SBI Caps, KPMG to draw road map for power rate compensation

Panel will recommend roadmap for implementation of CERC order on Adani Power and Tata Power

A panel headed by HDFC Chairman Deepak Parekh has appointed SBI Caps as advisor and KPMG as auditor to recommend road map for implementation of the Central Electricity Regulatory Commission’s (CERC) order on a compensatory rate for Adani Power and Tata Power for their projects in Gujarat. CERC, in its two separate orders delivered in April, had permitted Adani Power and Tata Power to raise supply rates to compensate for an unexpected increase in coal cost.

A source associated with the Parekh Panel told Business Standard: “Prima facie, there is unanimity in the panel that the investment which has gone into the development of projects by Adani Power and Tata Power in Gujarat should not go waste especially when there is a huge exposure of banks and financial institutions. CERC’s compensatory tariff formula is clear. It is over and above the tariff decided under the power- purchase agreement (PPA)  and the panel will look into the ways for its implementation.’’ Parekh panel, formed in May, has sought an extension to complete its exercise.

The panel comprises the IIM Lucknow director, principal secretaries for the energy departments of Maharashtra, Gujarat and Punjab, additional chief secretary of Haryana and the managing director of Punjab State Distribution Company. The panel on Wednesday met the lenders of Adani Power and Tata Power for their projects in Gujarat.

According to sources, KPMG will look into the submission made by Adani and Tata with regard to the hit they will have to take due to rise in the cost of coal in particular.

Adani Power had entered into two power purchase agreements (PPAs) of 1,000 Mw each with the Gujarat government at Rs 2.35 a unit and Rs 2.89 a unit for its 4,620-Mw plant in Mundra. It entered into a similar accord with the Haryana government at Rs 2.94 a unit for 1,424 Mw. The company approached CERC under Section 79 of the Electricity Act after Haryana and Gujarat refused to pay a higher rate.

Adani Power argued the additional cost for the Haryana would of 64 paise a unit and Rs 1.11 a unit for Gujarat in the first year of supply.

“KPMG will verify Adani Power’s numbers and submit its report to the panel,” said sources.

KPMG will examine Tata Power’s claim of Rs 1,900-crore annual financial impact, based on June 2012 price, due to the unforeseeable increase in prices of imported coal. Tata Power’s special purpose vehicle, Coastal Gujarat Power Ltd, had entered into to sell electricity generated from its Mundra plant to Gujarat, Maharashtra, Haryana, Punjab and Rajasthan at Rs 2.26 a unit.

Subsequent to the submission of KPMG’s recommendations, SBI Caps will make its suggestions to the Parekh panel to finalise its report.