Tata Power and Adani Power have filed separate petitions with the central electricity regulator to seek permission to hike electricity tariffs for their ultra mega and non-ultra mega power plants at Mundra to reflect the increase in Indonesian coal price due to the recent change in law there.
The regulator is expected to club the two petitions for hearing on Thursday as they have both sought permission to hike tariff to pass on increase in Indonesian coal price. This is the first time any developer has approached the central electricity regulatory commission (CERC) for review of fuel cost which is fixed under the power supply contract.
Tata Power, the developer of the Mundra UMPP, has pleaded with the CERC to establish an appropriate mechanism to offset the adverse impact of the unforeseen, uncontrollable and unprecedented escalation in the imported coal price and the change in law by the Indonesian government.
The regulator has also been asked to evolve a methodology for future fuel price pass-through to secure to the project a viable economic condition while building suitable safeguard to pass to power procurer benefit of any reduction in imported coal price.
The petitioner has submitted that it is a Force Majeure event because the escalation in the fuel price for the project is due to change in Indonesian mining law which the developer could not have foreseen.
The petitioner has further said that financial covenants for loans for the project are unlikely to be met as an adverse impact of the coal price increase. As a result, two leading international credit rating agencies, Standard and Poors and Moody?s, have already indicated downgrade of Tata Power?s ratings. This has an adverse impact on the company?s reputation and credit worthiness in the market.
Tata Power has submitted that though it has tried everything in its control to perform its obligations under the power purchase agreement, such conditions have arisen that it will no longer be able to sustain the financial impact caused by the increase in imported coal price. At the current tariff, the entire networth of the company might get wiped out in less than three years, the company has said.