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Home News Power Sector News Tata Power follows Reliance - seeks higher rate for Mundra UMPP

Tata Power follows Reliance - seeks higher rate for Mundra UMPP

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Tata PowerTata Power chairman Ratan Tata on 24-08-2011 said they were seeking a higher rate for supply from its under-construction 4,000 Mw ultra mega power project(UMPP) at Mundra in Gujarat's Kutch district. It is in discussion with the Union government on this. Earlier, Reliance Power-arm, Coastal Andhra Power Ltd. (CAPL), has stopped work at its Krishnapatnam Ultra Mega Power Project citing rise in the cost of Indonesian coal that the project is to run on.  This has caused big blow to the much hyped UMPP projects of central government.

The revision is being sought due to changes in Indonesian government policy on export of coal from that country, that has pushed up the fuel cost. Mundra is supposed to use Indonesian coal.

Addressing the company's annual general meeting, Tata said he did not blame the Indonesian government for benchmarking exported coal to commercial rates.

Answering queries from shareholders, he said rate revision apart, they were examining options. One was to set up a power plant in Indonesia itself, if the Mundra revision didn't happen.

Tata Power managing director Anil Sardana said alternatives, if the Mundra revision didn't happen, included experimenting with low-grade coal from various sources, to keep the plant running. "We are already doing this at our Trombay power plant," he said.

As for setting up power plants in Indonesia, "If there is lesser meaning in bringing the coal back here, we might use it there," Sardana said. Tata Power owns 30 per cent stake in three coal mines of Bumi Resources in Indonesia.

According to government officials, provisions under the power purchase agreement (PPA) with RPower / Tata Power, do not allow rate rise that is influenced by change in policies by foreign governments.On the likely impact of this issue on the stock price, Tata said, "We are taking up the issues with the government and the share prices will stabilise once there will be a solution." The stock fell 4.5 per cent on Wednesday to Rs 1,036 a share on the Bombay Stock Exchange.

Tata also answered queries on the company's Mumbai distribution business, where shareholders asked about continuing to use Reliance Infrastructure's network for supplying power. "We have regulatory advice to use the existing wires for wheeling power. We are not doing anything that the law does not enable us to do," Tata said.

The standard Power Purchase Agreement (PPA) for projects such as the UMPPs excludes fuel from the force majeure provisions. Fuel, instead, is mentioned under Clause (a) of Article 12.4 of the PPA that lists out the ‘Force Majeure Exclusions'. Besides, the ‘Non-natural Force Majeure events' specified in the PPA does not include actions by a foreign government.

Article 14 of the PPA, which deals with the termination of contract on account of default by the power seller (in this case CAPL), lists out the "abandonment by the seller or the seller's construction contractors... for a continuous period of two months" as a condition for triggering the clause, provided if "such a default is not rectified within 30 days from the receipt of first notice from any of the procurer or procurers".


Source- Business standard


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