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CERC move positive, CIL coal linkage an issue: Adani Power

CERC has allowed gross compensatory tariff of Rs 0.85 / kWh against Gujarat PPA (vs Deepak Parekh committee recommendation of Rs 0.89 / kWh) and Rs 0.36/kWh against Haryana PPA (vs Deepak Parekh committee recommendation of Rs 0.41 / kWh).

The Central Electricity Regulatory Commission’s (CERC) order allowing gross compensatory tariffs to Adani Power against the Power Purchase Agreements with the Gujarat and Harayana governments will partially mitigate the strain on the company’s balance sheet, said Vneet Jaain, CEO, Adani Power.

CERC has allowed gross compensatory tariff of Rs 0.85 / kWh against Gujarat PPA (vs Deepak Parekh committee recommendation of Rs 0.89 / kWh) and Rs 0.36/kWh against Haryana PPA (vs Deepak Parekh committee recommendation of Rs 0.41 / kWh).

In an interview to CNBC-TV18’s Latha Venkatesh and Sonia Shenoy Jaain said the order gives provisional compensation of around Rs 330 crore for past losses. But he said domestic coal linkage from Coal India continued to be an issue, and that further mitigation of losses would depend on the CERC formula. He said the company has filed petitions in Maharashtra Electricity Regulatory Commission (MERC) and CERC for Tiroda and Kawai plants.

Below is the verbatim transcript of his interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18

Can you quantify for us the impact or the relief that Adani Power will see post this judgement?

A: The CERC order will partly mitigate the financial stress on the company on account of energy cost. CERC has given the methodology for computation of compensative tariff, which shall be variable in nature and based on assumptions illustrated in the order.

How much could the bottomline losses be curtailed?

A: The absolute amount cannot be given like this because they have suggested a formula and based on large number of variables such as the coal cost, the free on board (FOB) cost and others and the rupee depreciation, the calculations will work out. Therefore, they have suggested the computation methodology and formula.

So what about this price that was the gross compensatory tariff of 85 paise in Gujarat mean? It may not be 85 paise, it maybe less or more?

A: It is not 85 paise because after this we have to share with them the sale of power beyond the normal availability in the ratio of 60:40 percent and also there will be the adjustment on account, which they have suggested, for the profit from the Indonesian mines.

So you will not have any ballpark figure as well as to how much money you might make because of this compensatory tariff increase?
A: On account of the past losses, they have given the amount of Rs 830 crore. However, as far as further compensative tariff is concerned, they have not given any absolute amount. They have suggested a formula in methodology. Therefore right now saying the absolute amount is not possible. Latha: So that Rs 830 crore is coming for sure? A: Yes, they have suggested that much amount from the past losses. Latha: That will come within 12 months? A: No, this they have suggested in thirty-six months in installments.
You mean the prior losses, the past year losses?

A: Correct.

What will that mean in terms of an interest rate burden falling, what will the relief show on the profit and loss (P&L) in this quarter itself, Q4?

A: No, right now I cannot say how much impact this will have on this quarter results.

But there could be some impact?

A: Yes, there will be positive impact on the balance sheet and there will be a positive impact in this quarter itself.

For the next one-two years, from Rs 46,000 crore debt that Adani Power is sitting on, how much do you think the debt stress could come down to, what kind of target would Adani Power be looking at?

A: On this compensative tariff they have given the value on account of the energy cost and not on the fixed cost. So therefore, the financial stress will slightly remain continuing however, saying the exact amount is not possible for me right now.

Source:  Moneycontrol/CNBC-TV18