Adani Power shares in focus as SC agrees to hear appeal in Punjab State Electricity Regulatory Commission case

Adani Power shares will remain in focus on Tuesday, January 7, after the Supreme Court on Monday agreed to examine the company’s appeal against the Punjab State Electricity Regulatory Commission’s (PSERC) refusal to approve a 2006 power purchase agreement (PPA) between the former Udupi Power Corp and a Punjab state discom.

A Bench led by Justice PS Narasimha issued a notice to the Punjab State Electricity Regulatory Commission (PSERC) and Punjab State Power Corp (PSPCL) on Adani Power’s appeal challenging the Appellate Tribunal for Electricity’s September order that upheld the Commission’s decision to refuse approval.

The agreement was signed between Udupi Power Corp and Punjab State Power Corp for the supply of 101.5 MW of power, which was 10% of the then proposed installed capacity of the 1,015 MW project located in Udupi, Karnataka. Adani Power is the successor in interest of Udupi Power. The generating company having a 600 MW imported coal-based power project in Udupi district supplies power to discoms in Karnataka, Punjab and Gujarat.

The Commission had refused to approve PSPCL’s proposal regarding procurement of 101.5 MW of power from Udupi in terms of the PPA, saying the need to procure power from Udupi on long-term basis is not established and it would not be economically viable propositions for PSPCL to purchase power from Udupi project at the given price determined by the Central Commission particularly when much cheaper power is available in the market.

Adani Power told the SC that the Commission had refused to approve the agreement after 14 years of its signing and having been acted upon by the parties. The regulatory body had earlier regulated power purchase and approved power procurement by Punjab State Power Corp from Udupi power project, thus the power purchase agreement was deemed to be approved, it said.

Stating that PSERC was not justified in refusing approval of the 2006 PPA based on information and material given by PSPCL pertaining to 2020, Adani said that investments were made by its generating companies on the strength of PPAs.

The Aptel judgment, if allowed to be sustained, in the long term, will jeopardize investments and result in regulatory uncertainty in the power sector as it would give a licence to the distribution companies like PSPCL to sit over for more than a decade, and then turn around and abandon its PPAs signed with generators. “This would thwart the legitimate expectation of generators, and run contrary to the principles of promissory estoppel, and regulatory certainty,” the appeal stated.

On Monday, Adani Power shares closed at Rs 498, down 4.33% on the BSE, while the benchmark Sensex declined 1.59%. The stock has plunged 30% over the past six months but gained nearly 400% in the last three years. The company’s market capitalization stands at Rs 1,92,056 crore.