Accompanying court fee amounting to Rs. 10000

BEFORE THE HON'BLE KERALA STATE ELECTRICITY REGULATORY

COMMISSION

AT THIRUVANANTHAPURAM, KERALA

O.P. NO. __________ OF 2022

IN THE MATTER OF:

Petition under Section 142 and 146 of the Electricity Act, 2003, seeking appropriate

directions against the wilful, deliberate, contumacious and continued non-

compliance of this Hon’ble Commission’s Order dated 05.10.2018 passed in O.P. No.

34 of 2015 by the Kerala State Electricity Board Limited.

AND IN THE MATTER OF:

BSES Kerala Power Limited …Petitioner

Versus

Kerala State Electricity Board Ltd. ...Respondent

INDEX

(MASTER INDEX)

S. NO. PARTICULARS PAGES

1. Form 1 1

2. Form 2 (Affidavit) 2-3

3. Petition under section 142 and 146 of the Electricity Act,

2003.

4-31

Accompanying court fee amounting to Rs. 10,000/- has been transferred through bank transfer. The proof of remittance of payment is annexed along with the present petition.

4. ANNEXURE P/1

A True Copy of the PPA dated 24.12.1996

32-37

5. ANNEXURE P/2

A True Copy of the Order dated 25.04.1997 issued by the

Government of Kerala

38-39

6. ANNEXURE P/3

A True Copy of the FSA dated 17.03.1998

40-92

7. ANNEXURE P/4

A True Copy of the letter dated 30.04.1999 issued by

Government of Kerala.

93

8. ANNEXURE P/5

A True Copy of the PPA dated 03.05.1999.

94-167

9. ANNEXURE P/6

A True Copy of the Letter dated 26.08.1999 issued by IOCL

168

10. ANNEXURE P-7 (COLLY.)

True Copies of various letters dated 11.07.2013,

30.01.2013, 01.08.2013, 24.08.2013, 17.09.2013,

27.11.2013 issued by the Petitioner to Respondent and

Government of Kerala regarding conversion of fuel.

169-187

11. ANNEXURE P/8

A True Copy of the Letter dated 07.11.2014 issued by

KSEB

188

12. ANNEXURE P/9

A True Copy of the email dated 15.01.2015

189

13. ANNEXURE P/10

A True Copy of the Letter dated 29.01.2015

190-191

14. ANNEXURE P/11


Government of India, Ministry of Commerce & Industry

(Petroleum and Explosive Safety Organisation)

192-194

15. ANNEXURE P/12


195

16. ANNEXURE P/13


196-197

17. ANNEXURE P/14



198-201

18. ANNEXURE P/15

A True Copy of communications dated 07.07.2016 and

18.06.2016 issued by the Petitioner

202-218

19. ANNEXURE P/16

A True Copy of the Order dated 26.10.2016 passed in

Petition No. 34 of 2015

219-234

20. ANNEXURE P/17


235-238

21. ANNEXURE P/18


239-240

22. ANNEXURE P/19

A True Copy of the Order dated 29.12.2016

241-242

23. ANNEXURE P/20

A True Copy of the IOCL Report dated 07.02.2017

243-246

24. ANNEXURE P/21


247-248

25. ANNEXURE P/22

A True Copy of the Order dated 04.04.2017 passed by the

Hon’ble High Court of Kerala

249-260

26. ANNEXURE P/23


261-275

27. ANNEXURE P/24

A True Copy of the judgment dated 31.10.2017 passed by

Hon’ble High Court in W.P. (C) No. 540 of 2017

276-295

28. ANNEXURE P/25


296-297

29. ANNEXURE P/26

A True Copy of the Judgment dated 29.01.2018, passed by

Hon’ble High Court in W.A. No. 237 of 2018

298-303

30. ANNEXURE P/27


304-357

31. ANNEXURE P/28

A True Copy of the letter dated 22.10.2018

358-374

32. ANNEXURE P/29

A True Copy of the Order dated 13.05.2022 passed by

Hon’ble APTEL in Appeal No. 352 of 2018

375-376

33. Vakalatnama along with Board Resolution. 377-384

34. Court fee 385

FILED BY

[SKV LAW OFFICES] Advocates for Petitioner

B-50, Defence Colony, New Delhi- 110024 E: [email protected]

E: [email protected] Mobile: 9818771818

Off: No: 011-47099999 Place: New Delhi Date:13.06.2022


COMMISSION


O.P. NO. __________ OF 2022

IN THE MATTER OF:







Versus


INDEX

(VOLLUME-I)


1. Form 1 1

2. Form 2 (Affidavit) 2-3

3. Petition under section 142 and 146 of the Electricity Act,

2003.

