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Energy | May 2014

Adani Power: Riding on compensatory tariff order

By Rahul Kamat

Since the compensatory tariff order by the Maharashtra Electricity Regulatory Commission (MERC) on 5 May 2014, Adani Power, an arm of Adani Group, has been riding high and performing at its best. After the MERC order, which clearly favoured Adani, its stock prices zoomed from Rs 49.60 on 9 May 2014 to Rs 54.80, up by 9 per cent, today. APML is implementing a 3,300 MW project in Tiroda, Maharashtra and has entered into a 25-year Case-I power purchase agreement (PPA) for 1,320 MW with the Mahasrashtra State Electricity Distribution Company Ltd.

MERC order

MERC, in its 5 May 2014 order, has cleared compensatory tariff for APML's Tiroda project after conducting suo-motu actions and hearing out the stakeholders of the project.

In August 2013, the regulator had recommended an expert committee to deliberate on the compensatory tariff. MERC has now given its approval and accepted the committee's report, which is subject to few modifications, including reducing 20 per cent profits. It has allowed indicative compensatory energy charge of Rs 1.01/kWh (based on prevailing coal prices, operational parameters and linkage assumptions) for 800 MW on retrospective basis.

Coal sourcing

The company had planned to source coal from the Lohara coal blocks (allocated to it by the Government of India) for 800 MW and the rest from Coal India Limited (CIL) by the way of linkage. However, due to proximity to the Tadoba Andheri Tiger Reserve, the Ministry of Environment and Forests (MoEF) withheld the clearance for mining. Being denied access to cheaper captive coal, APML had approached MERC seeking compensation against increase in fuel cost (on blending expensive imported/spot coal).

CIL honouring its coal contracts The company expects domestic linkages from CIL to meet its coal requirements for much of the 9,240 MW capacity. However, it is expected that CIL will not be able to honour its existing contracts in totality (80 per cent of CIL's commitment for Mundra IV, i.e., 3x660 and Tiroda I, i.e., 3x660 to be met based on draft revised FSAs circulated by CIL) due to current problems in scaling up and logistics (rake availability).

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