APTransco may contest GVK's capital cost hike

This, as it may have to pay more to enable company to recover costs

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The state power regulator's recent decision to enhance the capital cost of the 15-year old gas-based power plant owned by GVK group may not go uncontested as the state power utility will have to pay more to enable the company to recover the additional cost.

"We are planning to challenge the orders in the Appellate Tribunal for Electricity (APTEL) in Delhi," said P Shivarao, legal advisor of the Andhra Pradesh Transmission Corporation (APTransco).

Ending a long legal dispute between the private power developer and the power procurer, the Andhra Pradesh Electricity Regulatory Authority (Aperc) last week enhanced the capital cost of GVK group's 216-Mw Phase 1 gas power project at Jegurupadu in East Godavari district by Rs 66.74 crore.

According to Shivarao, the recovery of this additional cost also involves interest costs for the past 15 years and the final figure could be any where close to Rs 500 crore.

More than the financial liability, the power purchase agreement(PPA) signed between the power utility and the company does not support such enhancement except the customs duty variations, he argued.

The company did not respond to a request seeking clarification on the issue. GVK had signed 18-year PPA with the state power utility based on the capital cost of the project. The power utility will have to allow the recovery of these additional costs in the remaining 3 years of the PPA period.

The company sought approval for a capital cost of Rs 1,025.24 crore as against the capital cost of Rs 816 crore as prescribed by the AP government prior to the enactment of the new electricity act and the formation of state level power regulator.

The legal department of APTransco is planning to challenge a couple of other orders, including the conversion of the State Bank of India's loan as equity in the 208-mw Spectrum Power project now owned by the Asset Reconstruction Company of India Limited(ARCIL).