Adani Power scraps pact with Gujarat

Feb. 8: Adani Power, which had agreed to supply power to Gujarat Government for 25 years at the same price may be thinking of scrapping the agreement, sources say. The company had entered into an agreement with Gujrarat Urja Vikas Nigam Limited (GUVNL) to supply 1,000 mw power at Rs 2.35/unit for twenty five years.
Sources claimed the scrapping of PPA would mean Gujarat would have to buy power at a higher rate. This could cost the exchequer approximately Rs 650-700 crore every year for next 25 years.
However, the company would honour another bid for 1,000 MW at Rs 2.89 per unit without escalation for 25 years. In 2007, GUNVL inked four PPAs to procure 3,200 MW of power from Adani Power (2,000 MW), Essar Power (1,000 MW for Rs 2.4006 per unit) and Aryan Coal (200 MW for Rs 2.2498 per unit).
This development was dubbed as “a serious blow to government of Gujarat’s move to ensure adequate power supplies for long term” by senior bureaucrats.
Sources said GUNVL has already approached the regulatory Gujarat Electricity Regulatory Commission (GERC) to prevent
Adani Power from backing off. “Scraping the PPA might cost Rs 100 crore to Adani in form of forfeiting of its security deposit. Adani Power preferred to absorb short-term loss against the long term damage since it was supposed to supply power at constant tariff for 25 years,” the source said.
However, sources close to the development revealed that Adani Power decided to go away its agreement with GUVNVL on account of missing fuel linkage.
Adani Power director, Mr Ameet Desai, could not be reached for a comment.