In a move that will cut by Rs.36,000 crore the future capital expenditure of Reliance Power, a part of the Anil Ambani-led group, the company announced on Tuesday that it has terminated the power purchase agreement of its 3,960-MW ultra mega project at Tilaiya in Jharkhand.
Citing the reasons for the termination, the company said the power purchase agreement required the procurers to hand over by February 2010 the land for the power station and the coal mines, as also the site clearance from the Ministry of Environment and Forests.
"However, the required land is yet to be made available. Even the forest land in the power station area, for which the Stage-II Forest Clearance was accorded by the central government way back in November 2010, has not been handed over till now," the company said in a statement.
"As regards the coal block, the land acquisition process is yet to get initiated, for which the application was submitted way back in February 2009," it added, with respect to the decision taken by it's wholly owned subsidiary, Jharkhand Integrated Power Ltd. (JIPL).
"Considering all these facts, JIPL has decided to terminate the PPA with the Procurers. This decision will reduce the future capex (capital expenditure) pipeline of Reliance Power by nearly Rs.36,000 crore."
The company said it pursued in vain with the state government for some five-and-half years and held more than 25 review meetings. But there was no movement forward from the authorities. It said based on the present estimates the project cannot be completed before 2023-24.
The decision, incidentally, comes against the backdrop of Reliance Power recently announcing that it has successful achievement full commercial operation of all the six units of another ultra mega power project -- the 3,960-MW capacity project at Sasan in Madhya Pradesh.
"It may also be mentioned that five units of 660-MW each totaling 3,300 MW were commissioned in just about 12 months. The Sasan project is the largest integrated power plant cum coal mining project at a single location in the world, involving investment of over Rs.27,000 crore."
Reliance Power was awarded the Tilaya project based on tariff-based bidding managed by Power Finance Corp, in February 2009. The company's special purpose vehicle was handed over this task in the same year. Power purchase pacts were also signed with 18 buyers in 10 states for 25 years.
For fuel security, the project was allocated Kerendari BC captive coal mine block.
The Reliance Power statement said with the completion of its first phase of capital investments of nearly Rs.50,000 crore, it has six operating plants with a capacity of nearly 6,000 MW, it said, adding that it will now focus on clean and green portfolio of renewable and hydro power projects.
With a debt to equity ratio of 1.5:1, one of the lowest in the power sector, Reliance Power remains a financially conservative company.