NTPC threatens to pull the plug on BSES Delhi

State-run power producer NTPC has issued notices to Reliance Infrastructure subsidiaries, BSES Rajdhani and BSES Yamuna, which distribute power in Delhi, threatening suspension of supply over non-clearance of dues of about Rs 900 crore.

In the notices dated August 31, posted on the company’s website, NTPC said both BSES Rajdhani and BSES Yamuna had failed to maintain the letter of credit (LC) in their power purchase agreement (PPA).

NTPC, which supplies about 2,051 Mw power to the two companies for Delhi, has asked them to renew the LC immediately or the supply could be suspended from September 7. NTPC’s supplies are about two-thirds of the total peak power demand the two BSES companies are required to meet in Delhi.

The PPA says the companies are required to ensure availability of the requisite LC value and ensure the LC remains valid at all times during the validity of the PPA, with a renewal at least 30 days before the expiry of its term. The LC expired on August 31 and the companies have been given almost a week to renew it. Failing that, power will be suspended from September 7.

A BSES spokesperson said, “BSES Delhi is in discussions with NTPC and bankers for resolution of the issue. BSES stands committed to its 2.8 million consumers and will make all efforts to ensure no inconvenience is caused to them.” The notice said, “As on date, the LC for Rs 131.12 crore, which was valid till August 31, has been encashed in view of the defaults in the payment of amounts due to NTPC from BSES Yamuna (BYPL). The amount due to NTPC was Rs 320.26 crore. After adjusting the amount of Rs 13 1.12 crore from the LC, the outstanding balance due from BYPL is Rs 189.14 crore.”

For BSES Rajdhani (BRPL), after realisation of Rs 203.31 crore from the LC, the outstanding balance is Rs 290.63 crore.

In addition to the above, about Rs 425 crore worth of power has already been supplied to both BYPL and BRPL in August, which will take the total amount due from both to about Rs 900 crore.

The PPAs say, in case of non-maintenance of the LC, NTPC would serve a notice of 90 days on BRPL/BYPL to remedy the default, during which period power supply would remain suspended. If the LC is not renewed immediately, supply would remain suspended till December 1, 2011 and subsequently, NTPC would have the right to terminate both PPAs.