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Proposal for 'Success fee' on ultra mega power projects

The Power Ministry points out that under bidding guidelines, the CERC has to be approach for adoption of tariff, reports M Rajendran.

india Updated: Dec 29, 2006 18:45 IST

The Power Finance Corporation is likely to levy a "success fee" for any ultra mega power projects coming up in future.

While no formal decision has yet been taken, a senior PFC official said on the condition of anonymity, "There is a proposal and it has been discussed with the Power Secretary. The PFC board would have to take a call now."

According to documents available with Hindustan Times, a meeting under the chairmanship of Secretary Power RV Shahi held early this month says, "It was decided that in case of future projects, some success fee could be charged by the PFC. Further details are yet to be worked out."

When contacted, Shahi confirmed that a fee would be imposed on future UMPPs. "It is the overhead cost for the efforts made by the PFC," he said.

It was also decided at the meeting that all necessary actions should be taken expeditiously for the transfer of the special purpose vehicle (SPV) to the successful bidder.

Accordingly, the Power Ministry asked Lanco Infratech and Tata Power to submit the Rs 300-crore performance bank guarantee within the next 60 days for Sasan and Mundra ultra mega power projects, respectively. The companies received the letters of intent on Thursday.

Within the next 60 days, the two companies would also have to acquire 100 per cent shares of the shell company (Sasan Power Ltd and Coastal Gujarat Power Ltd) and enter into a share purchase agreement and sign the power purchase agreement, escrow (a written legal instrument like deed which, with agreement between the two parties, is held by a neutral third party, until all conditions of the agreement are met) and other agreements.

The Power Ministry has pointed out that under the Electricity Act and bidding guidelines, the Central Electricity Regulatory Commission (CERC) has to be approached for adoption of tariff.

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First Published: Dec 29, 2006 18:45 IST