Aptel lets Tata, Adani Power recover higher fuel costs

Tata Power and Adani PowerBSE 0.45 % 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 Rs

64.10 on Thursday. Adani Power fell 11.6% and closed 2.92% lower at Rs 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. The tribunal upheld the tariff, which was challenged again by the

distribution companies. This time Aptel ruled that CERC cannot alter tariff of projects bid competitively

and that the case fell under the ambit of force majeure.

NGS INDIA