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Lanco cracks power purchase agreement with MP

New Delhi,Business/Economy, Mon, 03 Dec 2012 IANS

New Delhi, Dec 3 (IANS) In a breakthrough, infrastructure firm Lanco Infratech Monday announced it had begun supply of power to Madhya Pradesh discoms from its Amarkantak Thermal Power Station after resolving the issue of pricing.

Madhya Pradesh Electricity Regulatory Commission (MPERC) Saturday approved the procurement process and price for long term power purchase by the state from Power Trading Corporation (PTC) to be sourced from unit 1 of Lanco's Amarkantak power station, a statement said.

Longstanding disputes about the Power Purchase Agreement (PPA) signed in 2005 had held up commencement of power supply, which were resolved by a settlement agreement in October between MP Power Management Company (MPPMC), representing state discoms - PTC and Lanco.

Lanco Amarkantak Power Private Ltd., a subsidiary of Lanco Infratech had entered into a power purchase agreement with Power Trading Corporation in May 2005 through which the state was to be supplied 300 MW.

"The revised PPA benefits Madhya Pradesh with supply of 300 MW of power on a long term basis at one of the lowest tariffs in the region determined as per CERC Regulations," a Lanco statement said here.

"Supply of power to Madhya Pradesh discoms through PTC from the 300 MW Unit No.1 of Amarkantak power station has started from 00:00hrs on Dec 3, 2012," it added.

With the new agreement, Lanco will be able to pass on rising fuel costs to the distribution companies.

"There has been an unexpected change in fuel availability and prices. As a power producer, we do not want to make money on fuel but we do not want to lose money either. So, we wanted a reasonable rate of return on our fixed costs and a pass-through in tariff," K. Raj Gopal, CEO (power), Lanco Infratech, told IANS.

"The revised PPA provides for a pass-through of energy (fuel) charges, and also enables Lanco to procure alternate fuel supplies such as e-auction or imported coal in case of short-supply from South Eastern Coalfields Limited (SECL), and receive the fuel charge at actuals," Raj Gopal added.

The company was forced to sell power from the plant, commissioned two years back at a cost of Rs.1,350 crore, to Punjab after it found that the Rs.2.25 per unit ceiling on power tariff was unviable.

The Madhya Pradesh government had black-listed Lanco and all its group companies for doing business in the state for five years in February this year, for not supplying power under the contract.

"The state agreeing to waive the tariff ceiling for power to be supplied from the plant is a key aspect of the settlement," said Raj Gopal.

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