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Adani Power Ltd (APL) is expected to maintain its profit margins in October-January quarter on the back of a recent reprieve by the State-level regulator from effecting supplies of 1,000 MW at a “non-remunerative” tariff of Rs 2.35 a unit, from Mundra to the Gujarat State utility. The profits will largely be contributed by merchant sales of the available power.
APL posted a profit before depreciation and tax of Rs 331 crore on a turnover of Rs 1,073 crore in July-September 2011 quarter.
Supplies from Feb
According to a company official, contrary to the expectations of State-run Gujarat Urja Vikas Nigam Ltd (GUVNL), the supplies will now be effected from February 2012, consequent upon commissioning of the entire 4,620-MW thermal power station. “The State regulator has allowed us to effect the supplies from February 2012,” a company official told Business Line .
The development has brought a major relief to the Adani camp, as the company is already facing a squeeze of margins following imposition of index (HBA Index)-based coal export by Indonesia beginning September this year and the sharp devaluation of rupee against dollar.
Earlier APL's plea to State electricity regulator for a tariff revision was turned down. An appeal before the Appellate Tribunal for Electricity challenging the State regulator's order was also rejected in September 2011, giving rise to apprehension that the company may have to give effect to the loss-making PPA in the current quarter.
Non-remunerative PPA
In 2007, APL signed two power supply agreements of 1,000 MW each with GUVNL at fixed tariffs of Rs 2.89 and Rs 2.35 a unit, for 25-years. While the first agreement was linked to units to be run on imported coal the second one was linked to domestic coal-based generation.
Based on the agreement, GUVNL argued that APL should start supplying 1,000 MW at Rs 2.35 a unit as soon as the fifth and sixth units of 660 MW each were commissioned early this year. APL, however, felt that the contract is effective as soon as the entire 4,620 MW project is commissioned.
“We were hurt on both the PPAs, due to unexpected change in Indonesian law. However, the one based on domestic coal-based generation hurts us the most,” an APL source says.
No domestic coal
According to company officials, overall 40 per cent of the capacity was linked to domestic coal to be supplied by Gujarat Mineral Development Corporation from Morga block in Chhatishgarh.
However, an embargo by the Ministry of Environment and Forests came in the way of GMDC to carry out mining in the block. Though the State-controlled miner was later compensated by another block (Naini) in Orissa; the loss of time forced APL to bank on import options to feed the generation capacities implemented ahead of schedule.
According to Mr V.S. Gadhvi, Managing Director of GMDC, the Naini block is currently under exploration. The company expects to approach the Environment Ministry for environmental clearance in mid-2012. Considering the procedural uncertainties, he is not ready to give a timeline for beginning production.
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