Tata, Adani Al­lowed to Re­cover Higher Fuel Costs from Cus­tomers

Tri­bunal has al­lowed firms to re­cover higher costs un­der force ma­jeure norms

The Economic Times - - Companies - Our Bu­reau

New Delhi: Tata Power and Adani Power stand to ben­e­fit as the Ap­pel­late Tri­bunal for Elec­tric­ity (Aptel) has al­lowed their im­ported coal-based power plants in Mun­dra, Gu­jarat, to re­cover higher fuel costs from con­sumers un­der force ma­jeure pro­vi­sions.

The tri­bunal held that a change in In­done­sian law, which im­pacted the coal price of the two gen­er­a­tors, does not con­sti­tute change in law un­der the power pur­chase agree­ments, but may con­sti­tute force ma­jeure. It struck down the com­pen­satory tar­iff mech­a­nism evolved by the Cen­tral Elec­tric­ity Reg­u­la­tory Com­mis­sion (CERC) to the two firms, say­ing the reg­u­la­tor does not have pow­ers to mod­ify tar­iff dis­cov­ered through tar­iff-based bid­ding.

In a state­ment to the BSE, Tata Power said Aptel al­lowed the ap­peals of dis­tri­bu­tion com­pa­nies of its Mun­dra plant chal­leng­ing com­pen­satory tar­iff de­ter­mined by CERC. Email sent to Adani Power re­mained unan­swered.

“Pro­mul­ga­tion of In­done­sian reg­u­la­tion qual­i­fies as force ma­jeure but re­lief can be granted only as per the power pur­chase agree­ment (PPA). Or­ders dated 15.04.2013 and 1.02.2014 passed by CERC were set aside and the mat­ter was re­manded back to CERC to con­sider re­lief to be granted to CGPL (Coastal Gu­jarat Power Ltd) for force ma­jeure event,” the state­ment quoted the or­der.

As­so­ci­a­tion of Power Pro­duc­ers di­rec­tor gen­eral Ashok Khu­rana said: “With this or­der, the process seems to be mov­ing into a de­ci­sive and pos­i­tive phase where a fi­nal out­come can pos­si­bly be ex­pected soon. Force ma­jeure sit­u­a­tion per­mits both the pro­cur­ers and gen­er­a­tors greater flex­i­bil­ity in terms of reach­ing an agreed way for­ward with nec­es­sary over­sights.”

Shares of the two firms tum­bled af­ter the news in morn­ing trade on the BSE, but made some re­cov­ery later in the day. Tata Power dived as much as 8.7% dur­ing the day be­fore clos­ing 3.83% down at .₹ 64.10 on Thurs­day. Adani Power fell 11.6% and closed 2.92% lower at .₹ 33.20. CERC had in April 2013 al­lowed CGPL, Tata Power’s unit op­er­at­ing the 4,000 MW Mun­dra UMPP and Adani Power’s 1980 MW plant, to raise power tar­iffs from the projects to com­pen­sate for an un­ex­pected in­crease in coal cost due to change in In­done­sian law.

In Fe­bru­ary 2014, the com­mis­sion de­cided 52 paise per unit com­pen­satory tar­iff for Tata Power’s plant and 41 paise per unit for Adani Power’s project.

Five procur­ing states of the two projects moved the Supreme Court that stayed the com­pen­sa­tion and re­ferred the mat­ter back to Aptel.

Elec­tric­ity tri­bunal has held that a change in In­done­sian law did not con­sti­tute change in law un­der PPA

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