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CERC nod for higher tariff for Adani Power's Mundra plant a positive measure: Icra

Press Trust of India  |  New Delhi 

Power regulator CERC's decision to approve higher tariff for Power (Mundra) Ltd is a positive measure for affected imported coal-based independent power producers, rating agency said on Wednesday.

The tariff relief approved under the supplemental PPAs (power purchase agreements) by the (CERC) will significantly reduce the losses faced by APML and improve viability of the project, said in a statement.

The CERC in its order on April 12, 2019, had approved the supplemental PPAs signed between Power (Mundra) Ltd (APML) and Urja Vikas Nigam Ltd (GUVNL) for 2,000 MW power supply.

The supplemental PPAs allow pass-through of imported coal cost by the APML, subject to certain covenants. While approving these PPAs, the CERC has considered the importance of the project in meeting the state power requirements and the cost competitive rates offered by the project even after the pass-through of higher imported fuel cost, the agency said.

"This order would provide a positive sign for resolution of other imported-coal-based assets like the CGPL and (Tata and plants), which are under stress, due to inability to pass-on the higher cost of imported coal to the off-takers, post change in regulations in

"At an estimated coal cost of 65 USD per tonne, the tariff for the APML is expected to increase by Rs 0.9 per unit for the 100 per cent imported coal-based capacity, after adjusting for profits and reduction in fixed charges," Sabyasachi Majumdar, - Corporate ratings, Icra, said.

On the other hand, the higher tariff for the APML will increase the power purchase cost for discoms by 14 paise per unit in FY2020 and impact the by 17 per unit, given that supply from the APML constitutes 15 per cent of power requirement of discoms, he added.

The agency also said that the tariffs offered by APML, including the pass-through of higher cost of imported coal remains competitive against tariffs offered in the short-term market as well as against tariffs offered by the recently commissioned projects.

As per the supplemental PPAs, the pass-through of fuel cost is subject to covenants like ceiling on cost of imported coal at USD 110 per tonne for coal GCV (gross calorific value) of 6,322 Kcal/kg, reduction in fixed cost of 20 paise per unit (through savings from lenders) and sharing of 100 per cent of the profits with a floor of 5 paise per unit.

In addition, APML will increase the normative availability to 90 per cent without any additional charges and the procurer will have an option to procure untied-capacity of APML at similar terms of the existing PPAs and option to extend the PPA tenure by 10 years, it added.

The CERC order follows the directions issued by the in October 2018 to decide on the changes proposed by the to the PPAs tied up by the imported coal-based plants of APML, CGPL and

The amendments to the PPAs are based on a report submitted by the appointed high-powered committee, chaired by the former Justice R K Agrawal.

This committee was set up to suggest to resolve the hardship faced by these projects due to high price of coal imported from Indonesia, post change in mining regulations in This is in view of the stoppage / reduction in supply from these power plants to the Gujarat discoms leading to an increase in dependence on procurement from the short-term market at higher tariff rates.

Earlier in April 2017, the ruled out any compensatory tariff for these projects by setting aside the favourable orders issued by the CERC and (APTEL). The apex court in its order noted that the change in international regulations would not construe as a change in law or force majeure event with respect to the PPAs signed with the

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, April 15 2019. 20:35 IST