4-31

4. ANNEXURE P/1 32-37

A True Copy of the PPA dated 24.12.1996

5. ANNEXURE P/2

A True Copy of the Order dated 25.04.1997 issued by the


38-39

6. ANNEXURE P/3

A True Copy of the FSA dated 17.03.1998

40-92

7. ANNEXURE P/4

A True Copy of the letter dated 30.04.1999 issued by

Government of Kerala.

93

8. ANNEXURE P/5

A True Copy of the PPA dated 03.05.1999.

94-167

9. ANNEXURE P/6

A True Copy of the Letter dated 26.08.1999 issued by IOCL

168

10. ANNEXURE P-7 (COLLY.)

True Copies of various letters dated 11.07.2013,

30.01.2013, 01.08.2013, 24.08.2013, 17.09.2013,

27.11.2013 issued by the Petitioner to Respondent and

Government of Kerala regarding conversion of fuel.

169-187

11. ANNEXURE P/8


KSEB

188

12. ANNEXURE P/9

A True Copy of the email dated 15.01.2015

189

13. ANNEXURE P/10


190-191

14. ANNEXURE P/11


Government of India, Ministry of Commerce & Industry

(Petroleum and Explosive Safety Organisation)

192-194

15. ANNEXURE P/12


195

16. ANNEXURE P/13


196-197

17. ANNEXURE P/14



198-201

FILED BY





FORM 1

[See Regulation 24(3)]

General Heading for petitions BEFORE THE HON'BLE KERALA STATE ELECTRICITY REGULATORY

COMMISSION


O.P. NO. __________ OF 2022 IN THE MATTER OF:






BSES Kerala Power Limited Through its Authorized Representative Puthiya Road, Udyogmandal, Kochi – 683501 Email: [email protected] …Petitioner

Versus

Kerala State Electricity Board Ltd. Vydyuthi Bhavan, Pattom, Thiruvananthapuram - 695033 Email: [email protected] …Respondent

FILED BY





1

2FORM 2[See Regulation 24(5)]

3


COMMISSION


O.P. NO. __________ OF 2022

IN THE MATTER OF:

Petition under Section 142 and 146 of the Electricity Act, 2003, seeking

appropriate directions against the wilful, deliberate, contumacious and continued

non-compliance of this Hon’ble Commission’s Order dated 05.10.2018 passed in

O.P. No. 34 of 2015 by the Kerala State Electricity Board Limited.



Versus


PETITION UNDER SECTION 142 AND 146 OF THE ELECTRICITY ACT, 2003

MOST RESPECTFULLY SHEWETH:

I. CONSPECTUS

1. The present Petition is being filed by BSES Kerala Power Limited

("Petitioner” / “BSES Kerala”) under Section 142 and 146 of the

Electricity Act, 2003 (“Act”), on account of wilful, deliberate, contumacious

and continued non-compliance of this Hon’ble Commission’s Order dated

4

05.10.2018 passed in OP No. 34 of 2015 by the Respondent / Kerala State

Electricity Board (“KSEB” / “Respondent”).

2. This Hon’ble Commission vide its Order dated 05.10.2018 had inter alia

passed the following directions: -

“46. Order of the Commission The Commission having duly considered the arguments of the subject matter during the hearings on 23.01.2018, and after examining all the documents and other details placed before the Commission during the proceedings of the subject petition, and after duly considering the directions of the Hon'ble High Court in its interim order dated 04.04.2017 in WP (C) 540/2017 and the final judgment of the Hon'ble High Court dated 31.10.2017 in WP(C) 540/2017, the Commission issues the following orders as per the provisions of the Electricity Act, 2003 and the Tariff Regulations, 2014: (1) There is no power purchase agreement between the petitioner

BKPL and the respondent KSEB Ltd with effect from 01.12.2015, i.e, after one month from the date of the expiry of the PPA dated 03.05.1999.

