10 buyers agree to let go Tilaiya power project

R-Power to get Rs 800-cr damages from them

At least 10 of the 18 buyers, who had signed power purchase agreements (PPAs) to procure power from Reliance Power's 4,000-megawatt (Mw) ultra mega power project (UMPP) at Tilaiya, have agreed to terminate the PPAs with the Anil Ambani-led company.

In April this year, Reliance Power had announced that its special purpose vehicle Jharkhand Integrated Power, which runs the UMPP, had terminated the PPAs with 18 power distribution companies (discoms) spread across 10 states, citing the reason of delayed land acquisition.

Jharkhand, Gujarat, Delhi, Punjab and Haryana were among the places with which the company had signed 25-year contracts for power supply. Among those terminating PPAs are lead procurers Jharkhand, Uttar Pradesh, Punjab, Rajasthan and Bihar.

TILAIYA PLANT A LIGHTBULB MOMENT

• RPower served termination notice on April 29 on power procurers citing delay in land acquisition
• The company was awarded Tilaiya project in 2009 at a levelised rate of Rs 1.77 a unit after it beat NTPC, Lanco Infratech, Jindal Power and Sterlite Energy
• It had planned capex of Rs 36,000 crore for the project
• The project came with Kerandari coal block in North Karanpura Coalfield in Jharkhand

Reliance Power would receive compensation of around Rs 800 crore from these buyers as well as the ministry of coal.

According to sources, the 10 buyers are in advanced talks to terminate the PPAs.

Reliance Power had been awarded the Tilaiya UMPP in February 2009 at a levelised tariff of Rs 1.77 a unit. The project was allocated the Kerandari BC captive coal mine block for fuel.

"The modalities of the transfer of special purpose vehicle back to the procurers and release of bank guarantees and compensation to Reliance are being worked out. The procurers' decision to agree on the compensation terms is aimed at avoiding long-drawn litigation and auctioning the project afresh based on newly developed bidding documents for UMPPs," said a source in the know.

According to officials, the termination of the PPAs would reduce Reliance Power's future capital expenditure pipeline by Rs 36,000 crore, avoid any additional debt burden of Rs 27,000 crore and an equity commitment of Rs 9,000 crore.

The company had planned a capex of Rs 36,000 crore for the project, which comes along with the Kerandari coal block in the North Karanpura Coalfield in Jharkhand.

The Jharkhand government, after a delay of five years, had allotted 470 acres of forest land to the company and was in the process of allotting another 1,220 acres by mid-May, said a state government official.

Reliance Power had moved Delhi High Court in May 2014 for a stay on encashment of its Rs 800-crore bank guarantee for the Tilaiya UMPP in Jharkhand. The case, company officials said, would be withdrawn once the payment the termination is through.

The land required for the coal mine and power project is 17,000 acres. Based on present estimates of the land handover process, the company said the project could not have been completed before 2023-24.

Of the 16 UMPPs the previous United Progressive Alliance government planned, only four had been awarded.

Three of these at Sasan, Tilaiya and Krishnapatnam were to be set up by Reliance Power and the one at Mundra by Tata Power.