, are in no mood to deal with the exigency of tariff revision for these projects, fearing political backlash. So the stage is set for litigation.

"The government has to create a mechanism where they can listen to developers and decide on merit. Otherwise, developers will have no option but to go for litigation which will be a long-drawn process," Ashok Khurana, director general, APP, said. The association has taken up the matter with the union power ministry.

Source- Financial Express


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