The Uttar Pradesh Rajya Vidyut Utpadan Nigam (UPRVUN), the company handling thermal power stations in Uttar Pradesh, has shot down the NTPC’s proposal to take over the UP government’s 50% equity share in the 1,320-MW Meja power project in Allahabad. In its initial response to the NTPC’s proposal to take over UPRVUN’s equity in the project, UPRVUN has said that the proposal is not in the interest of either itself or the state of Uttar Pradesh. In a reply to the energy department’s directive to examine the effectiveness of NTPC’s proposal, the UPRVUN has contradicted NTPC’s claim in its proposal that if UPRVUN gives up its stake, the project cost would come down, thus reducing the the cost of electricity. “The management of Meja project is already in the hands of NTPC. Thereby, its argument that UPRVUN giving up its share of equity will help bring down the cost of the project and thus have a bearing on lowering of power tariff does not seem logical,” the note said, adding that the project has already finalised an LoA with South Eastern Coalfields for providing 5.59 MTPA of coal.
Stressing the fact that land acquisition is a major bottleneck for infra projects, which often leads to delays and cost escalations, UPRVUN says that 1118.6 hectares of land have already been acquired for the project. Apart from the Stage I of the project, on which 2×660 MW is being currently developed, plans are in place for developing 2×660 MP (Stage II) later, in which too, UP has a share. “There would be no need to acquire additional land for Stage II,” the letter stated, adding that after the Land Acquisition Act 2013 came into force, acquiring land has not only become four times costlier, but it is also fraught with many legal issues.
“Moreover, if UPRVUN retains its share in the Meja project, its overall asset value will rise, due to which it would be easier for it to raise cheaper loans from various financial institutions,” the note said, adding that the profit from the sale of power from this project would also benefit UP, as it has a 50% share in it. According to the Gadgil Formula, UP’s share from the project is 69.4%, which is 916 MW. Pointing this out, the letter says, “UPPCL can afford to make delayed payments to UPRVUN for this power if the state retains its share in the project. Otherwise, it would need to pay the NTPC upfront,” adding that due to these points, it is advisable that UP retains its share in the project through UPRVUN.
The Meja project is a 50:50 joint venture between NTPC and UPRVUN. The MoU for the project was signed in 2007, when Mayawati was the chief minister. The first unit of 660 MW of the project was synchronised with the main grid last week and commercial operations are expected to start in December. The second unit is expected to be ready by June next year. NTPC is rather keen to acquire the Uttar Pradesh government’s 50% equity in the project as it would bring the project entirely under NTPC’s balance sheet and that would make it easier to raise loans. This is NTPC’s second shot at acquisition.
Recently, it acquired the Chhabra power plant in Rajasthan, taking over the Rajasthan government’s stake in the 1,000-MW project.
Last month, Meja Utpadan Nigam Pvt had signed a loan agreement for `6608 crore to finance capital expenditure of 1,320-MW project from Power Finance Corporation, the proceeds of which would be utilised partly to refinance costlier loan obtained from a consortium of banks and financial institutions.