India

Sikkim Government not to sell stake in Teesta Urja ltd.

Government to continue holding controlling equity in the 1200 MW project
By Soumik Dutta

“The new state Government of Sikkim under the Sikkim Krantikari Morcha Party has restructured the Special Purpose Vehicle (SPV) Teesta Urja Limited(TUL) and is now the project owner. There are definitely no plans or discussions for selling our controlling stake in TUL, the private equity partners in the TUL could be in talks, but no decision has yet been communicated to the Government”, informed Mr. M. N. Sherpa, Minister for Power and Energy, Government of Sikkim, speaking exclusively to this correspondent.

“TUL is a Sikkim Government Enterprise”, said a nominee director in the board of TUL representing Asian Genco, adding that  during the previous government  of Mr. Pawan Chamling, there was such a proposal mooted, but since a new political party has come to power in Sikkim, no action was taken on such a proposal.

The Minister stated this amid speculations and news reports that Singapore’s GIC and Abu Dhabi Investment Authority backed Greenko is all set to buy the 1200 MW Teesta Stage III hydro power project in Sikkim, in phases. The report also speculated that since Greenko has a penchant for having controlling interest in power assets it acquires, it would thus initially acquire 40% stake in the first phase pegged at an investment of  $200-250 million(Rs.1400-1750 crores) from Singapore based Asian Genco.

The said report went on to say that Greenko had already applied to the Competion Commission of India for mandatory sanctions, however, when contacted neither Greenko nor the Competition Commission of India divulged any details of this move.

The Genesis:

In March  2010,  private equity (PE) firms led by General Atlantic, Goldman Sachs, Morgan Stanley, Norwest Partners, Ashmore Investment and Everstone Capital invested close to $425 million in Singapore based infrastructure firm Asian Genco, through Mauritius based Varuna Investments as the holding company , having 100% preference shares but without voting rights.

In 2014, the dispute between PE investors and Asian Genco promoter T. V. Vijaykumar took a nasty turn in their business relations. Hyderabad police stated that Cobalt Power, a company owned by Vijaykumar, had invested Rs 200 crore in a Seemandhra thermal power project, promoted by Asian Genco.

As Cobalt did not get back its money or get any share in the company, it approached the local court. The court directed the police to probe the cheating complaint against all directors of Asian Genco, which included the nominees of the PE entities.

The PEs  had in their part moved for arbitration proceedings  in Singapore courts for management control and to recover their funds.

TUL always in the eye of the storm:

Asian Genco’s projects have been delayed considerably and face massive cost overruns. Allegations of bending of rules to get the Teesta Stage-III 1200 MW project from the government of Sikkim,  ensuing PIL’s and an earthquake in 2011, had further delayed commissioning. Its Andhra project faced opposition from locals over land acquisition issues.

Asian Genco’s promoter T. V. Vijaykumar is known to be in the inner coterie of businessmen  close to Jagan Mohan Reddy currently Chief Minister of Andhra Pradesh, son of the late Andhra chief minister, Y S Rajasekhara Reddy.

Though the  GOS signed the Memorandum of Understanding(MOU) with a consortium headed by a nondescript company   Athena projects private limited in February 2005, as late as in July 2012, it had to literally fight to get its share of 26% equity for which it had to borrow Rs.296 crores.

According to credit rating agency ICRA, the present share holding composition of TUL is as follows:

  • Government of Sikkim(GOS) holds 60.08%
  • Asian Genco Pte Singapore  holds 24.98%
  • Power Trading Corporation India Limited(PTC) -5.62%
  • Indus Clean Energy (India) Private Limited-5.18%
  • Athena Projects Private Limited-2.72%
  • APPL Power Private Limited-1.42%

Surprisingly, most original share holders mentioned in the letter of intent( LOI) and the MOU are missing like L&T, ICICI Securities, Karvy, Halcrow and even APGENCO! are not there, nor were they ever there!

