Once linkages with Coal India are snapped, new owners need to apply afresh; CESC's stake buy in Dhariwal Infra's Chandrapur plant and Adani Power's buy of Avantha's Korba plant may be impacted
In a bid to prevent any possible trading in linkages, the central government has finalised the norm for ownership change of power plants that would trigger snapping of coal supplies from Coal India to the project.
The new norm, which replaces earlier policy adhocism, would impact power plants like the one promoted by Dhariwal Infrastructure, which was subsequently acquired by Sanjiv Goenka-owned CESC Ltd.
Power plants where 50% or more of equity capital has been divested without putting in at least half of the project costs, such power companies would lose their coal linkages with Coal India, and the new owners need to apply afresh.
And with Coal India's hands already full with all its output tied up for existing as well as upcoming plants, possibility of getting new linkage agreements are remote.
"Promoters of linkage or Fuel Supply Agreement-holder company should not have divested 50% or more of shareholding in the company without achieving significant level of investment in the project. The significant level of investment may be treated as at least 50% of the total project cost as certified by lead banker," coal ministry said in a note dated April 7.
There are other conditions though, which also needs to be fulfilled. Like keeping the project parameters and location intact.
"The new policy shall apply to requests for change of names, and consequential transfer of linkage, received after the publication of the new policy guidelines," the note said.
The development comes at a time when the government is gearing up to start auctioning coal linkages much the same way it gave out coal blocks through two rounds of highly competitive bidding so far.
The new coal linkage norm would specifically impact the 600 mw thermal power station in Chandrapur, about 150 km from Nagpur which CESC had earlier acquired.
Coal India's subsidiary South Eastern Coalfields refused to sign FSA with Dhariwal citing violation of existing norms for Letter of Agreement signed in 2008 and 2009.
The coal ministry then observed that a policy to address the issue of change in name of a company due to amalgamation, takeover, change in ownership and shareholding pattern was under formulation, which would decide on the matter.
Now that the policy has been decided, CESC would need to apply for fresh FSA for its Maharashtra plant as entire shareholding of Dhariwal Infrastructure Pvt Ltd was transferred to Haldia Energy Ltd, a subsidiary of CESC following Dhariwal's takeover by Sanjiv Goenka from the Manikchand Group.
Some of the other power plants that could be affected include the 500 mw Korba West Power Co promoted by Gautam Thapar-promoted Avantha group which has been acquired by Adani Power in November.
The change in the ownership of this completed power project, which has a linkage pact with South Eastern Coalfields, hasn't come up before the ministry since a meeting of the Standing Committee discussed another issue of the project in September.
Lanco Infratech's 1,200 mw Udupi thermal power plant which has also been taken over by Adani Power won't, however, get affected as the plant is based on imported coal.
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