Power firms, AP govt reach win-win deal

The gas-starved power producers in Andhra Pradesh are close to an agreement with the state government which promises to be a reprieve for both the parties.

The Andhra government will be freed of its commitment to pay Rs 1,020 crore annually towards fixed costs to the four independent power producers (IPPs), whether they generate power or not, in return for an extension of the power purchase agreements (PPAs) signed by these companies and some other sops.

Three IPPs in the state, GVK, Konaseema and Gautami, have agreed to the deletion of the alternative fuel clause from the PPAs, which commits the state government to the payment.

The fourth IPP "" GMR Group promoted 370 Mw Vemagiri power "" has already signed an amended PPA with the state power utility on similar lines.

Konaseema Power (445 Mw), Gautami (370 Mw) and GVK's expansion project (220 Mw) yesterday informed the Andhra Pradesh Electricity Regulatory Commission (Aperc) that they, too, had agreed to the deletion of the alternative fuel clause in the yet-to-be-concluded negotiations with APTransco.

"The three IPPs have told the commission that they had agreed to the deletion of alternate fuel clause and were currently engaged in final negotiations with APTransco," a senior official of Aperc told Business Standard.

In the past, the four developers had accepted the non-usage of alternative fuel""naphtha"" till January 1, 2007. Under the new agreement, expected to be cleared by Aperc shortly, GMR's Vemagiri project was given an extension of PPA for 8 years beyond the existing 15-year period, besides extension the term of foreign debt service charge (FDSC) payment period to set off the revenue loss.

Though the project is ready for commercial operation, the new agreement enables the company to claim fixed charges only from April 1, 2008, which means the project gets no revenue for the next 20 months besides sitting idle in the absence of gas.