Based on this ICRA pattern, all other share holders except GOS add up to 39.92% of equity, so whose 40% stake is Greenko planning to buy? It must be the combined 39.92% and 0.08% from GOS.

GOS is now the owner of TUL with 60.08% equity, though as per MOU it was to be only a 26% share holder, but circumstances forced it to borrow first Rs.296 crores for 26% equity, at that time Asian Genco held control with 50.9% equity and then in excess of Rs.3000 crores for buying controlling shares from salvaging the project from liquidation when Asian Genco and their PE investors were in legal battles.

Athena Projects Private Limited is a minority holder now , though they are supposed to be project proponents at LOI and MOU time, APPL Power Private Limited has some people from Athena as their directors.

Indus Clean Energy India Private Limited is a nominal share holder, but when and why it bought shares is not known. Interestingly, it is a subsidiary of a foreign company. PTC India has a nominal share holding presence, which has progressively reduced over time, though it has been an initial promoter within Athena .

Though the Sikkim Minister of Power has clarified, GOS is definitely not keen to sell off TUL stake, it is debt strapped.

In the last assembly session, the new chief minister had mentioned a per capita debt of 1.5 lakhs per Sikkimese person and an overall debt of Rs.16000 crores on the exchequer, out of which hydro projects where GOS held or was supposed to hold between 11-26% equity, and definitely TUL has the largest share of debts mostly from Rural Electrification Corporation( REC), and Power Finance Corporation( PFC) .

REC had lent Rs.4600 crores leading a consortium of ten nationalized banks in the early years of TUL, which were investigated to be shown as a charge in the account of Asian Genco Singapore.

Earlier, the All India Power Engineer’s Federation had alleged the Teesta-III power project as a failed example of public-private partnership since it is selling electricity at a discounted rate in open market, as against the contracted rate.

The Federation claimed that power produced from Teesta- III power plant is being sold at a rate below Rs 3 per unit in open market after Punjab, Haryana, Rajasthan and Uttar Pradesh refused to buy electricity from it at Rs 6 per unit– which is the contracted rate.

Punjab, Haryana, UP and Rajasthan  refused to accept the high cost power from 1,200 MW Teesta-III hydro project in Sikkim at the escalated tariff of about Rs 6 per unit instead of original Rs 1.92 paise per unit, the federation said in a statement.

On February 28, 2017 after commissioning, since the 400 kV double circuit lines were  not completed, as a temporary measure, the power from Teesta –III was injected at the Rangpo grid substation of Power Grid Corporation of India Limited (PGCIL), in Sikkim –West Bengal border.

From Rangpo to Binaguri in West Bengal, the power was transmitted through the existing old double circuit line constructed for transmitting 510 MW of NHPC’s  power project. It  could not  take the additional power of 1200 MW from Teesta –III project, and in order to avoid over loading, the power generation of Teesta –III had to be restricted to about 850-900 MW against the capacity of 1200MW.

In the Monsoon period of 2017 and 2018 the Teesta-III project suffered power loss of 400-450 MW due to non availability of the 400 kV double circuit lines from Teesta –III to Kishanganj.

One of the two transmission lines i.e. Teesta-III to Rangpo line was commissioned only as late as January 2019 while the second line, Rangpo to Kishanganj was completed and commissioned in February 2019.

It was only in June 2019 that the Teesta-III hydro project was in a position to generate full 1320MW, with the increase of water flow in the Teesta and with both the 400 kV lines operational.

The Genesis of the problem:

In an emergency meeting held on June 13, 2017 at the Eastern Regional Power Committee (ERPC) Kolkata, TUL stated that Teesta III power production is being restricted to 600 MW (as against 1200 MW capacity) and is daily losing 12 million units valued at  ₹6 Crores. This was owing to the non-completion of the 400 kv dc transmission line of Teesta III from Sikkim to Kishanganj Bihar.