(2) The petitioner BKPL is not eligible to claim fixed cost, lease rent, Income tax or any other charges during the period from 01.12.2015 to 31.10.2017.

(3) KSEB Ltd is not bound to pay fixed charges, lease rent, income tax and other charges to the petitioner during the period from 01.12.2015 to 31.10.2017.

(4) KSEB Ltd shall make fixed cost payments to BKPL for the month of November 2015, at the rate agreed to by KSEB Ltd.

(5) KSEB Ltd do not have any liability on the balance stock of fuel as on 31.10.2015, available at the premises of BKPL and at the nearby premises of IOCL, from the date of expiry of the PPA dated 03.05.1999.

(6) KSEB Ltd shall be liable to pay electricity charges to the petitioner BKPL for the energy generated and injected into the grid during the period from 25.05.2017 to 24.06.2017 at the average RTC clearing price of Indian Energy Exchange (IEX) in each day in S3 region in the day ahead market.”

5

[Emphasis Supplied]

3. In terms of the aforesaid directions issued by this Hon’ble Commission, the

Respondent is liable to pay an amount of Rs. 19,81,42,512/-. The

computation of the amounts due and payable by the Respondent, in terms

of the aforesaid order is detailed below: -

S. No. Date of

Invoice

PARTICULARS AMOUNT

(In Rs.)

1. 22.10.2018 Fixed Charges for the

month of November, 2015

[Refer Para 46(4)]

2,68,14,853/-

2. 22.10.2018 Electricity Charges for

period from 25.05.2017 to

24.06.2017 [Refer Para

46(6)]

17,13,27,659/-

3. Total Amount 19,81,42,512/-

4. It is apposite to mention that both KSEB and the Petitioner have challenged

the Order dated 05.10.2018 passed in O.P. No. 34 of 2015, before the

Hon’ble Appellate Tribunal for Electricity (“Hon’ble APTEL”), by way of

Appeal Nos. 240 of 2019 and 352 of 2018 respectively. The Petitioner by

way of the Appeal No. 352 of 2018 had also filed an Interim Application,

bearing I.A. No. 1704 of 2018, seeking the following prayers: -

“(a) Direct the Respondent No. 2 / KSEB Ltd. to pay an amount of Rs.78.67 Crores which constitutes 50% of the total outstanding for the period 01.11.2015 to 31.10.2017 on account of in terms of the submissions made herein above; and

6

(b) Alternatively, direct Respondent No. 2 to pay the amount as determined in the impugned Order…...”

5. The Respondent, though obligated to pay the amounts as reproduced at

Para. 3 above, had not sought for a stay of the Order dated 05.10.2018

passed by this Hon’ble Commission. Hon’ble APTEL heard the cross-

appeals on 13.05.2022, and was accordingly pleased to permit the

Petitioner herein to move an appropriate application before this Hon’ble

Commission for execution of the order passed in its favour. The relevant

extract of the Order dated 13.05.2022 is extracted hereunder:

“The learned counsel for the applicant submits that this application is being withdrawn, the request being for liberty to approach the State Commission for appropriate relief which is the nature of prayer for enforcement of the relief already granted. The application is disposed of with liberty as granted.”

6. In terms of the liberty granted by the Hon’ble APTEL, the present petition

is being filed before this Hon’ble Commission under Section 142 and 146 of

the Act.

II. DESCRIPTION OF PARTIES

7. The Petitioner, being an Independent Power Producer of the State,

established a Naphtha based power plant at Kochi, with the approval of the

State Government, during the year 2000. Further, earlier with the approval

of the State Government, the erstwhile KSEB had entered into a Power

Purchase Agreement (“PPA”) with the Petitioner on 03.05.1999, for

purchasing electricity from the plant.

7

8. The Respondent i.e. Kerala State Electricity Board was constituted by the

Government of Kerala vide its Order dated 07.03.1957, under the Electricity

Supply Act, 1948 vested with generation, transmission and distribution of

electricity in the State of Kerala. After the enactment of the Act, all the

functions, properties and interests, rights in properties, all rights and

liabilities of the Board are vested in the State Government. All these

functions and undertakings of the Board as vested in Government were re-

vested in a company Kerala State Electricity Board Limited incorporated as

a fully owned Government company under the Companies Act, 1956.

