The Hindu Business Line : TNEB told to sort out payment row with IPPs

The Union Power Ministry is tracking the issue mainly to ensure that the problem does not get blown out of proportion and the issues are sorted out at the earliest.

CHENNAI, May 14

WITH a number of US power companies having equity stakes in private power projects in Tamil Nadu raising the payment problems faced by the projects in the State, the Centre recently convened a meeting with officials of the Tamil Nadu Electricity Board to understand the issues involved.

Officials in the Union Power Ministry confirmed to Business Line that some US investors had written to the Ministry about the payment problems faced by projects in Tamil Nadu.

The Union Power Ministry is tracking the issue mainly to ensure that the problem does not get blown out of proportion and the issues are sorted out at the earliest, according to the officials.

"All that we tried to do was to understand the problem and see whether anything can be done on our part," the officials said. At the meeting, the TNEB had told them that it was keen to re-negotiate some of the issues such as the price of power and the heat rate agreed upon in the power purchase agreements.

It is pointed out that the independent power producers had contracted loans at 17-19 per cent interest whereas the present rate is much lower. The TNEB, therefore, feels there is substantial scope for asking the IPPs to rework their interest cost, which can lead to a reduction by as much as 12 paise per unit of power.

The meeting between the Union Power Ministry and TNEB officials took place in the back drop of one of the IPPs in the State — the 330 MW combined cycle PPN Power Generating Co Ltd — shutting down the plant following non-payment of bills by the electricity board. The plant, which runs on a mix of naphtha and gas, has been shut from April 10.

The company defaulted on repaying an instalment of debt that was due for the quarter ended March 31, 2003 because the TNEB had not settled its bill on time. Subsequently, it is learnt that the TNEB has paid two instalments of the monthly bill to PPN Power Generating Co.

As it is, the TNEB pays the IPPs a flat rate of Rs 2.25 per unit of power and helps them meet their debt service obligations by settling the claims whenever they are presented.

The rate of Rs 2.25 per unit is much lower than what the power would cost, going by the power purchase agreement terms, according to the sources.

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