 "Gautam Adani")
Power regulatory Central Electricity Regulatory Commission's (CERC) order approving relief under force majeure for Adani Power, Tata Power is a positive development but implementation timelines unclear says ICRA.
"On December 6, 2016, the CERC has come out with the final order on tariff relief for imported coal-based projects of Adani Power Ltd (APL) and Coastal Gujarat Power Limited (CGPL), a subsidiary of Tata Power Company Ltd," ICRA said in a statement said.
According to the statement, the CERC has estimated the tariff relief for APL at Rs 0.29 per unit and Rs 0.26 per unit for PPAs with distribution utilities (or discoms) in Gujarat and Haryana respectively, based on prices of coal and index exchange rate in March 2016.
CERC has estimated the tariff relief for CGPL at Rs 0.05 per unit based on prices of coal and exchange rate prevailing in August 2015, it said.
"ICRA is of the view that the CERC order allowing tariff relief as per directions of the APTEL (Appellate Tribunal of Electricity) is positive development for APL and CGPL, however, it is subject to final approval by Supreme Court (SC) and thus, timelines of its implementation remain uncertain and are not clear," Sabyasachi Majumdar, Senior VP, ICRA Ratings, said.
CERC's order was subsequent to order issued by the APTEL on April 7, 2016, directing the CERC to assess an impact of change in regulations in Indonesia, on projects of APL and CGPL and provide them such relief under force majeure event, as may be available under the respective PPAs.
Implementation of the order issued by the CERC is subject to the permission of the SC.
This tariff relief is before adjustment of incremental profits from mines owned by Adani Enterprises and Tata Power Company in Indonesia, arising from higher coal price, post change in Indonesian regulations, it said.
In addition, the CERC has allowed relief for the past period, which has to be paid in 6 equal monthly instalments by the procurers, from the date of implementation of this order.
However, the CERC has not allowed the actual exchange rate level for tariff relief estimation in case of APL and instead has allowed the exchange rate in line with the bid assumption till the project completion date, which thereafter is escalated at the CERC indexed rate.
In turn, actual tariff relief requirement at prevailing exchange rate for APL is estimated to remain higher by about 8-10 paise/unit over the estimated level according to the CERC's directive.
According to ICRA's estimates, tariff relief estimate for CGPL at prevailing coal price level based on the CERC's order is lower by about 12-15 paise/unit.
"The impact on retail tariff is estimated to vary between 1 to 6 paisa/unit for FY2017 (which is equivalent to 0.1 to 1 per cent on tariff applicable for FY2017 across the states), with a relatively higher impact on the discoms in the states of Gujarat and Haryana. Consequently, timely pass-through of the additional cost under the fuel and power purchase cost adjustment (FFPCA) framework remain crucial for the discoms, else it could affect their cash flow position," Majumdar added.
