Tata Power Contemplates Over 51% Stake Sale In Mundra UMPP. Know Why

Tata Power is concerned about the UMPP becoming an NPA and has therefore written to the Prime Minister’s Office and Power Ministry offering to sell the said stake to Gujarat government for a token amount of Re 1.

However, the power generating company’s offer is contingent to the government helping to cover production costs at the Mundra UMPP. Tata Power has also assured to stay on as a 49% stakeholder in the project after the stake sale.

The UMPP has been in losses for over years due to higher Indonesian coal prices during the initial years of operation and the delay in grant of a compensatory tariff.

Both companies had cited the term and conditions of the power purchase agreement (PPA) between them and the electricity distributors, to claim that the change in Indonesian regulations in 2010 that increased the cost of coal imported by the companies was a force majeure event and therefore the companies can pass on their increased costs to their consumers.

Appellate Tribunal for Electricity Regulation, APTEL had ruled in April 2016 that both the power companies needed to be compensated because the change in Indonesian laws was beyond the control of these companies. It further ruled that as per the terms and conditions of PPA between the power generating companies and distributors, this change in Indonesian laws was a “force majeure event” hence the power generating companies can pass on their cost due to their consumers.

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