Calls for re-negotiation of 'Basin Bridge' PPA
In the same report, CAG expresses serious misgivings about a Power Purchase Agreement (PPA) between TNEB and the GMR Vasavi Group for the 196-MW 'Basin Bridge' power project north of Chennai.
From an initial perusal of the CAG report it would seem that the PPA terms are unbelievably loose, resulting in huge loss to TNEB, writes a Petrowatch correspondent in Chennai. In its report, CAG points to a central government directive issued on 30th March 1992, which states that incentive is payable to Independent Power Producers (IPPs) at the rate of 0.7% Return On Equity (ROE) for each percentage point increase in actual Plant Load Factor (PLF), over and above 68.49%.
CAG accuses TNEB of ignoring this directive, and instead committing to pay 0.7% on actual equity. The report notes that the GMR Vasavi plant is running at 85% PLF and that the equity of the company that runs the project is Rs227cr ($52m).
According to the national auditor, this translates into an incentive payment of Rs24.37cr ($5.6m) per annum, as compared to Rs3.90cr ($908,000) per annum payable if calculated on ROE, resulting in extra expenditure of Rs20.47cr ($4.7m) per annum to TNEB. In addition, CAG talks of an unjust enrichment of the promoters by Rs2.66cr ($619,000) per annum because ROE payments are made on a monthly basis rather than yearly.
Monthly payments result in a compounded rate of 17.17% as against the agreed 16%. In its concluding chapter, CAG ominously calls upon the TNEB to renegotiate some of the terms of the PPA,and also to consider these aspects in other PPAs entered into or under finalisation in respect of other projects.