1. JSPL slaps Rs 123 crore ‘liquidated damages’ notice on BHEL for project delays

JSPL slaps Rs 123 crore ‘liquidated damages’ notice on BHEL for project delays

Navin Jindal-promoted Jindal Steel and Power (JSPL) has slapped a R123-crore notice on the state-run power equipment maker BHEL, citing delays in execution of projects at two units of JSPL's 2,400 MW coal-based plant at Tamnar in Chhattisgarh.

By: | Updated: March 21, 2016 6:50 AM
The heavily leveraged JSPL is believed to be in talks with the largest private power developer Adani Power to sell its Tamnar super thermal power plant to ease its mounting debt that currently stands at over Rs 32,600 crore. The heavily leveraged JSPL is believed to be in talks with the largest private power developer Adani Power to sell its Tamnar super thermal power plant to ease its mounting debt that currently stands at over Rs 32,600 crore.

Navin Jindal-promoted Jindal Steel and Power (JSPL) has slapped a Rs 123-crore notice on the state-run power equipment maker BHEL, citing delays in execution of projects at two units of JSPL’s 2,400 MW coal-based plant at Tamnar in Chhattisgarh. JSPL invoked the contractual clause titled ‘liquidated damages’.

BHEL is executing the boiler, turbine and generator (BTG) packages for all the four units of the plant. While it commissioned the first and fourth units on schedule, there were delays of four and eight months respectively in case of the second and third units. The total contract value, with each BTG unit costing Rs 150 crore, is Rs 600 crore, which means if the JSPL’s claim is honoured, BHEL would lose 20% of the business.

“We are examining the claim by the client (JSPL) and we would likely to ascertain if our estimates for liquidated damage varies from the client’s demand,” an official at BHEL told FE on condition of anonymity, adding that the PSU was willing to negotiate the matter with the power company.

Another official at BHEL said that such claims often arise due to delays on the part of the client as well as other factors like delays in injection of full load power to the regional grid, a requirement for declaring a unit as commissioned. However, he admitted that BHEL has historically faced some problems in documenting delays due to reasons beyond its control.

BHEL lacks experience in negotiating the claims made under liquidated damage as it has mostly worked with state-run power developers like NTPC and DVC which don’t normally claim such damages.

Both these companies have been facing headwinds due to the slump in the power sector. While JSPL has been facing severe cash crunch due to lack of long-term power purchase agreements and subdued power price in the merchant market, BHEL has faced weak order inflows and incurred losses in the last quarter.

The heavily leveraged JSPL is believed to be in talks with the largest private power developer Adani Power to sell its Tamnar super thermal power plant to ease its mounting debt that currently stands at over Rs 32,600 crore. The company’s debt was downgraded to ‘default’ status by CRISIL recently.

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  1. A
    Ashish
    Mar 21, 2016 at 4:21 am
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    1. V
      V.SRIDHARAN
      Mar 21, 2016 at 9:07 am
      This is unfair on the part of JSPL. During the execution of the Project by BHEL at TAMNAR proper siding was not provided by JSPL. Also there were innumerable number of blockades of BHEL goods by local people (mafia) for jobs with BHEL and their contractors. Not but not the least JSPL has not been good pay master. There have been delays in release of payments. Hypothetically uming the delay entirely due to BHEL, Rs123 cr is very high considering rs2400Cr order value and also NOT as pef contractual terms. The newspaper contention of "BHEL has little experience of FIGHTING demands from clients citing project delays: is NOT TRUE. At BHEL customer is held esteem position (as compared to any PSU) but when it comes to contractual terms they politely oppose citing various customer delays and dela inputs last but not the least delays in payments causing delays in meeting supply deadlines. This aspect is well proved by the fact (as mentioned in this article) that NTPC & DVC do ot levy LD. Not that there had no delay in NTPC/DVC projects but fact remains that they are innumerable delays from customer side right from the day one for e.g project clearances, Rly siding/ storage yard coal handling facilty etc to mention a few. Power plant is big project involving so many agencies and unless proper co-ordination is done CUSTOMER project slippages occur. NTPC though is a central power utility organisation , is one of the toughest customer for BHEL both on technical and execution wise.
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