III. BRIEF FACTS

9. In 1995, Government of Kerala decided to implement short gestation

Thermal Power Plants, in collaboration with Kerala State Industrial

Development Corporation Limited (“KSIDC”) to bridge the gap between

the power requirement and power supply in the State of Kerala.

Accordingly, KSIDC invited global bids for establishment of

open/combined cycle power plants using Naphtha / Furnace Oil as fuel at

various sites. BSES Limited, Mumbai was awarded two 40.5 MW projects,

one at Kakkanad, Kochi and the other at Techno park,

Thiruvananthapuram.

9.1. The bids were invited on the premise that components such as heat rate,

fixed charges and actual fuel cost would be a pass-through and recoverable

by way of the tariff.

9.2. In 1996, BSES Kerala Power Ltd. (“BKPL”) was set up as a joint venture

8

Company between BSES Ltd. and KSIDC by virtue of the Promoters'

Agreement entered into on 24.12.1996.

9.3. Two PPA’s dated 24.12.1996 and 23.04.1998 were signed between the

Petitioner and KSEB to develop, procure, finance, construct, own, operate

and maintain two Projects of 40.5 MW Nominal Capacity, to be located at

Kochi and Thiruvananthapuram. A True Copy of the PPA dated 24.12.1996

is annexed hereto and marked as ANNEXURE P-1.

9.4. On 25.04.1997, the Government of Kerala vide an Order approved the

shifting of the 40 MW project, originally proposed at Techno park,

Trivandrum to Kochi, along with the Model Power Plant awarded to KSIDC

by Planning Commission, Government of India. Hence, it was decided to set

up all three projects at one location and convert the open cycle plant to a

combined cycle plant. Accordingly, a Combined Cycle Power Plant was set

up by the Petitioner consisting of 3 General Electric Make Gas Turbine

Generators ("GTG") and 1 Steam Turbine Generator, having a total capacity

of 157MW. A True Copy of the Order dated 25.04.1997 issued by the

Government of Kerala is annexed hereto and marked as ANNEXURE P-2.

9.5. Meanwhile, on 17.03.1998, BSES Ltd. entered into a Fuel Supply Agreement

(“FSA”) for supply of Naphtha from Indian Oil Corporation Limited

(“IOCL”) for the 107 MW plant to be set up in Kerala. As per Clause 7.4.3 of

the FSA, BSES Ltd was obligated to specify the annual required quantity, 3

months prior in writing to IOCL. As per Clause 11.1 of FSA, the Seller (IOCL)

was required to stock in its storage facilities at the supply point, an

9

inventory equal to 1/24th of the Annual Linkage Quantity. Further as per

Clause 11.4 of the FSA, BSES Ltd. i.e., the Petitioner was also obligated to

keep in store an inventory equal to at least 1/12th of the Annual Linkage

Quantity. In terms of Article 7.4 and 7.5 of the FSA, the Petitioner was

required to prescribe its minimum quantum of off-take or else it would be

liable pay to IOCL hefty charges. A True Copy of the FSA dated 17.03.1998


9.6. On 30.04.1999, Government of Kerala, through the Principal Secretary to

the Government, issued clearance to the Petitioner’s Power Plant vide its

Letter No. 4245/Bl/99/PD under the then existing provisions of the

Electricity (Supply) Act, 1948. A True Copy of the letter dated 30.04.1999

issued by Government of Kerala is annexed hereto and marked as

ANNEXURE P-4.

9.7. On the basis of the clearance given by Government of Kerala, on 03.05.1999

the Petitioner and Respondent entered into a Combined Cycle PPA. As per

the PPA, the Petitioner was required to establish a Power Plant, and sell

electricity to the Respondent for the entire project capacity of 157 MW. The

variable cost in the PPA was based on the actual landed cost, including all

taxes. It is further pertinent to mention that as per Clause 7.5 of the PPA,

the Petitioner could only execute an FSA upon necessary clearance from

the Respondent. As per Clause 7.6 of the PPA, in case of availability of

Liquified Natural Gas ("LNG"), the Petitioner was obligated to convert its

power plant into an LNG based Power Plant. Clause 15.1 of the PPA

10

provided for extension of term for a period of ten tariff periods beyond the

fifteenth tariff period, on mutually agreed tariff as per Clause 7.4 thereof. A

True Copy of the PPA dated 03.05.1999 is annexed hereto and marked as

ANNEXURE P-5.

