New Delhi | June 22, 2017: Tata Power has proposed to sell a 51 per cent equity in its 4000MW Mundra power plant for just Re 1 to states such as Gujarat which buy power from the plant - with the unit, which runs on imported coal, amassing so much loss that the operations have become unviable.
Coastal Gujarat Power Ltd (CGPL), the Tata Power unit which operates Mundra, has written to Gujarat Urja Vikas Nigam Ltd earlier this month offering to retain only a 49 per cent stake and operate the project as a contractor provided the new majority owner buys all the power at a rate to fully address the under-recovery of fuel cost.
In a letter written to Gujarat Urja Vikas Nigam, Coastal Gujarat Power Limited (CGPL) has suggested the proposal to sell equity and renegotiate the power purchase agreement.
"The procurers take over 51 per cent paid-up equity shares of CGPL for a nominal value of Re 1 and grant relief to the project by purchasing power at a rate to fully address the under-recovery of fuel costs at CGPL.
"Tata Power shall continue to operate the plant under an O&M (operation and maintenance) contract and provide all required support to the project as a 49 per cent stakeholder," said the letter.
In the letter, copies of which were marked to Nripendra Misra, principal secretary to the Prime Minister, and Union power secretary, Coastal Gujarat Power CEO Krishna Kumar Sharma said Mundra had accumulated losses of Rs 6,457 crore against paid-up equity of Rs 6,083 crore.
In a project outlay of about Rs 17,900 crore, CGPL has a total outstanding long-term loan of Rs 10,159 crore and an additional loan of Rs 4,460 crore taken by Tata Power to meet CGPL's cash requirements.
In February 2006, the Tatas had won the bid for the 4,000MW Mundra project in Gujarat, quoting a price of Rs 2.26 for every unit of electricity generated. It had intended to fire the plant with coal imported from mines owned by the Tata group in Indonesia.
In 2010, the Indonesian government said that any export of coal could be done only at prices linked to international rates. The Tatas, in turn, sought higher tariffs, but the plea was rejected by the Supreme Court.
Power minister Piyush Goyal said the company has written to the state government and it was for the procurers and the firm to sort out the issue.
"But as responsible part of the government in the country, the central government is willing to play the role of a facilitator to bring all the stakeholders on the table so that an informed, considered view can be taken," he said.
"The government has clarified that it will act as a facilitator. It's the banks and the states that are procuring power from these units that will take the final decision," said an official
Tata Power in a statement said it made the suggestion after exhausting all other options. Bankers, it said, "made a suggestion that if 51 per cent equity is taken over on a back to back basis with the procurers, the procurers would have advantage of competitive power for full life of the plant e.g. 40 years at 'very low and competitive price'".
"CGPL has and will continue to be open to exploring all options for the long term sustainability and viability of the plant," the company said.
(Source: https://www.telegraphindia.com/)