The country’s first independent power project, the 217-MW Jegurupadu gas-fired plant of GVK Power & Infrastructure Ltd located in Andhra Pradesh, has emerged as a test case as its power purchase agreement hits sunset clause.

Its fate is uncertain. There are two possible outcomes, one where the plant is refurbished and a fresh power purchase agreement inked and it continues to be in the GVK fold, the second option is outright buyout by the Andhra Pradesh Power Generation Corporation, the State-owned utility.

Commissioned in 1997, the project has completed 18 years of its PPA term, supplying power. After the expiry of the term, the power project is up for grabs for AP Genco, insists its Chairman K Vijayanand and has written to the government expressing interest to acquire the project.

An independent consultant Grant Thornton was appointed for its due diligence and to asses various aspects of taking over the plant from the GVK management by paying up the terminal cost plus some other related amounts.

Isaac A George, Group CFO, GVK, told BusinessLine , “The agreement has the provision for project takeover after the PPA term expiry. We had invested ₹1125 crore on the project and the terminal value has been assessed at ₹293 crore. But that is not all, there are a number of cases and claims all of which need to be settled. It is for the Government if it would bear the entire costs.”

The promoter of the project has no say in this as this is part of the agreement and it does not require its consent, Vijayanand said.

For AP Genco, if it takes over after paying out the amount for the plant and related assets value, it invests in refurbishing (which could go up to ₹500 crore) and then manages the plant on its own as an owner.

Phase II

George said, “We successfully bid during the gas auctions and soon operate the phase II Jegurupadu unit (228 MW) at 25 per cent plant load factor.”