APTEL Challenges Orders By CERC On Tata, Adani Projects
Biswajit Yadav / 01 Apr 2014
Electricity regulator Central Electricity Regulatory Commission's (CERC) move to allow compensatory tariff for Tata Power and Adani Power has been challenged before Appellate Tribunal for Electricity (APTEL) by an NGO.
Electricity regulator Central Electricity Regulatory Commission's (CERC) move to allow compensatory tariff for Tata Power and Adani Power has been challenged before Appellate Tribunal for Electricity (APTEL) by an NGO, which alleges that the move will give undue benefits to these utilities. The tariff hike was supposed to come into effect from April 1, 2014.
As per the Power Purchase Agreement (PPA), Tata Power and Adani Power having capacity of 4000 MW and 4620 MW respectively were supplying power at a fixed rate to the state distribution companies but were incurring huge losses due to import of coal from Indonesia at higher price. This happened due to the change in rule by Indonesian government of disallowing export of coal at less than international prices. CERC allowed Tata Power and Adani Power to raise tariff and receive compensation to reduce its losses incurred at their Mundra Projects.
To compensate past losses worth Rs. 1158 crore, CERC allowed the states to recover earlier losses which were accrued due to import of coal. CERC allowed Tata Power to raise tariff by Rs. 0.52 per Kwh to recover the loss of Rs 329.45 crore from Gujarat, Maharashtra, Rajasthan, Haryana, and Punjab, while for Adani Power, the regulator has allowed a rate hike by Rs. 0.85 per Kwh and Rs. 0.39 per Kwh for the Gujarat and Haryana plants respectively to recover the loss of Rs. 829 crore.
The NGO has alleged that an increase in tariff and compensation will result in an undue benefit of Rs. 75000 crore for the two power producers. Due to this tariff hike, the distribution companies will have to bear an extra burden of Rs. 31800 crore. Apart from this, the coal suppliers will have to bear an extra burden of Rs. 44000 crore as a part of compensation.
Till September 2013, Adani Power was sitting on a total debt of around Rs. 40608 crore while Tata Power was sitting on a total debt of more than Rs. 38047 crore. As far as losses are concerned, Tata Power had total loss of Rs. 266.79 crore till Q3FY14 while Adani power had reported total losses of Rs. 2815 crore in the same period. Due to compensation, the debt burden on the companies will be reduced while the tariff hike may turn all the loss into profits.
Tata Power, yesterday (31 March, 2014) lost around 2.6% on intraday trading and closed at Rs. 84.80 on BSE and today (1 April, 2014- 10:45 AM) it is trading at Rs. 84.05 which is 0.88% lower than its previous close. On the other hand, Adani Power yesterday closed at Rs. 48.65 on BSE, lower by 0.5% from its open price and today (10:45 AM) it is trading at Rs. 47.35, down by 2.67%.
We therefore advise our investors to keep a close eye on the issue. If the tariff hike is barred, the scrip may see some further fall.
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