The Uttar Pradesh electricity regulator may not yet have made up its mind on Lanco Infratechs request to rework tariff for its 1,200-MW Anpara C project, but the government seems to have decided on taking up the companys offer to sell it.
We want to either buy out the project on our own or with NTPC. We will go through all the pros and cons before making the final decision, a state energy sector official told FE. The government is conducting informal talks with Lanco even as it challenges the unilateral termination of the power purchase agreement, he added.
What is the states rationale for buying out the project Anpara C was Indias first project awarded under tariff-based bidding in 2006. Lanco won the bid quoting the lowest-ever tariff of R1.91/unit. It would be difficult for the power regulator to increase the tariff in a competitive bid project. In that case, the only option is for us to buy out the project, said a UPPCL official.
The finances would work out like this: At the cost at which it was set up R4 crore per MW the acquisition would cost a total of R4,800 crore, he said.
Since Lancos R4,000-crore loan will get be transferred to us, only the balance R800 crore needs to be arranged. The state government could either lend this money or have a partnership with NTPC. If we alone buy it out, UPRVUN will run it. In case of a partnership, NTPC can run it and provide the entire power to UP. We are talking to NTPC and hope to come to a decision soon, he said.
The region around Sonebhadra district, where the Lanco project is located, is home to many thermal power stations, including three of NTPC and two of UPRVUNL, the official added. It will be easy for us to manage it as several projects there. Coal too would cease to be a problem, he claimed.
When contacted, an NTPC official said while the company was not averse to the buyout, there was no formal offer from the UPPCL yet.
Earlier, UP had to sell its thermal power plants at Unchahar and Tanda to NTPC in lieu of unpaid power dues.
It may be mentioned that prior to filing the tariff hike petition with UPERC, Lanco had served termination notices to the four discoms of UPPCL on January 24. The project has become commercially unviable with the average plant availability factor of around 40% over past more than 270 consecutive days the termination notice had stated, adding on account of the complete inaction on part of the buyers (discoms) and UPPCL in remedying the alterations highlighted by it, Lanco exercises its right under Clause 13.6 of the PPA and terminates the PPA. The buyers are requested to enter into discussions to commence the process of buyout of the Anpara C plant in accordance to the terms laid out in Schedule 10 of the PPA.
Though UPPCL still needs to study the legal aspects before making the investment, an expert said the buyout would help the state's power sector. The entire infrastructure of Anpara C is in place. It is also one of the cheapest sources of electricity to the state. Lancos frequent project shutdowns due to non-payment of dues by UPPCL or non-availability of coal, is not in the interest of the power sector, he said.