Loss in the first year due to spillage

In 2017 , the first year of its operation itself, TUL’s spillage loss was estimated to be in the order of 1100 million units (MU)  as against design energy of 5200 MU.  Spillage loss of 300 MW is 7.2 MU per day (300×24= 7200 MWh i.e. 7.2 MU). 7.2 million units is that power which could have been sold in market (power exchange) at around ₹3 per unit. Financial loss per day would be  ₹21.6 million (7.2X3= 21.6).

Teesta III HEP had the potential to generate 3818.6 MU (ex bus) against which the actual energy sent out (ex bus) was only 2356.42 MU – that indicates an energy loss of 1462 MU.

TUL have indicated an energy rate of INR 5 per unit for Teesta III in the ERPC meeting of 13 June 2017. Thus, an energy loss of 1462 MU translates to a financial loss of  ₹731 crore due to delay in construction of the transmission line to Kishanganj.

The original estimated cost of the Teesta III to Kishanganj transmission line was  ₹770.8 crore at the price levels of August 2008, while the loss due to delay in the very first year is  ₹731 crore, due to spillage and energy loss.

A joint venture was formed between Teesta Urja Limited and Power Grid Corporation of India Limited in a 75:25 ratio. The new subsidiary company – Teesta Valley Power Transmission company Limited (TVPTL) – was responsible for execution of the transmission line from Teesta III up to Kishanganj.

However, due to delays in the project, the final revised cost estimate was put at  ₹1450.36 Crores, as of 5 January 2016, with the revised scheduled commercial operation date fixed as 31 March 2017.

Violation of laws:

The declaration of commercial operation(COD) is the date from which the units and power station have proved and passed the performance test through trial run. Power evacuation or transmission system is a critical component before declaring the COD.

As per the regulations of the Central Electricity Regulatory Commission (CERC) and the Central Electricity Authority (CEA)  the period of full load operation of each unit is 12 hours and for the station as a whole with all 6 units running at full load the station has to prove its capacity of 1200 MW for 12 hours.

However, in blatant violation of these norms, the Teesta  III station did  not carry out the full capacity test of 1200 MW either for 8 hours or for 12 hours because the transmission line to Kishanganj was incomplete and the transmission system of Rangpo-Binnaguri did not allow more than 600 MW of Teesta III power (as admitted by TUL on 13 June 2017 in ERPC).

TUL had filed a tariff application before CERC for determining a tariff to be charged from the four northern states which had signed PPAs for 840 MW out of 1200 MW capacity. On 23 May 2017 CERC passed an order allowing an ad hoc tariff from 23 Feb (3 units) and from 28 Feb 2017 (3 units).The matter is sub judice at the Appellate Tribunal of Electricity.

A tariff can be allowed or charged only after the station attains Commercial operation Date (COD). To attain COD the station has to pass the station capacity test at 1200 MW (full capacity) for 8 or 12 hours, pointed out Padamjit Singh, chief patron of the All India Power Engineers Federation(AIPEF).

PTC  had filed an application for long term open access before PGCIL for the long term power sale from Teesta III to four northern states, which was granted on 26 May 2009 and further amended on 7 October 2015.

The LTOA was granted on condition that the transmission line from Teesta III to Kishanganj is to be constructed by the generation developer i.e TUL, so on this count too there is violation of law, added Singh.

Power Trading Corporation of India (PTC India) had signed the PPA with TUL in 2006 and signed PSA Power Sale Agreements (PSA) with the four northern states in Sept 2006, wherein PTC would buy the total power of Teesta III from TUL. PTC signed PSAs to sell power to four Northern States;

  • Punjab    340 MW
  • Haryana  200 MW
  • U P         200 MW
  • Rajasthan 100 MW

Total 840 MW which is 70 % of total capacity of 1200 MW. Out of balance capacity of 30% i.e. 360 MW, 12% i.e. 144 MW is free power for Sikkim (as per MOU) and 18% i.e. 216 MW is for sale in open market.

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