9.8. On 26.08.1999, IOCL vide its letter intimated the Petitioner regarding its

readiness for supply of additional quantity of Naphtha for Petitioner’s 157

MW combined cycle power plant at Cochin. A True Copy of the Letter dated

26.08.1999 issued by IOCL is annexed hereto and marked as ANNEXURE

P-6.

9.9. During the year 2013, Petitioner made numerous requests to the

Respondent as well as the Government of Kerala stating its bona fide

intentions to convert the fuel for the plant from Naphtha to LNG, but to no

benefit. True Copies of various letters dated 11.07.2013, 30.01.2013,

01.08.2013, 24.08.2013, 17.09.2013, 27.11.2013 issued by the Petitioner to

Respondent and Government of Kerala regarding conversion of fuel are

annexed hereto and marked as ANNEXURE P-7 (COLLY.).

9.10. However, the said request of the Petitioner was not acceded to by the

Respondent or the Government of Kerala, stating one pretext or the other

and the Petitioner was constrained to buy Naphtha worth Rs. 45 Crores as

per the Dispatch Instructions issued by the SLDC and in anticipation of

continued operation of the plant. Accordingly, the Petitioner raised

Invoices on KSEB Ltd. for supply of power, based on Naphtha.

9.11. This was as per Respondent's letter dated 07.11.2014, wherein

11

Respondent had instructed the Petitioner to ensure sufficient fuel stock at

the station considering the envisaged continuous scheduling of the plant

and according to PPA. It is necessary to highlight that due to the non-

availability of Naphtha on short notice from Kochi Refinery, the Petitioner

was even forced to procure fuel i.e., Naphtha from IOCL, Chennai. However,

after 22.11.2014 the plant had been scheduled only for a brief period

between 04.05.2015 and 06.05.2015. A True Copy of the Letter dated

07.11.2014 issued by KSEB is annexed hereto and marked as ANNEXURE

P-8.

9.12. Hence, the aforesaid non-scheduling of the plant by Respondent, is in

contradiction to their own letter dated 07.11.2014 which has resulted in

Petitioner’s holding of Naphtha for more than 2 years i.e., 10400 MT.

Thereafter, Petitioner on 15.01.2015 vide its email informed Respondent

regarding the Naphtha stock which was lying unused. It is further

submitted that the Petitioner time and again had apprised the Respondent

about the stock of Naphtha available at its site and with IOCL. A True Copy

of the email dated 15.01.2015 is annexed hereto and marked as

ANNEXURE P-9.

9.13. On 29.01.2015, the Petitioner requested the Respondent to consider the

proposal of conversion of Petitioner’s power plant from Naphtha to LNG

based plant with an extension of the PPA for another 10 years. The

Petitioner also requested that in the interim the plant be run on Naphtha

as fuel without interruption till completion of conversion of plant. It is

12

relevant to submit that though the PPA of Petitioner with Respondent was

expiring on 31.10.2015, Government of India, Ministry of Commerce &

Industry (Petroleum and Explosive Safety Organisation) renewed

Petitioner’s license for storage of Naphtha up to 31.12.2017 by way of a

letter dated 17.06.2015.

A True Copy of the Letter dated 29.01.2015 is annexed hereto and marked

as ANNEXURE P-10.

A True Copy of the Letter dated 17.06.2015 issued by Government of India,

Ministry of Commerce & Industry (Petroleum and Explosive Safety

Organisation) is annexed hereto and marked as ANNEXURE P-11.

