Essar Power to terminate 800 mw PPA with Gujarat

AHMEDABAD: Gujarat’s aggressive plans in power sector is facing troubles yet again. Essar Power Limited that agreed to supply 800 mw of power for next 25 years at Rs 2.80 per unit wants to terminate its agreement with the state utility Gujarat Urja Vikas Nigam Limited (GUVNL). The power purchase agreement (PPA) was signed in May 2010 and Essar Power issued one week notice for terminating PPA to GUVNL on August 14.

Essar Power statement read, “This (PPA termination) decision follows the failure by GUVNL to satisfy certain conditions under the PPA within the required timescale.” However, industry sources reveal that increasing imported coal prices have made many power projects unviable. Essar Power is commissioning 1320 mw of imported coal based project at Salaya in Saurashtra region of Gujarat.

Earlier, Adani Power terminated its PPA for 1000 mw with GUVNL sighting non-allocation of coal mine by the government of Gujarat as a reason. GUVNL challenged Adani Power before the regulator and the matter is pending before the appellate.

Meanwhile, Essar Power stated that the company remains committed to the Salaya power project and will be reviewing its options with regard to power sales. Proposed project is currently scheduled to commission in Q1 2014. It may be mentioned here that Essar Group cancelled its plans to commission special economic zone in Gujarat last year.

Gujarat’s one of the largest investors Essar Group is the oldest independent power producer in Gujarat with 500 MW of PPA. It has also signed one more PPA for 1000 mw with GUVNL and the project is expected to be commissioned anytime soon.

The latest development has created concerns among the state machinery, which has promptly approached the Gujarat Electricity Regulatory Commission to complete the formalities within a weeklong notice issued by Essar Power.