“We have reached an agreement and documentation work is under way,” Sowmyan Ramakrishnan, executive director for finance at the Mumbai-based utility, said in an interview. “We expect to sign a final agreement by October.”
The relief on breaches of debt covenants was extended ahead of an expected increase in the tariff earned by the 4-gigawatt plant on India’s western coast, raising its chance of a revival. The higher fee may also help the company win better credit ratings from companies including Moody’s Investors Service, which downgraded its outlook to negative from stable in July.
Tata wrote off 26.5 billion rupees ($400 million) on the Mundra site in Gujarat after fuel costs rose. It won the project by bidding at the lowest tariff, counting on low prices for coal from Indonesia, the biggest exporter to Indian power stations.
Indonesia’s decision to link its coal prices to a world benchmark made the tariff unviable, prompting Tata to seek a higher rate from the electricity regulator.
The Central Electricity Regulatory Commission agreed to a compensatory tariff for Tata Power and Adani Power Ltd. (ADANI), which also applied for a higher rate. The watchdog told the companies to form a committee to agree the tariff increase with consumers. The committee has submitted a report to the regulator, which will give a final order based on the document.
Tata Power won the right to build Mundra in December 2006 with a tariff of 2.26367 rupees a kilowatt-hour. The price of Indonesian coal with a calorific value of 5,350 kilocalories a kilogram is up 54 percent from $42.13 a metric ton since then.
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