Adani Power cannot terminate PPA with GUVNL: GERC

In a major relief to the state-run electricity company, Gujarat Urja Vikas Nigam Ltd (GUVNL), Gujarat Electricity Regulatory Commission (GERC) has ruled that Adani Power cannot terminate power purchase agreement (PPA) inked with GUVNL on the basis of non-execution of fuel supply.

Adani Power, a company of Ahmedabad-based business conglomerate Adani Group, had entered into a long-term PPA with GUVNL in 2007 for supply of 1,000 Mw. The PPA was signed following a competitive bidding and Adani group had committed to supply power at Rs 2.35 per unit for 25 years.

Adani Power had dashed off a notice in November 2008 to GUVNL seeking termination of PPA with the public sector company in the wake of its inability to execute a Fuel Supply Agreement (FSA) with the fuel supplier. Adani Power was expecting coal from Gujarat Mineral Development Corporation’s (GMDC) coal block in Chhatisgarh.

However, GUVNL approached GERC insisting that Adani Power should comply with the terms of the PPA and withdraw its termination of the agreement.

In its recent order, GERC maintained that Adani Power cannot terminate the PPA dated February 2, 2007 on the basis of its not having executed the fuel supply agreement with GMDC, and therefore cannot be relieved of its obligation from supply of power to GUVNL under the agreement.

The state power regulatory body held that the obligations for executing the FSA was with the seller, i.e. Adani Power, who, after executing the FSA within a stipulated time frame had to provide a copy of the same to GUVNL.

According to GERC, the obligation of Adani Power under the PPA is “not co-terminus with its arrangement for supply of fuel by GMDC.”“At no stage, either from the terms of the bid documents or the Power Purchase Agreement, it can be said that the Petitioner (GUVNL) had undertaken any obligation to arrange coal on behalf of the Respondent (Adani Power),” GERC further held.

GERC observed that it was difficult to accept that Adani Power “did not have the ability to execute a fuel supply agreement, because in fact they have made statements on the existence of such agreements in their own documents which are in the public domain.”

“It is also a fact that the Respondent has increased the capacity of the project substantially and gone ahead with the execution of the project, which could not be feasible without any arrangement for fuel. These are matters on record and cannot be disputed,” the body further observed.