Tilaiya UMPP: Discoms agree to terminate PPA

By: | Updated: November 18, 2015 1:02 AM

Reliance Power had in April decided to give up 4,000-MW project after delays in land acquisition

In a positive development for Anil Ambani-promoted Reliance Power, electricity distribution utilities, or discoms, have agreed to terminate the power purchase agreement (PPA) with the Tilaiya ultra mega power project (UMPP) in Jharkhand. In April, the Ambani firm decided to give up on the 4,000-MW project after delays in land acquisition.
“In a meeting held earlier this month, the majority of the 18 distribution utilities in 10 states have agreed to accept termination of PPA and the terms of compensation to be paid to Reliance Power,” said an official privy to the development.

When asked why the discoms would take this unexpected step, the official said, “Procurers’ decision to agree on the compensation terms is aimed at avoiding long-drawn litigation and auctioning the project afresh, based on newly developed bidding documents for UMPPs.”

This means debt-laden Reliance Power will be compensated for Rs 114 crore and other agreed expenditure, and another R800-crore bank guarantees issued to procurers and the coal ministry will be released. Earlier, Reliance Power has approached court for a stay on encashment of its Rs 800-crore bank guarantee.

In February 2009, Reliance Power won the Tilaiya UMPP at a levelised tariff of Rs 1.77 a unit. The company had said that despite the Stage-II forest clearance by the Centre in November 2010, the land was not handed over for erecting the power plant. For the coal block, the land acquisition process is yet to be initiated, for which the application was submitted in February 2009.

At the time of termination of the PPA, Reliance Power had said that going by the current status of land acquisition, the project, which was to come up during the time-frame of 2015-17, cannot be completed before 2023-24.

The termination of the PPA also reduces Reliance Power’s future CAPEX pipeline by nearly Rs 36,000 crore thereby avoiding an additional debt burden of nearly Rs 27,000 crore and an equity commitment of Rs 9,000 crore.

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