Power purchase agreements that are set to end for some of the first batch of independent power producers (IPPs) like GVK Jegurupadu, Spectrum and Lanco Kondapalli, which were set up after the reforms initiated in the mid-1990s, are up for buyouts by AP utilities.
Two optionsIn a first such initiative, AP Transco and Discoms have written to the State government expressing their interest to buyout GVK’s 220 MW project. It is for the State government to decide whether to exercise this option, K Vijayanand, Chairman of AP Transco, told BusinessLine .
According to terms of the PPA, the first batch of projects have a couple of options. One of them is the buy-out option by utilities; the second is to refurbish and upgrade, and get into fresh agreements for supply, Vijayanand said.
“We enlisted the services of consultant Grant Thornton for the process to assess its terminal value and other issues. Based on their findings and our own assessment, we have approached the State government with a proposal to buy the asset out for ₹300 crore,” he said.
A CFO of a leading power company said, “It all depends on how the PPA was drafted and various provisions in it, in terms of validity period and others.
Normally, the first right of refusal lies with the utilities if they are being considered for sale, and in a situation where the option to extend PPAs is not considered.” “It is to be seen if the State approves such a move as this could be against the spirit of country’s reform process, which sought to encourage private sector participation by taking away the State’s monopoly on power generation,” he said.
Proposal submittedAjay Jain, Secretary (Energy), Andhra Pradesh, said, “We have recently received a proposal with an expression of intent to buyout, by the utilities. We will study the proposal and present it to the government.”
Vijayanand said apart from the GVK Project, Spectrum Power’s 220 MW power project and Lanco Kondapalli’s 368 MW unit one will also come up for similar consideration.