R-Infra's Samalkot plant maintenance from Sep 28; informs RIL

Anil Ambani Group firm Reliance Infrastructure has informed Reliance Industries (RIL) that it will shut its Samalkot power plant for maintenance later this month, coinciding with Mukesh Ambani-run firm's notice of suspension of natural gas supplies over payment defaults.

Reliance Infra has sent a letter to RIL on September 24 informing the of the shutdown of the 220 MW power plant in Andhra Pradesh for maintenance to September 28 instead of a day earlier.

Reliance Infra had incidentally also challenged on September 24 the RIL notice for suspension of gas supplies over non-payment of marketing margins, estimated at about Rs 12 lakh, while terming the action as "malafide".

When contacted the company spokesperson said the 35-day shutdown from September 20 was planned way back in April and Andhra Pradesh government was informed accordingly. However, the shutdown was deferred by 7 days on the request of state government and a further adjustment of a day was made to accommodate the experts who were to fly from Italy.

Reliance Infra, which till last month was paying the $0.135 per million British thermal unit marketing margin, refused to pay the amount due for first half of September saying such a levy was "unauthorised and illegal".

Some say Reliance Infra took a calculated risk as even if RIL was to cut supplies of 0.56 million standard cubic meters per day (mmscmd) of gas to Samalkot by weekend, the business would not be impacted.

As an industry practice, power plants cannot recover their fixed charges if it faces shutdown due to non-availability of gas. It, however, would get the charges for period during maintenance shutdown.

Besides using K-G D6 gas, Reliance Infra buys 0.2 mmscmd from GAIL for the Samalkot plant for which the state-run firm would charge $0.17 per mmBtu marketing margin.

RIL may shut gas supplies to Samalkot by the weekend if the issue of payment of Rs 12 lakh a fortnight in marketing charges is not resolved by then.

Since May, the 220 Mw power plant had paid about Rs 25 lakh per month in marketing margin on the natural gas it buys from RIL but it has suddenly become a contentious issue.

Sources said over Rs 12 lakh due in marketing margin for the first fortnight of September was recovered by RIL by invoking the Letter of Credit (or bank guarantee) Reliance Infra had created before commencement of gas supplies.

RIL, they said, may stop supplies in next couple of days if Reliance Infra continues to oppose marketing margin, which was being paid by 40 other customers.

Reliance Infra in April signed a Gas Sales and Purchase Agreement (GSPA) to buy 0.19 mmscmd of gas from RIL's K-G D6 fields at government-approved rates of $4.20/ mmBtu plus taxes and transportation.

Samalkot is one of the eight power plants identified in Andhra Pradesh to receive the gas. The allocation the plant was raised on a 'fall-back' or temporary basis to 0.56 mmscmd as not all identified clients for the initial 40 mmscmd of output from K-G D6 fields were taking their quota.