Adani Power on Thursday filed a petition with the Central Electricity Regulatory Authority (CERC), claiming compensatory tariff of about Rs 852 crore due to costs its 4,620-MW thermal power plant in Mundra (Gujarat) has incurred after changes in coal distribution policies. The move follows the Supreme Court judgment on April 11, which said cost increases due to vicissitudes of policy changes in India would be considered as a ‘Change in Law’ (CL) event and empowered the CERC to determine the relief that power producers are entitled to because of such policy changes. The SC ruling had said the “purpose of compensating the party affected by such change in law is to restore, through monthly tariff payments, the affected party to the economic position as if such change in law has not occurred.” The court was, however, clear that the CL clause in power PPAs can’t be invoked in the event of change in foreign laws and rejected the claims of Tata Power and Adani Power for compensatory tariffs for their Mundra units owing to the spike in Indonesian coal prices.
Adani Power had signed power purchase agreements (PPAs) with Gujarat and Haryana in 2007 and 2008, respectively. Prices of power in the two PPAs (of 1,000 MW each) with Gujarat were set at Rs 2.89/unit and Rs 2.35/unit. It signed PPAs for 1,424 MW with Haryana at Rs 2.94/unit. Power to Haryana was supplied from units 7, 8 and 9 of the power plant, which would blend domestic and imported coal on a 70:30 ratio.
The latest petition relates to power supply to Haryana only, which began in August 2012. Power supplied to Gujarat is based on imported coal, which was rendered ineligible for compensatory tariff by the aforementioned apex court ruling.
The company said it was forced to procure high-cost imported coal due to the unavailability of domestic coal. Adani Power has also proposed a compensatory mechanism which is similar to the way CERC had granted relief to GMR Group in 2016 for facing domestic coal shortfall in one of their plants.
The company is also seeking interest for deferred payments and a provisional compensation until the issue is resolved by the quasi judicial body.
Last week the company’s board approved the slump sale of the Mundra plant to its subsidiary Adani Power (Mundra) to source its funding more efficiently for investments in capacity expansion and asset acquisition. Revenues from the Mundra plant in 2016-17 were Rs 11,018 crore and constituted 93.7% of Adani Power’s total revenues.
On May 15, CERC granted Adani Power full compensation for the rise in the cost of electricity generation at Mundra due to increased domestic levies on imported coal. The company had said in the petition that the assorted levies had cost it over Rs 29 crore in just one month in September, 2015.
Adani Power’s consolidated earnings before interest, tax, depreciation and amortisation for FY17 fell 29% to Rs 6,391 crore mainly due to lower recognition of compensatory tariff by Rs 2,002 crore. “Consequent to outcome of the hon’ble Supreme Court judgment, we have engaged with the stakeholders for possible remedial measures for long term sustainability of the Mundra plant,” Adani Power chairman Gautam Adani had said while announcing the full-year results last month.