Cogentrix Cites Higher Costs To Seek Fresh Clearance

US-based Cogentrix Inc is seeking a fresh techno-economic clearance (TEC) for its proposed 1,000 mega watts (mw) power project in Mangalore. Cogentrix has cited increased project costs on account of inflation as the reason for its request for a fresh TEC.

According to Cogentrix, the rupee cost of the project has escalated by Rs 73 crore, while the foreign exchange component cost has risen by $20 million since July 10, 1996, the day the project received techno-economic clearance from the Central Electricity Authority (CEA).

However, the CEA has refused to grant fresh clearance to the project, arguing that as per the government notification, inflation cannot be considered a factor for cost revision.

 

Further, the CEA claims that Cogentrix itself is to be blamed for the cost escalation. According to the terms of the TEC, Cogentrix was required to submit a firm financial package to the CEA within six months from the date of issue of the letter communicating the projects clearance. But it has failed to do so even after 10 months have elapsed.

Cogentrix claims that it could not firm up its financial package in time because of the delay in finalisation of the power purchase agreement (PPA) for the project. Inflation in the intervening period pushed up the project cost.

Cogentrix is also learnt to have clarified that the delay in PPA finalisation was not entirely of its own making.

The company claims that various agencies involved in the project were taking a long time to work out certain vital details.

The power ministry is learnt to be sympathetic towards Cogentrix and is reportedly considering ways and means of revising the project cost. According to industry experts, this can be done only by amending the tariff notification.

In case the government agrees to the revised cost estimates, it will have to pay Cogentrix a higher price for the power generated at the plant.

The techno-economic clearance of July 1996 had pegged the project cost at $751.574 million plus Rs 1,580.89 crore. At this cost, the levelised tariff came to Rs 2.29 per Kwh, consisting of fixed charges of Rs 1.41 per Kwh and variable charges of Rs 0.88 per Kwh.