CERC allows compensation for Tatas, Adani power projects

Written by Press Trust of India | New Delhi | Updated: Feb 23 2014, 01:06am hrs
CERCIn a major relief for Tata Power and Adani Power, electricity regulator CERC has allowed them higher. Reuters
In a major relief for Tata Power and Adani Power, electricity regulator CERC has allowed them higher tariff and total compensation worth over Rs 1,100 crore for their Mundra power projects fired by imported coal.

The much awaited rulings would help mitigate the losses suffered by the two Mundra projects, located in Gujarat, due to price rise in Indonesian coal that is used to fire these plants.

Tata Power is running the 4,000 MW Mundra Ultra Mega Power Project (UMPP), while Adani Power is implementing the 4,620 MW Mundra plant.

The Central Electricity Regulatory Commission has allowed higher tariff as well as compensation of Rs 329.45 crore for Tata Power's Mundra plant, as per a 112-page order.

It has directed 5 states that procure power from the plant to pay the compensation for the period from April 1, 2012 to March 31, 2013. Besides, a compensatory tariff of Rs 0.524 per kWh has been granted for the project from the period beyond April 1, 2013.

Power from this Mundra project is supplied to Gujarat, Maharashtra, Rajasthan, Haryana and Punjab.

Describing the order as "balanced, Tata Power said in a statement that it provides partial relief to Mundra UMPP.

In a separate order, running into 133 pages, CERC granted nearly Rs 830 crore compensation for Adani Power's 4,620 MW Mundra plant.

Gujarat has to pay Rs 420.24 crore while Haryana has to shell out Rs 409.51 crore as compensation from the commissioning date till March 31, 2013, the order said.

Further, for compensatory tariff for period starting from April 1, 2013, a formula has been decided upon by CERC.

Adani Power has inked two power purchase agreements with Gujarat - 1,000 MW each - and PPAs with two Haryana utilities for 1,424 MW. Rest of the electricity generated from the plant is sold on merchant basis.

This order pertains to one PPA (February 2, 2007) with Gujarat Urja Vikas Nigam Ltd for 1,000 MW and two PPAs (August 7, 2008) with Haryana utilities -- Uttar Haryana Bijli Vidyut Nigam Ltd and Dakshin Haryana Bijli Vidyut Nigam Ltd.

"The Commission shall review the compensatory tariff after a period of three years unless the compensatory tariff is withdrawn earlier in terms of our order," CERC said in both the rulings that have come on petitions filed back in 2012.

The orders, finalised yesterday, were released today.

Noting that the compensation should be paid in 36 equal monthly instalments, CERC in both orders said the "parameters shall be used for calculation of compensatory tariff on monthly basis, w.e.f. April 1, 2013 till the hardship on account of Indonesian regulations persists".

Last April, CERC had allowed hike in tariffs for the project and also set up a panel to work out the compensatory tariffs to mitigate the impact of higher overseas coal prices.

The panel, headed by eminent banker Deepak Parekh, had submitted his recommendations to CERC last August.

On sharing of actual profit from coal mining operations in Indonesia, the order on Tata Power plea said it should be calculated after taking into account total incremental revenue after payment of taxes and royalty as per Indonesian norms, among others.

The petition at CERC was filed by Coastal Gujarat Power Ltd (CGPL), a wholly-owned subsidiary of Tata Power which is implementing the 4,000 MW Mundra project.

Observing that the petitioner should share the burden of hardship to some extent, CERC said adjustment in the tariff towards sacrifice of Return on Equity (ROE) shall be equivalent to 1 per cent of ROE. This would based on equity investment of contracted capacity, as on the Scheduled Commissioning Date (SCOD).

For Adani Power case also, CERC has said the company should share the burden of hardship to some extent.

"...the adjustment in the tariff towards sacrifice of ROE shall be made equivalent to 1 per cent and 0.25 per cent of ROE for Gujarat and Haryana respectively, based on equity investment of respective contracted capacity, as on the SCOD".

In both cases, the relevant amount would be adjusted from the compensatory tariff payable to the generator by the procurers.

Reacting to the order, Tata Power said the decision of CERC was awaited to make Mundra viable, which had got impacted due to no fault of the firm, but due to change of law at Indonesia as also other coal exporting countries and an unprecedented rise which could not have been perceived.

Further, the company said the order would help resolve a major impasse affecting imported coal based power projects in the country that got impacted due to uncontrollable extraneous factors.

"Mundra UMPP has been since inception delivering to the full potential of Mundra across the five beneficiary states albeit with tremendous fiscal pain and this challenge of keeping Mundra UMPP viable had continued far too long," Tata Power said in the statement.