Shares of Tata Power Company and Adani Power rallied up to 7% on BSE in intra-day trade on Monday amid reports that the Gujarat government has decided to increase tariffs of three coal-based power plants.
The Gujarat government has directed its power distribution company to raise tariffs of the three imported coal-based power plants owned by Tata Power, Adani Power and Essar Power by amending their power purchase agreements (PPAs) and approaching the power regulators for approval, the Economic Times said.
Tata Power has moved higher by 7% to Rs 81.30 on back of heavy volumes after the company said it welcomes the resolution by the Government of Gujarat to accept the recommendations of the High Power Committee in giving some relief to Mundra Ultra Mega Power Project that meets nearly 15% of Gujarat's requirement of power at a very reasonable cost.
“This relief will help Coastal Gujarat Power Ltd to continue its operations to meet its obligations to the entire five beneficiary states. Though the coal cost is now a pass-throughh, the company would continue to make losses due to the rebate on financing cost and coal mines profit is being passed on to the beneficiary states. We expect to get the consent of other four procurer states based on the recommendations of the High Power Committee's and thereafter amendment to the PPAs so as to seek necessary approvals from CERC as per the directions of the Hon'ble Supreme Court,” Tata Power said in a regulatory filing.
This positive step is in the interest of all stakeholders, including the end consumers, who get 24X7 reliable electricity supply from CGPL power plant. In case these projects shut down, replacing such huge capacity with alternate sources from the market would not be feasible as the short-term market prices are not only much higher and volatile, the availability of power is uncertain. Also, establishing new imported/indigenous coal-based power plants would have significantly higher fixed and variable costs and high gestation period and hence, would not offer any solution to immediate power requirement, it added.
The Gujarat government has directed its power distribution company to raise tariffs of the three imported coal-based power plants owned by Tata Power, Adani Power and Essar Power by amending their power purchase agreements (PPAs) and approaching the power regulators for approval, the Economic Times report suggested.
Adani Power hit a fresh over three-year high of Rs 57.65 per share, gaining 4% today. In the past two months, the stock of Adani Group Company has outperformed the market by zooming 122% from Rs 26. In comparison, the S&P BSE Sensex was up 1% during the same period.