Kannur Power Projects Ltd appears to have overcome the last hurdle in setting up its undertaking with Elpaso Energy as co-promoter, subject to certain conditions set by the Kerala government.
The government told the Supreme Court on Friday that after the Kannur company gave up its partnership with Enron and declared that its collaboration was exclusively with Elpaso, it had no objection to the joint venture.
The government told the apex court Bench comprising Justice Y K Sabharwal and Justice H K Sema that in view of the emerging scenario in the power sector it had decided to allow the request of Kannur Power Projects under the conditions that it would use only liquefied natural gas (LNG) as fuel and would comply with the equity conditions stipulated by the central government from time to time. The court has given two weeks to the government to finalise the deal.
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The previous Left Democ-ratic Front government had opposed the company's collaboration with Enron and this led to litigation in the Kerala High Court and the Supreme Court.
The company had come in appeal against the high court order. However, after the taking over by the United Democratic Front government and the collapse of Enron there was no serious problem for the project getting the green signal.
Moreover, the company had complied with the conditions set by the Central Electricity Authority and been granted techno-economic clearance by it. The equity structure of the project satisfied the guidelines of the central government and the proposed financial structure of the project fully complied with the conditions of the clearance, according to the state government.
The capital cost of the 513-mw project at Rs 588 crore is stated to be the lowest, not only in Kerala, but in the country.
It is the only project which has got techno-economic clearance for the use of natural gas and naphtha as fuel. The Kerala State Electricity Board was of the opinion that with naphtha as fuel the cost of electricity would be very high and the price might not be affordable to the board.
Therefore, natural gas was considered as an alternative fuel to bring the price of electricity to affordable levels.
Moreover, the continued and uninterrupted supply of the gas at steady a price has to be ensured, according to the government's terms for sanctioning the private power project.
Given the present rate of energy consumption in the state, the electricity board will not be able to absorb all the generated capacity. Therefore, the company may have to explore the possibility of selling power to other states. The electricity board has also stated that it is not possible for it to open escrow account in its favour.