22 October, 2019
Five power distribution companies of Uttar Pradesh had entered into a power purchase agreement dated November 21, 2008 (‘PPA’) with Prayagraj Power Generation Company Limited (‘PPGCL’) to purchase power from its thermal power project in Uttar Pradesh. The tariff under the PPA was determined based on a competitive bidding process undertaken by Uttar Pradesh Power Corporation Limited (‘UPPCL’). Upon the application of UPPCL, the tariff adopted under the PPA through a transparent bidding process was approved by the Uttar Pradesh Electricity Regulatory Commission (‘UPERC’) pursuant to Section 63 of the Electricity Act, 2003 (‘Electricity Act’).
PPGCL had raised loans from a consortium of lenders led by State Bank of India (‘SBI’) and such loans were secured by a pledge of 88.51% of the equity shares of PPGCL held by Jaiprakash Power Ventures Limited. PPGCL failed to discharge its debt obligations due to which the lenders enforced the pledge and, thereafter, SBI issued a tender for sale of pledged shares in order to resolve the financial and operational stress of PPGCL. Resurgent Power Ventures, Singapore (‘Resurgent Singapore’) was selected as a successful bidder for acquisition of 75.01% of equity share capital of PPGCL, which acquisition is to be effected by Renascent Power Ventures Private Limited (‘Renascent India’), an Indian subsidiary of Resurgent Singapore. As the PPA contained certain restrictions in relation to change in shareholding of PPGCL, the lenders sought consent of the PPA counterparties for the transfer of 75.01% equity shareholding to Renascent India. However, the PPA counterparties asked the lenders to seek such consent from the UPERC.
Upon the petition filed by the SBI to the UPERC for the approval of sale of 75.01% shares, the UPERC observed that it has no objection in transfer of shares but the tariff should be reduced by Rs. 0.14 per unit on the ground that the debt burden of PPGCL was substantially reducing due to lenders writing off a part of debt owed by PPGCL to them and that the benefit accruing to Renascent India due to such debt reduction should be shared with the consumers by reducing the tariff. Renascent India being aggrieved by the order passed by the UPERC, filed an appeal before the Appellate Tribunal of Electricity (‘APTEL’). On this appeal of Renascent India, the APTEL, by its order dated September 27, 2019, held that that UPERC is not justified in reducing the fixed charges (forming part of the tariff) because the tariff was adopted by the UPERC under Section 63 of the Electricity Act through a transparent competitive process and in accordance with the Case-II bidding guidelines issued by the Central Government.
Additionally, APTEL observed that the petition from which the impugned order has emerged was in relation to the transfer of shares and not for adoption of the tariff.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
