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ALL INDIA INSTALLED CAPACITY

ALL INDIA INSTALLED CAPACITY

Tuesday, January 10, 2012

Adani Power approach SC to scrap electricity sales contract; case may break Rs 1.6 lakh cr projects

Adani Power has approached the Supreme Court to scrap an electricity sales contract because of fuel supply uncertainty and unexpected rise in cost of imported coal, in a case that can make or break mega projects worth Rs 1.6 lakh crore and their lenders.
The company had signed a power purchase agreement in 2007 for supply of 1,000 mw to a state utility at a fixed tariff of 2.35 per unit for 25 years. But project economics changed drastically with the fall in domestic coal supply and abrupt rise in cost of imports, prompting Adani Power to issue a notice to terminate the contract.
The utility, happy with the low tariff that Adani had bid, rejected the notice and won its case in the state's regulatory body and the appellate tribunal.
A Gujarat government official said Adani Power has filed a civil appeal challenging the regulators. Adani Power declined comment.
The court's verdict would have huge implications for ultra mega power projects by Tata Power at Mundra and Reliance Power at Krishnapatnam, which have become unviable because of the abrupt rise in price of Indonesian coal but are locked in contracts to sell cheap electricity. It will also impact projects of Essar, JSW, Lanco, India Bulls and Shapoorji-Pallonji.
"Current contractual framework does not protect power companies from short supplies of coal 'assured' by CIL or from unexpected level of changes triggered by any 'change in law' event in coal exporting country.
As these developments are beyond the control of the developer, these contracts should be modified through appropriate policy/regulatory interventions to translate the impact of these uncontrollable factors on tariff," said Ashok Khurana, director general, Association of Power Producers.

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