Two weeks after Tata Power made the offer to sell 51% stake in its loss making Mundra Ultra Mega Power Project to Gujarat Urja Vikas Nigam for Rs 1, the state discom is uncertain of its position to conclude the deal. A senior GUVNL official told FE, that, “CGPL (the holding company for Mundra UMPP) has written a letter to us but beyond that we have not thought or done anything.” The official also declined to indicate if they are in talks with other procurers – Maharashtra, Rajasthan, Haryana and Punjab – to share the debt burden that would be part of the deal. A Maharashtra State Electricity Distribution Company official said, they have not spoken to concerned parties yet, but it could be a possibility that the procurers may divide the loan as per the percentage of contracted capacity from Mundra, though it’s not the final position. Gujarat Urja Vikas Nigam receives 47.5% of the contracted capacity from Mundra, Maharashtra State Electricity Distribution Company gets 20%, Punjab State Electricity Board receives 12.5%, Haryana Power Generation Corporation and Rajasthan receive 10% each.
On June 22, Tata Power proposed to sell 51% stake in Mundra UMPP to GUVNL for Rs 1. As per the offer the procurers can purchase power at higher tariff to address the under-recovery of fuel costs at CGPL, while Tata Power will continue to operate the plant under the O&M contract and provide all required support to the project.
Tata Power has accumulated losses of Rs 6,547 crore at CGPL, while its paid-up equity is Rs 6,083 crore. In a project outlay of `17,900 crore, CGPL has a total outstanding long-term loan of Rs 10,159 crore. The company also took an additional `4,460 crore loan to meet cash requirements of CGPL.
Manoj Kumar, managing partner and founder of Hammurabi and Solomon, a Delhi-based legal firm said, the entire event should be seen in a context of power purchase agreement as well as securities and loan agreements between the lenders. “An agreement of one discom cannot be seen as obligation for others. Unless the discoms see a commercial value they cannot be obliged to buy at a higher tariff. Besides, the lenders on both side will have to sort the inter lending issues through inter creditor agreements. Mechanisms such as imposition and recovery of pledged shares, who will take charge on the pledged shares will have to be worked out between the company and discom lenders. Any unhappy lender can topple the cart,” Kumar said.
Kumar also says if everyone agrees to the deal say, the discoms, the lenders and the power producer, it would have the potential risk to invoke the Competition Commission Act. Since the ultimate sufferer would be the consumer for no fault of theirs.