Adani Power's beleaguered, imported coal-based Mundra power project on Friday got a much-needed booster with the Central Electricity Regulatory Commission (CERC) allowing tariff hike for 2,000 MW capacity linked to Gujarat discom GUVNL by amending the power purchase agreement (PPA).
The regulator's move, which keeps hopes alive for the plants of Tata Power and Essar Power in Gujarat facing similar problems, could allow Adani Power to hike tariffs by Rs 0.80/unit or close to a third in the current coal environment. Edelweiss Securities had said that the tariff hike (as recommended by a high-powered committee and now approved by the regulator) could boost earnings before interest, taxes, depreciation and amortisation (Ebitda) of the firm by about Rs 1,600 crore (annually) at 70 per cent PLF level.
There's also a 20 paise/unit cut in capacity charge owing to the haircut by lenders. The Adani Power stock went up 5.2 per cent on Friday to close at Rs 52.95.
The regulator also allowed pass through of coal costs, subject to a cap of $110/tonne. Additionally, it allowed extension of PPA with GUVNL by another 10 years after completion of the 25-year tenure by 2032. The supplemental PPA will take effect retrospectively from October 15, 2018.
Adani Power is the first to benefit from the Supreme Court's October 29, 2018, ruling that extended the lifeline to the three troubled imported-coal-based power plants in Gujarat (Tata Power's Mundra unit and Essar's Salaya plant are the other two) by allowing the CERC to amend their PPAs to facilitate pass-through of future fuel price escalation, subject to a ceiling. The court said its April 2017 order denying compensatory tariffs to these plants wouldn't come in the way of implementing the fuel cost pass-through and other measures recommended by a high-level committee to salvage the units. These units got into trouble due to unforeseen hike in Indonesian coal prices. Adani's Mundra unit – which a total capacity of 4,620 MW – reported accumulated losses of Rs 10,300 crore as at end of Q3FY19; the plants have been operating at very low PLF levels for quite some time.