9.14. On 13.07.2015, Respondent vide its Letter communicated its decision taken

by its Board of Directors to accord in-principle approval for Petitioner to

run its power plant on Naphtha for another 2 years. Further on 29.09.2015

Respondent vide its letter asked Petitioner to file petition for approval for

tariff with the KSERC. On 03.10.2015, Petitioner filed O.P. No. 34 of 2015

under Section 86 (i) (b) of the Act for approval of extension of PPA. In the

said petition, the Petitioner further sought Interim Approval for running

the plant on Naphtha as the PPA was expiring on 31.10.2015. The said

request of the Petitioner was not accorded by this Hon’ble Commission.


as ANNEXURE P-12.


as ANNEXURE P-13.

13

9.15. On 24.02.2016, the Government of Kerala ratified the in-principle approval

for extension of PPA granted by the Respondent vide its Letter dated

13.07.2015, subject to the condition that final tariff shall be determined by

this Hon’ble Commission and brought back to Government of Kerala for its

final approval. A True Copy of the Letter dated 24.02.2016 issued by

Government of Kerala is annexed hereto and marked as ANNEXURE P-14.

9.16. During the year 2016, several other communications were sent by

Petitioner to resolve the problems with regards to the draft PPA but could

not be resolved due to lack of consensus. It is pertinent to mention herein

that Respondent vide its submission dated 25.04.2016 had agreed to Fixed

Charges of Rs. 0.297/kWh. A True Copy of communications dated

07.07.2016 and 18.06.2016 issued by the Petitioner are annexed hereto

and marked as ANNEXURE P-15.

9.17. On 26.10.2016, this Hon’ble Commission dismissed the O.P. No.34 of 2015

filed by the Petitioner. Therefore, because of the dismissal of Petition No.

34 of 2015 there was some uncertainty between the parties regarding the

continuity of the PPA. A True Copy of the Order dated 26.10.2016 passed in

Petition No. 34 of 2015 is annexed hereto and marked as ANNEXURE P-16.

9.18. Petitioner again raised the issue of lying naphtha stock with the

Respondent and with the Government of Kerala vide its letter dated

09.12.2016. The Petitioner stated that it had maintained the said stock due

to the legitimate expectation on account of the assurance given by the

Respondent and Government of Kerala and the same has not been off taken

14

due to reduction in demand by the Respondent. A True Copy of the Letter

dated 09.12.2016 is annexed hereto and marked as ANNEXURE P-17.

9.19. The office of the District Collector & Chairman, District Disaster

Management Authority initiated action under the provisions of the Disaster

Management Act, 2005 and issued directions to the Petitioner to dispose of

the Naphtha, lying in the property of the Petitioner or maintain required

manpower for the safety of the Power Plant. Petitioner vide its letter dated

17.12.2016 assured District Collector & Chairman, District Disaster

Management Authority regarding the continuing fool proof safety

mechanism which has been adopted by the Petitioner. A True Copy of the

Letter dated 17.12.2016 is annexed hereto and marked as ANNEXURE P-

18.

9.20. Thereafter, the District Collector & Chairman, District Disaster

Management Authority vide its Order dated 29.12.2016 arbitrarily invoked

provisions of Disaster Management Act to dispose of the Naphtha stock

lying at the Petitioner’s Plant. A True Copy of the Order dated 29.12.2016


9.21. Petitioner was constrained to approach the Hon’ble High Court of Kerala

by way of Writ Petition No. 540 of 2017 to quash the order of the District

Collector & Chairman, District Disaster Management Authority dated

29.12.2016 which was passed without jurisdiction along with a challenge

to this Hon’ble Commission’s Order dated 26.10.2016 passed in Petition

No. 34 of 2015.

15

9.22. The Hon’ble High Court of Kerala by its Order dated 20.01.2017 issued

directions to an Expert Committee to conduct an inspection of the site. An

inspection was conducted on 27.01.2017, which categorically records that

the power plant is not suffering from any dilution of safety. However, the

said report further recorded that option of transfer of Naphtha to other

Naphtha consuming industries like nearby FACT availing the services of the

oil marketers like IOCL was not feasible due to unserviceable pipelines of

the IOCL since September 2015.

9.23. Meanwhile, IOCL vide its Report dated 07.02.2017 after an inspection,

submitted that the feasibility of retransmitting Naphtha through the

underground pipelines to IOC is not possible. A True Copy of the IOCL

Report dated 07.02.2017 is annexed hereto and marked as ANNEXURE P-

20.

