Tata Power's Mundra ultra mega power project, which remained shut through out the second quarter because of the unviable price of its power, may spring back to action soon as the company is very close to signing a supplementary power purchase agreement (PPA) with the Gujarat government.
The signing may happen in a few days, Dr Praveer Sinha, the company's managing director and chief executive officer said in an interview for Moneycontrol's ongoing series "Latha & The Leaders".
Mundra, one of the four UMPPs signed in 2007, has been languishing intermittently, whenever coal prices rise because a well-hedged agreement that the company had entered into for Indonesian coal came unstuck a decade ago when the Southeast Asian nation's government changed the rules. Now with the demand for power rising sharply due to economic development and the rise of power guzzling industries like data centres, state governments appear to be showing an interest in renegotiating the power purchase agreement with Tata Power.
"Once the Gujarat PPA is in place, the four other states have told us they will also agree to the same arrangement," Sinha said.
The non-operation of the plant had caused the company a loss of about Rs 450 crore in the second quarter ended September 30. The plant does operate intermittently, when the Gujarat government, under section 11 of the Electricity Act, buys its power. Sinha confirmed that under the upcoming new PPA, the company is likely to be granted a similar return that it got under Section 11. If signed - and Sinha repeatedly said he expects it very soon - Tata Power may see a decades-old hemorrhaging come to a close.
Separately, the company expects to get Rs 4,500 crore paid to it by the Delhi government over the next 7 years. This is because the Supreme court recently ruled that past dues - which are lying unpaid for decades under the euphemism of regulatory assets - have to be cleared in seven years.
Other expected acts of good governance that may benefit the company is the new Electricity Amendment Act that allows all areas to have multiple power suppliers. The amendments also contain a provision of the Centre to help states reduce their accumulated losses on power distribution, provided they agree to a private-public partnership for their discoms.
Tata Power, after its success with the Odisha discom, hopes to bid for distribution business in more states as and when they open up.
All told, it appears that the power sector in the country is on the mend and Tata Power may increasingly be the beneficiary as old loans get paid back and more states opt for handing over their distrbution to private companies - provided the nudge in the Electricity Amendment Act sounds lucrative enough.
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