Edelweiss
The Central Electricity Regulatory Commission (CERC), in a landmark judgment, has issued an order on Adani Power?s tariff hike appeal for its Mundra PPAs after hearing both the parties. The regulator holds that Adani Power?s case does not satisfy the conditions of force majeure under Article 12 and change in law under Article 13 of the PPAs and, therefore, no relief could be granted to the petitioner under these provisions.
We believe this relief is a positive for Adani Power. However, it pertains to only ~2.4 GW of capacity. We estimate profit-before-tax impact of ~ R170 crore for every R0.1 per kilowatt-hour hike in tariff for the ~2.4 GW (at ~80% PLF) of capacities eligible for the compensatory tariff.
The decision on coal price pooling is critical now as the fuel risk is far greater than the benefits from tariff hike for companies like Adani Power, which is widely dependent on domestic coal supplies from Coal India. We see this development to be positive for other companies like Tata Power, which have also approached CERC seeking relief for their 4-GW UMPP at Mundra.
However, taking cognizance of the fact that the existing PPAs are not viable under current circumstances where Adani Power has no other option but to shut down the plant at the earliest, rather than bleed each day continuously, the commission has decided to provide a compensatory tariff (for two PPAs, one of 1,000 MW with Gujarat and 1,424 MW with Haryana) over and above the current PPA tariff.
This is to be decided within a month?s time by a group comprising concerned states/CMDs of the distribution companies, chairman of the petitioner company or his nominee, an independent financial analyst and an eminent banker.
This interim relief would be for a specified period till the unprecedented situation persists. However, one of the members is in disagreement with the order citing that the prices quoted by APL are firm (despite the provision to quote partly variable and fully variable) and PPA provides only two occasions where the prices can be varied namely force majeure and change of law.
He has ruled out that the current situation doesn?t warrant either of them.
