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Home News Power Sector News R-Power loses case against discoms over Krishnapatnam UMPP

R-Power loses case against discoms over Krishnapatnam UMPP

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Delhi HCIn a setback to the Anil Dhirubhai Ambani Group-controlled Reliance Power, the Delhi High Court on 02-07-2012 dismissed a writ petition against a Rs 400-crore penalty notice served by the power procurers of the proposed Krishnapatnam ultra mega power project (UMPP). Following the high court judgement, the procurers would encash the bank guarantee of Coastal Andhra Power Limited (CAPL), Reliance Power's wholly-owned subsidiary. Meanwhile, Reliance Power Ltd (R-Power) has begun arbitration proceedings against 11 power distribution companies (discoms) to push for an increase in tariff from its Krishnapatnam Ultra Mega Power Project (UMPP).

 The company responded by filing an appeal against the single judge order. Andhra Pradesh distribution companies, however, dismissed the filing, saying it was not in consonance with the power purchase agreement. The power procurers would encash the available amount of Rs 320 crore by invoking a bank guarantee, besides initiating action to collect the balance amount demanded from the company, P Shiva Rao, legal advisor to AP Transco told media. "The court has dismissed the petition in our favour, maintaining there are no grounds to grant interim injunction," he said.

The notice was served by 11 power procurers, led by Andhra Pradesh Southern Power Distribution Company Limited. In a statement issued on Monday, RPower said it had filed for arbitration against the procurers of power to be produced from its 4,000 Mw UMPP at Krishnapatnam in Andhra Pradesh. "Reliance Power has filed its statement of claim in the Indian Council of Arbitration, under the Indian Arbitration and Conciliation Act, 1996, against the 11 procurers from its Krishnapatnam UMPP," the company stated.

Rao, however, said the statement of claim filed by the company before the council was not valid, as the Central Electricity Regulatory Authority had the sole jurisdiction in deciding rates. In an earlier response to a petition filed by Reliance Power before the Delhi High Court, the state power utility had maintained the stance, arguing there was no element of force majeure, as claimed by the company.

CAPL has maintained the change in regulations in Indonesia, which was beyond its control, had hit all projects run on imported coal in the country.

The company had won the project in November 2007, quoting a rate of Rs 2.33 a unit for 25 years. Power was scheduled to be supplied to four distribution companies in Andhra Pradesh, five in Karnataka and one each in Tamil Nadu and Maharashtra. The UMPP has been stuck, after the Indonesian government decided to link the price of coal with the international market last year. This made imported coal more expensive. Since then, Reliance Power has sought a rise in the rate of power to be supplied from Krishnapatnam. However, the Centre has said procurers and power producers should resolve the matter among themselves.

In March, the Delhi High Court had granted a stay on a notice for penalty of Rs 400 crore by procurers of power from Reliance Power's Krishnapatnam UMPP.

The company said it had sent a dispute resolution notice for an amicable solution to procurers in March, but did not receive any response. It said the statement of claim had cited relevant clauses under the power purchase agreement signed between CAPL and the procurers. The agreement provides for resolving disputes by arbitration, under the Indian Arbitration and Conciliation Act, 1996. "CAPL has already sent a dispute resolution notice dated March 13 for an amicable solution under the power purchase agreement between the parties. The procurers had not responded to CAPL's notice. Today's filing is continuation of that," the company said.

A senior official of the state energy department said it was in no hurry to decide on the company's statement of claim. "We will take a view when it comes to us," the official said. However, officials of the legal department in AP Transco maintained there was no case for arbitration, as the Central Electricity Regulatory Commission had sole jurisdiction in rate matters.

A statement issued by R-Power on 02-07-2012 said it was forced to move the Indian Council of Arbitration (ICA) since the 11 discoms belonging to the four state governments of Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra, had failed to respond to the dispute resolution notice it had sent them in March. ICA is the apex dispute resolution services body authorized to appoint a panel of arbitrators to resolve contentious issues. R-Power is developing a 4,000 megawatts (MW) UMPP project on the coast of Andhra Pradesh that will be fuelled by coal imported from Indonesia. In September, the Indonesian government changed the pricing policy for exported coal, and linked it to the international spot market price. The move made Indonesian coal dearer by around by 150%, according to a claim by industry lobby group Association of Power Producers (APP) in a presentation to the power ministry. The move also nullified the long-term coal procurement contracts signed by Indian companies such as Tata Power Co. Ltd, Adani Power Ltd, R-Power, and JSW Energy Ltd. Around 15,000 MW of power projects with approximate investment of Rs.75,000 crore based on imported coal were affected by the Indonesian decision.

Source- Business Standard


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