Reliance Industries in a communication to the state government and MSEB has conveyed its willingness to sign the revised PPA which was necessitated following recent changes in the levelised capacity charges, reduction in capital cost and Central Electricity Authority's (CEA) decision to take as 447 mw and not 410 mw as installed capacity mentioned in the original PPA.

Reliance's stand deserves importance when the MSEB chairman Asoke Basak has already announced that the revised PPA will be signed soon after scrutinising all legal aspects.

According to top sources in Mantralaya, Reliance was anxiously waiting for a decision in its favour from CEA on the issue of installed capacity. However, CEA stuck to its stand and said that the installed capacity would be 447 mw andnot 410 mw.

The sources said that Reliance was more concern over the CEA's `adamant' stand especially when the PPA was signed for 410 mw capacity and not for 447 mw and the selection was done through competitive bidding. Incidentally, MSEB had joined hands with the Reliance to take up this issue with the CEA and reiterated that the installed capacity of 447 mw was not the contractual capacity. As per the terms of the PPA, Reliance was obliged to give power continuously under conditions of varying temperatures, change of fuel, varying system parameters and plant ageing effects and also has to ensure 90 per cent plant load factor for the whole term of the PPA.

However, government sources said that there was a catch. To maintain 16 per cent rate of earnings (RoE), Reliance with a capacity of 447 mw will have to produce 2,600 million units by running the unit for 6,000 hours with 68.5 per cent PLF. The company will be able to deliver 398 mw to the MSEB with the 90 per cent efficiency.

In case of 410 mw, thecompany can produce only 2,300 million units by running the unit for 6,000 hours with 68.5 per cent PLF. The company will be able to maintain 16 per cent RoE only with the PLF of 75 per cent. Cost-wise the difference will be as high as Rs 350 crore.

Interestingly, Reliance has heaved a sigh of relief on the state government's decision to increase the levelised capacity charges from Rs 1.41 per unit to Rs 1.48 per unit. The levelised capacity charge should be Rs 1.55 per unit as per the original PPA.

The Reliance during representation to the MSEB and state government had made it clear that the project would become financially unviable if levelised capacity charges will be Rs 1.41. The company had also said that the internal rate of return would decline from 18.5 per cent to 15.92 per cent. With the increase in the levelised capacity charges from Rs 1.41 per unit to Rs 1.48 per unit, the company will be able to maintain the internal rate of return at 17.25 per cent.

The company has also welcomed the stategovernment's decision to provide protection for foreign exchange fluctuations which was not there in the original PPA. This was possible mainly due to the CEA's ruling that the project cost would not exceed Rs 1,411 crore.