Anil Ambani led Reliance Power may lose Rs 200 crore bank guarantee

By: | Updated: June 24, 2016 6:54 AM

Anil Ambani-promoted Reliance Power may lose nearly Rs 200 crore if the coal ministry is not satisfied with the company’s response regarding its failure to develop Kerandari B&C coal mines

Reliance Power exited the Tilaiya UMPP in April last year, citing inordinate delay in land acquisition by the state government.(Reuters)Reliance Power exited the Tilaiya UMPP in April last year, citing inordinate delay in land acquisition by the state government.(Reuters)

Anil Ambani-promoted Reliance Power may lose nearly Rs 200 crore if the coal ministry is not satisfied with the company’s response regarding its failure to develop Kerandari B&C coal mines linked to the Jharkhand-based Tilaiya ultra mega power plant (UMPP) as per the milestones set out in the power purchase agreement (PPA). However, the company has managed to retrieve over `700 crore in other bank guarantees and compensation from the procurers.

Reliance Power exited the Tilaiya UMPP in April last year, citing inordinate delay in land acquisition by the state government. As per sources, all 18 procurers accepted the termination of PPA and agreed to pay `113 crore as compensation to the firm towards the various development expenses incurred. Additionally, the procurers also agreed to release the bank guarantee of `600 crore that was submitted by the company.

“The process for release of bank guarantee by procurers and payment of compensation is underway and all formalities are expected to be completed in the next few weeks.

As far as the coal ministry’s notice regarding the bank guarantee of `200 crore is concerned, “the company will respond to it in due course,” a source privy to the matter said.

Earlier this week, the government issued a show-cause notice to the firm, asking it to explain reasons for not developing these blocks as per the plan. This

was in response to a request from the company asking the ministry for release of bank guarantee submitted by the company these coal blocks.

The coal ministry contended that the development of the coal block should have happened as per the prescribed milestones even if the procurers didn’t fulfil their power purchase agreement.

Incidentally, the coal ministry under the UPA government had issued a similar notice to the company in late 2013. The company had furnished a detailed response to it in early 2014, listing the reasons for delay in developing the mines.

Sources said the company’s response to the latest notice would be along the same lines as the last one.

In its response, the company had blamed inability of the procurers to hand over land associated with the coal blocks for delay in development. The firm had also pointed out that the state government hadn’t been able to handover the entire land despite a stage II forest clearance which was obtained in 2010.

Additionally, the mining lease application had also been pending with the state government for prior approval from the government of India, as per the company’s reply.

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