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R-Power asks PFC to buy out Sasan UMPP

Firm is protesting de-allocation of Chhatrasal coal block, linked to the project

Shashikant Trivedi & Shreya Jai  |  Bhopal/New Delhi 

Image via Shutterstock
Image via Shutterstock

After pulling the plug from the 4,000-Mw ultra mega power project (UMPP) in Tilaiya, Jharkhand, Reliance Power Ltd (RPL) has asked the Union government-promoted Power Finance Corporation (PFC) to buy out its Sasan UMPP, citing a "breach of representation".

The company is protesting the de-allocation of the Chhatrasal coal block, which was linked to the project in Madhya Pradesh. In a letter to the ministry of power and PFC, the nodal agency for bidding of UMPPs, R-Power said cancellation of the coal block attached to the project was disregard of the bid agreement.

"Reliance Power Ltd is also not obliged to perform any of the obligations arising out of its submission of bid for the development of the Sasan UMPP and selection as the successful bidder," said the letter, dated July 17.

"In view of the government having altered the very foundation of the bid process leading to the bid contract, it is requested that within a period of seven days from the date hereof, Power Finance Corporation, the entity which sold the entire equity shareholding of Sasan Power Ltd to RPL, purchase the entire shareholding in SPL, along with all its assets and liabilities from RPL," said the letter, reviewed by Business Standard.

Senior executives at PFC confirmed receipt of the letter but declined to comment, as the matter was sub judice. "It is the will of the company to put in any request. PFC will give a reply only in court, as we are one of the respondents in the case," said a PFC executive.

A Reliance Power spokesperson declined to comment. The company has filed a case against the ministries of coal and power, as well as PFC, on the cancellation of the coal block.

The move would be a major blow to the UMPP programme and the National Democratic Alliance government's drive to invite private investment in the infrastructure sector. Of the four UMPPs awarded, only two are operational - Sasan and the Mundra UMPP (operated by Tata Power), which is also involved in a legal tussle over 'compensatory tariff'.

R-Power's Krishnapatnam UMPP has remained a non-starter, owing to land allocation issues. The company announced an exit from the Tilaiya UMPP in April this year, after awaiting clearances for five years. The Sasan UMPP achieved full commissioning in March 2015. The project was awarded to the company in 2007, when it bid the lowest rate of Rs 1.19 a unit for sale of power.

In August last year, a Supreme Court judgment had cancelled all coal block allocations through the past two decades, except the ones awarded to UMPPs on a bidding basis. It also asked the UMPPs not to use surplus coal from attached mines for commercial purposes. When the project was awarded, the Sasan UMPP had three mines - Moher, Moher Amlrohi extension and Chhatrasal.

According to Reliance Power's letter, the Union government had promised to allocate the three mines, with an aggregate capacity of 760 million tonnes. In May this year, the coal ministry cancelled the allocation of the Chhatrasal block, saying the three mines exceeded the amount of coal to be used by the plant and "surplus coal cannot be used by the promoter". At that time, a senior company executive had told Business Standard the company wasn't challenged in terms of blocks for which competitive bidding was held for the lowest tariff for power for UMPPs.

On July 31, the company approached court, contesting the government's move to take away one of the three blocks attached with the plant. The company's plea in the Delhi Court also stated PFC should buy the entire shareholding.

The company has argued the coal reserves of the two mines aren't enough for the power plant to run at a plant load factor of 85 per cent for the power purchase agreement term of 25 years. It would also hurt the capital investment already made, the plea said.


THE SASAN STORY
  • 2007: Reliance Power wins Sasan UMPP by bidding lowest rate of Rs 1.19 a unit
  • 2014: SC judgment cancels all coal allocations made to UMPPs
  • March 2015: Sasan UMPP achieves full commissioning with 3 blocks - Moher, Moher Amlohri extension & Chhatrasal
  • May 2015: Coal ministry cancels allocation of Chhatrasal with Sasan
  • July 17, 2015: R-Power writes to power ministry & PFC to buy out the project
  • July 30, 2015: Moves court over de-allocation of mine. Investment of around Rs 20,000 crore under cloud

First Published: Sat, August 29 2015. 00:59 IST
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