Adani Power has came out on top to finalise the amended power purchase agreement (PPA) for its imported coal-based plant in Gujarat with the state distribution company Gujarat Urja Vikas Nigam Ltd (GUVNL), ahead of Tata Power and Essar Power.
Adani Power’s Mundra power plant (4600 MW), Essar Power’s Salaya plant (1200 MW) and Tata power’s Coastal Gujarat Power (4000 MW) who sell their electricity to Gujarat, are designed to run on imported coal. The three power stations are in line to sign a revised PPA with RUVNL.
Media reports have informed that Adani power has signed the PPA agreement with Gujarat government, but the process would need to go through the Central Electricity Regulatory Commission (CERC) for approval.
Essar Power is also in the process of finalising the amended PPA with GUVNL and the document can be signed by end of this week. Essar’s Salaya plant is the only project out of three selling power solely to Gujarat, which makes the PPA amendment process relatively easier for the company.
This leaves Tata Power’s Coastal Gujarat Power (CGPL) last in the race to get long-awaited relief as it is selling power, besides Gujarat, to Haryana, Maharasthra, Punjab and Rajasthan.
Changes in PPA
Earlier this month, the Gujarat government has instructed GUVNL to amend PPAs with three power generators and approach the power regulators for approval.
The amendments in PPAs will follow the suggestions of the High Power Committee (HPC) which has recommended allowing pass through of coal price with a cap of USD 110/MT, increase in variable cost by around INR 0.60-0.70/unit, reducing the fixed component in the tariff by INR 0.20/unit which will lead to writing off a part of the loan to the projects by lenders.
HPC has also suggested extending the duration of the PPAs by another 10 years after the completion of existing term of 25 years.
The amendments would provide a sigh of relief to the plants’ owned by Tata power, Adani power and Essar power, which were have been facing challenges since 2010 when the change in regulations in Indonesia had led to increase in coal prices, making their projects unviable.
At the time of drastic surge in Indonesian coal prices, Adani power was even forced to close some of its power units.
Currently, the three private companies are among the largest suppliers of electricity to Gujarat. Adani has signed PPA to supply 1,000 MW to GUVNL at INR 2.35 per unit and another 1,000 MW at INR 2.89 per unit. Tata has PPA to supply 1,920 MW at INR 2.42/unit, and Essar 1,000 MW at INR 2.52/unit.
The tariff could rise significantly once the amended PPA comes into place.
However, government officials insist that the resulting burden would still be lower than that on account of buying costlier power from other sources.
GUVNL is said to have bought electricity for as much as INR 7/unit to meet power requirement. The revised tariff even after the pass-through to the three companies is expected to be significantly lower than this.
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