9.24. On 25.03.2017, Respondent vide its letter to the Petitioner communicated

that it has decided not to proceed with the extension of PPA for purchasing

more expensive electricity from the power plant of Petitioner and that a

proposal for buyout of the plant is under the consideration of Government

of Kerala. A True Copy of the Letter dated 25.03.2017 is annexed hereto

and marked as ANNEXURE P-21.

9.25. Meanwhile, on 04.04.2017, the Hon’ble High Court passed an Interim Order

in Writ Petition No.540 of 2017 providing options for disposal of Naphtha.

It was further ordered that in case the Petitioner did not intend carry out

the options as suggested by the Hon’ble High Court, then they should

16

generate power on Unscheduled Inter-change (UI) basis in coordination

with the Load Dispatch Centre and KSEBL, subject to the approval of this

Hon’ble Commission. A True Copy of the Order dated 04.04.2017 passed by

the Hon’ble High Court of Kerala is annexed hereto and marked as

ANNEXURE P-22.

9.26. On 18.04.2017, the Petitioner filed an application before this Hon’ble

Commission seeking necessary approval in connection with the

implementation of the Interim Order of the Hon’ble High Court dated

04.04.2017 in Writ Petition WP(C) No. 540/2017.

9.27. In view of the above, Respondent vide its letter dated 25.04.2017 submitted

its comments regarding the scheduling of power from the Petitioner’s plant

on UI basis.

9.28. Thereafter, on 27.04.2017, this Hon’ble Commission vide its Order disposed

of the Application filed by the Petitioner on 18.04.2017. By way of the said

Order, this Hon’ble Commission granted approval in accordance with the

directions of the Hon'ble High Court in its Order dated 04.04.2017, to the

SLDC of Respondent for scheduling power and to Strategic Business Unit-

Distribution of Respondent for purchasing the power generated on UI

basis, from the 6500 MT of Naphtha purchased and stored in the premises

of the Petitioner and the 6000 KL of Naphtha purchased and stored by the

Petitioner in the premises of IOCL. A True Copy of the Order dated

27.04.2017 is annexed hereto and marked as ANNEXURE P-23.

9.29. On 31.10.2017, the Hon’ble High Court delivered its Judgment in W.P. (C)

17

No. 540 of 2017, wherein it directed this Hon’ble Commission to decide the

rate/tariff which would govern the quantum of electricity supplied by the

Petitioner to Respondent. Notably, the same was required to be done

untrammelled by the findings of this Hon’ble Commission’s Order dated

27.04.2017. A True Copy of the judgment dated 31.10.2017 passed by

Hon’ble High Court in W.P. (C) No. 540 of 2017 is annexed hereto and

marked as ANNEXURE P-24.

9.30. Pursuant to the above, on 20.11.2017, the Petitioner vide its letter has duly

placed the copy of the Judgment passed by the Hon’ble High Court on

31.10.2017, before this Hon’ble Commission for its immediate compliance

and to issue subsequent orders with respect to the same. A True Copy of

the Letter dated 20.11.2017 is annexed hereto and marked as ANNEXURE

P-25.

9.31. On 18.12.2017, the Petitioner also filed an Application before this Hon’ble

Commission, praying for issuance of directions to the Respondent for

payment to the Petitioner for: -

(a) The price of energy generated and the fixed charges and other

reimbursements as per the provisions of the PPA, as modified by the

points of difference; and

(b) An amount of Rs 157.34 Crore along with the interest, as stipulated

in PPA, from the date on which the arrears fell due till the date of

realization.

9.32. Meanwhile, the Judgment dated 31.10.2017 passed by the Hon’ble High

18

Court in W.P. No. 540 of 2017 was challenged before the Division Bench of

the Hon’ble High Court, by way of Writ Appeal No. 237 of 2018. On

29.01.2018, the Division Bench of the Hon’ble High Court disposed of W.A.

No. 237 of 2018 with a direction that the question of existence of

Agreement (PPA)could be adjudicated upon by this Hon’ble Commission, if

found necessary. A True Copy of the Judgment dated 29.01.2018, passed by

Hon’ble High Court in W.A. No. 237 of 2018 is annexed hereto and marked

as ANNEXURE P-26.

