Lanco Infratech, which has stopped supplying power to the Uttar Pradesh Power Corporation (UPPCL) due to mounting unpaid dues, has asked the four distribution companies of the state power utility to enter into discussions with it to “commence the process of buyout of its Anpara C plant” in Sonebhadra district of the state. It has, in parallel, sought to renegotiate the power purchase agreement (PPA) given the central government’s revised coal allocation policy.
In a petition filed before the Uttar Pradesh Electricity Regulatory Commission (UPERC) on January 28, the company had prayed for an order determining new tariff for the supply of power from the Anpara C plant to the four discoms of UPPCL, which have also been made respondents in the case along with UPPCL “till the successful completion of the buyout of the plant”.
As an alternative to the buyout, it has suggested that the state power regulator “pass an order determining new tariff for the supply of power instead of a buyout of the plant, keeping in view the viability and sustainability of the plant after taking into account the accumulated losses of the plant till date”.
The 2x600 MW Anpara C coal-fired power project was the country’s first project to be awarded under tariff-based competitive bidding in 2006 and had won the bid by quoting the lowest ever tariff of R1.91/unit.
Prior to filing the petition with UPERC, the company had also served a termination notice to the four discoms on January 24 in which it stated that “Lanco has at all times kept the buyers (discoms) as well as UPPCL abreast of the difficulties being experienced by it in performing its material obligations under the PPA on account of the changes in the coal linkage for the Anpara C plant vis-à-vis the coal linkage offered as part of project RFP (request for proposal)”.
Holding the enactment of new directives and policies by the government, especially the National Coal Distribution Policy (NCDP), responsible for its present condition, the company has stated that this “resulted in changes in the terms and conditions governing coal allocation to Anpara C project, as a result of which there has been significant alteration in the available quantity of coal”, adding that “on account of the above, the coal receiving and handling logistics for the project, which were designed as per the project documents, cannot be utilised completely and coal from non-link sources is loaded manually”.
“The project has become commercially unviable with the average plant availability factor of around 40% over past more than 270 consecutive days….” the termination notice states, adding that “on account of the complete inaction on part of the buyers (discoms) and UPPCL in remedying the alterations highlighted by it, Lanco exercises its right under Clause 13.6 of the PPA and terminates the PPA. The buyers are requested to enter into discussions to commence the process of buyout of the Anpara C plant in accordance to the terms laid out in Schedule 10 of the PPA.”
The petition to UPERC also states that the four discoms are in “material breach of their obligation under the PPA signed on November 12, 2006, inasmuch as they have defaulted in making timely and complete payment to the company for supply of electricity under the PPA and have also failed to institute the requisite payment security mechanism as mandated under the PPA”. It has made a strong plea that the regulator direct the four discoms to clear all outstanding dues amounting to Rs 431 crore for October-December 2012.
Arguing that the significant amount of outstanding dues coupled with the absence of a payment security mechanism has severely impacted the company’s ability to operate Anpara C at optimum capacity, the petition states that it has “unduly increased the financial burden on it resulting from the penal interest charged on delayed payments by consortium lenders and various vendors of the project...”, adding that it has made repeated requests to the respondents to institute a payment security mechanism that would “enable it to refinance the project and consequently alleviate the financial burden on the project cash flows”.
However, with the situation not being remedied, the company stated that it was “constrained to issue a preliminary termination notice to the respondents” on December 12, 2012.
“The petitioner is constrained to exercise this right to terminate the PPA in case any of its material obligations is significantly prevented, hindered or delayed or the average availability factor of the plant is less than 65% in any period of 270 consecutive days”, the petition states, adding that it is “not in a position to supply the entire capacity of contractually stipulated power to the buyers”. It has also submitted that till the time the discoms institute the payment mechanism and clear outstanding dues, it is entitled to regulate the power supply to correspond with the payments made.
Additionally, it submits that “in public interest, the company is willing to supply power to the buyers till the completion of the buyout of the plant. However, the same shall be on a tariff determined by the Commission as…in view of the changed circumstances, the petitioner is no longer able to supply power at the same rates,” adding that due to the “fundamental change in the terms and effects of the PPA…it is no longer sustainable or viable for the project to continue on the basis of the initial contemplation between the parties”.
Having said that, the petition sums up that keeping in view public interest, “The company is willing to proceed further with the project, provided the tariff is regulated by the Commission taking into account the accumulated losses to ensure that the project remains sustainable and viable.”
Pulling the plug
* Ballooning Uttar Pradesh Power Corp dues & changes in coal policy forces Lanco Infra to end PPA with Uttar Pradesh
* Lanco also prays for an order determining new tariff for supply to the 4 UP discoms till the buy-out is completed
* As an alternative to the buyout, it suggests that the state power regulator pass an order determining new tariff