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Home News Power Sector News CERC move to reduce tariff may spell trouble for JPVL-JSW deal

CERC move to reduce tariff may spell trouble for JPVL-JSW deal

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CERCIn what could spell trouble for Rs 9,700-crore deal between Jaiprakash Power Venture (JPVL) and Sajjan Jindal-controlled JSW Energy for the former's hydropower projects, the Central Electricity Regulatory Authority (CERC) could disallow a portion of the cost associated with Karcham Wangtoo hydro project.

The Karcham Wangtoo hydro project is a part of the deal between the two companies.

Such a move would lead to downward adjustment in tariff for the project, leading to a possible lower valuation than that arrived at in the deal. The petition filed by JPVL for 2014-19 mentions the cost of the project at nearly Rs 6,900 crore. Sources said that if the CEA pegs the project capacity at 1,000 MW, CERC will have to reduce the project cost proportionately by nearly Rs 1,100 crore, leading to a lower tariff. The tariff for the Karcham Wangtoo project is determined by CERC on cost-plus basis as it was awarded to JPVL without competitive bidding.

Central Electricity Authority (CEA), the authority that grants techno-economic clearances (TEC) to projects, has written to CERC, saying that the project capacity be maintained at 1,000 MW after having determined that the project was running at capacity higher than approved under the TEC granted to the developer. Earlier, the CEA had sent a show-cause notice to JPVL for violating TEC conditions in the Karcham Wangtoo project as the authority suspected that the project was running at 20% higher capacity than was approved.

In November last year, JSW Energy agreed to acquire JPVL's two hydro-power plants -– 300-MW Baspa-II hydroelectric plant and 1,091-MW Karcham Wangtoo plant in Himachal Pradesh. The deal was announced after a similar deal between Reliance Power and JPVL collapsed.

Source- Financial Express


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