AP to soon initiate buy out process for GVK's 217-MW unit

The company will be getting Rs 295 cr towards the terminal value of the project from the government agency AP Transco

Andhra Pradesh power utilities are expected to initiate the buy out process for the 217 MW gas power plant owned by the GVK group later this month.

"We have appointed a committee, which will submit its report in 15 days time on all aspects involving the buy out process. We will initiate the process as soon as we receive the report," said K Vijayanand, chairman and managing director of Andhra Pradesh Transmission Corporation (AP Transco) on Tuesday.

The 18-year power purchase agreement (PPA) expired on June 20, triggering the next course of action involving two options-renewal of agreement or the buy out of the project depending on the sole discretion of the state power utilities as per the PPA.

Ahead of the PPA expiry, the power utility had issued notices to the company stating that they have exercised their option to buy out the power plant.

The power utility had defended its decision stating that the buy out was the least expensive alternative as compared to the high refurbishment costs proposed for the extension of the plant life.

The company will be getting Rs 295 crore towards the terminal value of the project from the government agency.

"It is fine if the AP Transco has initiated the process. The proposed buy-out as well as the termination value were determined long back," said Issac George, chief financial officer of GVK group said.

When asked if the unresolved claims of payment arising from the disputed project cost among other things would have any bearing on the buy-out process, Issac George said those legal disputes will not come in the way of the ongoing process. Built in 1997, Jegurupadu phase 1 was the country's first gas-based power project set up in private sector.