GMR Infra seeks gas plant's fixed cost from AP discom

GMR Infrastructure has sought Rs 480 crore for recovering fixed costs for its 388.5-megawatt (Mw) gas-based power plant from the Andhra Pradesh Central Power Distribution Company, sources said.

The power plant at Vemagiri in the state has been idling for lack of gas from Reliance Industries's KG-D6 block since the start of this financial year. It's plant load factor (a measure of capacity use) has been zero for months now, leading to losses. Consequently, GMR Infra is seeking recovery of fixed costs such as capital costs and maintenance from the state distribution company (discom), which buys power from it.

While the discom could not be reached for comments, GMR said denied to comment on the development. Many off-take contracts allow for recovery of fixed costs if the buyer fails to purchase power from the project. Reasons for not buying power can range from lack of demand to the finances of the discom. In such cases, the discom pays to ensure the power plant does not go into losses.

POWER PLAY

• GMR Infra’s plant at Vemagiri has been idling for lack of gas from RIL’s KG-D6 block since the start of FY14
• Many off-take contracts allow for recovery of fixed costs if the buyer fails to purchase power from the project
• In such cases, the discom pays to ensure the power plant does not go into losses
• However, the AP discom is not ready to buy power that the combined cycle power plant can generate using a costlier replacement of natural gas,LNG

However, the AP discom is not ready to buy power that the combined cycle power plant can generate using a costlier replacement of natural gas, liqufied natural gas or LNG. "The price of such power can be as high as Rs 7 a unit. The discom said it would not buy at such prices. There are other avenues of cheaper power and also it would increase the costs for the discom," said a power sector official.

Political pressure
The peak power deficit in Andhra Pradesh has come down markedly in the past one year, reducing its dependence on costlier alternatives. The difference between power supply and demand during peak hours had come down to five per cent in August this year from 28 per cent in the same last year. The gas-based Dabhol power plant in Maharashtra has also approached Mahavitaran, the state discom, with a similar request. But analysts say discoms might not entertain such requests.

Said a sector analyst on condition of anonymity, "The discoms might not agree to pay those power plants that are not producing power. There would be a lot of political pressure against it. Many distribution companies are already facing tough times."

By the end of the September quarter, the supply of natural gas from KG-D6 fell to 13 million standard cubic metres a day (mscmd) from its peak of 60 mscmd in 2011, hitting many power plants in Andhra Pradesh.

Apart from GMR, GVK, Lanco, Sravanthi and Konaseema have power plants in the state sourcing gas from the Krishna-Godavari basin.