Hence, Dhariwal’s plant would remain mostly idle, suffering losses as it waits for a replacement agreement
In a major setback for Sanjiv Goenka's flagship outfit CESC, energy regulator of Uttar Pradesh has rejected a power purchase agreement (PPA) between Noida Power Company Ltd (NPCL) and Dhariwal Infrastructure based in Maharashtra, both belonging to the group.
The cancellation of the pact means Dhariwal's power plant would remain mostly idle, suffering losses as it has to wait for another replacement agreement for selling its power.
"Competitive bidding is the only way which can ensure true discovery of market price and it also safeguards the interest of consumers. Therefore, the commission rejects the petition of NPCL to procure 200 megawatt (mw) power from Dhariwal Infrastructure and directs NPCL to initiate competitive bidding process immediately and complete the process as per timeline given in the Government of India guidelines. In the interim period, NPCL can arrange power through short-term measures," Uttar Pradesh Electricity Regulatory Commission (UPERC) said while delivering the order on the petition for approval of PPA signed on August 2016 between NPCL and Dhariwal for 200 mw of power for 25 years.
The regulator has rejected the recent lifeline for the troubled power plant on the grounds of non-competitive tariff, which at Rs 4.79 a unit is much higher than tariff bids of below Rs 4 a unit received by Uttar Pradesh Power Corp recently.
"As per the information of the commission, the first year L1 (lowest) tariff obtained in the last competitive bidding for 3,800 mw by UPPCL (Uttar Pradesh Power Corp) was Rs 3.939 per unit at UP periphery whereas in case of Dhariwal Infrastructure, on the basis of power being supplied at present by Dhariwal Infra to NPCL, the first year total tariff is more than Rs 4.79 if transmission charges up to UP periphery is also included," the regulator reasoned in its order.At least three other bids were also lower than Rs 4 a unit, UPERC added.
In its defence, Noida Power had argued that there is an urgent need to improve power supply capacities after April 2018 following growing demand projection; the company had to resort to a Memorandum of Understanding with group company Dhariwal after Essar Power Jharkhand failed to honour a long-term PPA.
Noida Power also argued that a competitive bidding process would have taken about five to six months, delaying additional power supplies.
The regulator has, however, found the argument not tenable.
"Commission pointed out that more than 1,000 mw capacity is lying idle for the want of PPAs. Then why NPCL has come up with a single proposal of Dhariwal Infrastructure, which is a related party to NPCL," the order said.
The 600 mw project at Chandrapur in Maharashtra has been a sore point for CESC for long. Except a deal to supply 100 mw to Tamil Nadu under long-term PPA, Dhariwal's pacts with Essar and its own group company have failed.
Nomura Securities pointed out UP regulator's rejection in a note to investors Thursday morning, following which the stock was down 3% in early trade before settling with 1.12% loss.
LIGHTS OUT
- UP’s energy regulator has rejected a PPA between Noida Power Company and Dhariwal Infrastructure
- Hence, Dhariwal’s plant would remain mostly idle, suffering losses as it waits for a replacement agreement
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"As per the information of the commission, the first year L1 (lowest) tariff obtained in the last competitive bidding for 3,800 mw by UPPCL (Uttar Pradesh Power Corp) was Rs 3.939 per unit at UP periphery whereas in case of Dhariwal Infrastructure, on the basis of power being supplied at present by Dhariwal Infra to NPCL, the first year total tariff is more than Rs 4.79 if transmission charges up to UP periphery is also included," the regulator reasoned in its order.At least three other bids were also lower than Rs 4 a unit, UPERC added.
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