Govt invites 4 projects for renegotiations

The Congress state government yesterday invited the four private gas-based power projects "" GVK (216 mw), Lanco (359 mw), Spectrum (208 mw) and BSES power (220 mw) "" for renegotiations on the proposed reduction of their fixed costs.

Announcing this on Thursday, Andhra Pradesh chief minister Y S Rajasekhara Reddy told the media that his government wanted to reduce their fixed cost to the extent of Rs 400 crore annually, which would be sufficient to subsidise the free power scheme being implemented for the farmers.

The chief minister stated that the government was prepared to face legal battles in its endeavour of cutting down fixed costs of these four projects.

"I don't think we will witness as big a legal complication as that of Enron in dealing with them," he cryptically remarked.

"Compared to the public sector, Andhra Pradesh Gas Power Corporation Limited (APGPCL), we have been paying at least Rs 200 crore annually to these projects towards fixed cost. To recover this, we now want to reduce the fixed cost by 10-15 paise on the Gouthami Power Project's (new IPP, which is nearing financial closure) fixed cost of Rs 0. 98 paise per unit, which is the lowest fixed cost among the new PPAs," Rajasekhara Reddy explained.

It is estimated that about Rs 250 crore would be saved if the fixed cost of the existing four power projects is brought to the level of Gouthami's fixed cost.

The government now intends to reduce the average fixed cost by about 45 paise per unit, which would be a rude shock to the project developers.

If the government wants it to be further reduced by about 15 paise, as the chief minister stated, then the fixed cost payment would come down to just Rs 438 crore, which is just half of what is being currently paid.

The four power projects with a combined installed capacity of about 1,000 mw, generating 7,000 million units of power at 80 per cent plant load factor (PLF) annually, have been paid Rs 1,496 crore towards power bills in the year 2003-04. Of this the total fixed cost component is Rs 838 crore.

APTransco has been paying Rs 192 crore (including an incentive of Rs 25 crore) to GVK, Rs 175 crore to Spectrum, Rs 318 crore to Lanco and Rs 156 crore to BSES power towards fixed costs annually.