India Court Asks Regulator to Decide on Tata, Adani Power Relief
Adani power’s Mundra Power Plant in Gujarat (Source: Adani Power Website) 

India Court Asks Regulator to Decide on Tata, Adani Power Relief

(Bloomberg) -- India’s top court Monday directed the federal electricity regulator to decide within 8 weeks on approving revised tariffs for three power producers in the western state of Gujarat due to increased cost of imported coal.

The Gujarat government sought the top court’s intervention to implement a state government panel’s report that recommended implementing a cost-reflective tariff, which would mirror any increase or decrease in input costs. The plea also includes a provision to extend the contract period for the plants run by Tata Power Co., Adani Power Ltd. and Essar Power.

The two judge bench led by Rohinton F. Nariman said the decision for tariff should not be bound by an earlier single-judge order, which had rejected the power producers demand for higher tariff last year. Tata Power jumped as much as 25 percent, the biggest jump in intra-day trade in a decade, while Adani shot up as much as 21 percent, the highest since January.

Higher tariffs would allow these plants, with a combined capacity of nearly 10 gigawatts, to run at full capacity, after lying under-utilized since the Supreme Court last year denied an increase in tariffs. Bringing these plants back into the grid could improve the reliability of supply as well as ward off chances of these projects slipping into non-performing assets.

The plants had bid for a fixed tariff to win the projects, but those tariffs turned unviable after Indonesia changed its coal pricing regulations in 2010, linking prices of the fuel to an international standard.

The revival plan also includes lenders writing off a part of their loans and project developers absorbing accumulated losses, according to people familiar with the plan. The court today asked the Central Electricity Regulatory Commission to hear all consumer groups on the proposals.

Tata Power operates a 4,000 megawatt plant in the coastal town of Mundra in Gujarat, while Adani Power runs a 4,620 megawatt plant at the same location. Both generating plants are fueled by coal imported from Indonesia. Essar operates a 1,200 megawatt plant at Salaya in the same state.

The plants haven’t been running at full capacity after the court ruled last year that a change in regulations overseas couldn’t be a ground for increasing power prices.

Adani’s plant ran at 44.3 percent capacity during the first half of the fiscal year that began April 1, compared with 66 percent in the same period a year earlier, according to the Central Electricity Authority. Tata Power’s Mundra station ran at 67.7 percent capacity, down from 69.2 percent in the previous year. Both these companies have coal mining rights in Indonesia, which hedges against the increase in coal prices. Essar, which doesn’t have a mine, kept its plant shut during the time, data show.

©2018 Bloomberg L.P.

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