Looking to rescue its 4,000-MW Mundra Ultra Mega Power Project (UMPP), Tata Power has written to the Centre proposing to sell 51 per cent equity of the ailing asset for a nominal fee of ₹1.

A letter from Coastal Gujarat Power Ltd (CGPL), the holding company for the Mundra plant, cited challenges faced by the company since Indonesian regulatir changes led to an increase in imported coal prices, rendering the plant unviable under the current terms.

Two options Since the Supreme Court had in April disallowed compensatory tariff to the company, the letter, seen by BusinessLine , suggested two options.

The first is to renegotiate the tariff and the terms of the power purchase agreement (PPA). The second is to sell 51 per cent of the paid-up equity shares of CGPL to power procurers for a nominal ₹1 . In the latter case, Tata Power will retain 49 per cent of the shares and continue to operate the plant under an O&M contract.

When contacted, the company said the second option had been put forward after exhausting all other options.

A company statement said CGPL’s bankers had suggested that if 51 per cent equity “is taken over on a back-to-back basis with the procurers, the procurers would have (the) advantage of competitive power for (the) full life of the plant” — which could be 40 years.

In February 2006, Tata Power had won a bid for the project, quoting a price of ₹2.26 per unit of electricity generated. The project was to run on coal imported from Indonesia, but in 2010, the Indonesian government decreed that coal exports could be done only at prices linked to international rates. Tata’s plea for higher tariff was rejected by the Supreme Court.

CGPL’s accumulated losses as on March 31, 2017 were ₹6,457 crore against a paid-up equity of ₹6,083 crore, the letter to Gujarat Urja Vikas Nigam Ltd (GUVNL) said. Its outstanding long-term loan is ₹10,159 crore; Tata Power, too, lent ₹4,460 crore to meet the cash requirements of the project.

In the letter, CGPL CEO Krishna Kumar Sharma notes that “the project lenders have stopped disbursal of loans beyond what is already disbursed due to non-viability of Mundra UMPP… Due to cash losses, CGPL has gone into breach of covenants and after much effort, the project lenders have given extension of time… but now there’s no hope to correct the situation.”

Govt’s standDelhi Bureau adds: Minister of State (Independent Charge) for Power, Coal, New and Renewable Energy, and Mines Piyush Goyal reiterated the Centre’s stand that it was for Tata Power and the Gujarat government to find a solution to the dispute.

The government, he said, can only play a facilitator’s role and bring the stakeholders together; the commercial issues have to be sorted out between them.

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