9.33. It is relevant to note that the observations made in the Judgment dated

31.10.2017 qua the merits of the Petitioner’s case and the directions to this

Hon’ble Commission to consider the matter untrammelled by its earlier

findings, were left untouched and hence attained finality.

9.34. On 05.10.2018, this Hon’ble Commission passed an Order, rejecting the

prayers sought by the Petitioner for the extension of PPA, and also for the

consequent tariff, and held that Petitioner is not eligible to claim fixed cost,

lease rent, income tax or any other charges during the period from

01.12.2015. to 31.10.2017. However this Hon’ble Commission directed that

Respondent shall make fixed cost payments to the Petitioner for the month

of November 2015, at the rate agreed to by the Respondent and also pay

electricity charges for the energy generated and injected into the grid

during the period from 25.05.2017 to 24.06.2017 at the average RTC

clearing price of Indian Energy Exchange (IEX) in each day in S3 region in

the day ahead market. A True Copy of the Order dated 05.10.2018 is

19

annexed hereto and marked as ANNEXURE P-27.

9.35. On 22.10.2018, the Petitioner issued a letter along with invoices and

supporting annexures for payment by the Respondent in terms of the

05.10.2018 passed by this Hon’ble Commission, a computation whereof is

set out in Para 3 hereinabove. A True Copy of the letter dated 22.10.2018

along with enclosures is annexed hereto and marked as ANNEXURE P-28.

9.36. It is apposite to mention that both KSEB and the Petitioner herein have filed

appeals bearing Appeal Nos. 240 of 2019 and 352 of 2018 respectively,

challenging the Order dated 05.10.2018 passed in O.P. No. 34 of 2015

before the Hon’ble APTEL. The Petitioner in its Appeal had also filed an

Interim Application being I.A. No.1704 of 2018 seeking the following

prayers: -

“(a) Direct the Respondent No.2 / KSEB Ltd. To pay an amount of Rs.78.67 Crores which constitutes 50% of the total outstanding for the period 01.11.2015 to 31.10.2017 on account of in terms of the submissions made herein above; and (b) Alternatively, Direct Respondent No.2 to pay the amount as determined in the impugned Order…...”

9.37. The Respondent, though obligated to pay the amounts as reproduced at

Para. 3 above, had not sought for a stay of the order dated 05.10.2018

passed by this Hon’ble Commission. The cross-appeals were heard by the

Hon’ble APTEL on 13.05.2022 and after hearing the parties, Hon’ble APTEL

was pleased to permit the Petitioner herein to move an appropriate

application before this Hon’ble Commission and seek execution of the

order passed in favour of the Petitioner. The relevant extract of the Order

20

dated 13.05.2022 is reproduced hereunder: -

“The learned counsel for the applicant submits that this application is being withdrawn, the request being for liberty to approach the State Commission for appropriate relief which is the nature of prayer for enforcement of the relief already granted. The application is disposed of with liberty as granted.”

A True Copy of the Order dated 13.05.2022 passed by Hon’ble APTEL in

Appeal No. 352 of 2018 is annexed herewith and marked as ANNEXURE P-

29.

9.38. In terms of the liberty granted by Hon’ble APTEL, the present petition is

being filed before this Hon’ble Commission under Section 142 and 146 of

the Act.

9.39. By its order dated 05.10.2018 of which enforcement / execution is sought,

this Hon’ble Commission had inter alia directed that KSEB Ltd. shall make

fixed cost payments to the Petitioner for the month of November 2015, and

also be liable to pay electricity charges to the Petitioner for the energy

generated and injected into the grid during the period from 25.05.2017 to

24.06.2017 at the average RTC clearing price of the JEX in each day in S3

region, in the day ahead market.

9.40. Respondent has committed wilful disobedience in complying with the

Order dated 05.10.2018 passed by this Hon’ble Commission. There is no

reason for the Respondent to not comply with the same in as much as no

application for stay of the Order dated 05.10.2018 was filed before Hon’ble

APTEL or granted. Furthermore, the continued disobedience by the

21

Respondent in complying with the Order dated 05.10.2018 has resulted in

severe financial loss to the Petitioner.

9.41. In case the Respondent is not directed to release payments in terms of the

Order dated 05.10.2018 passed by this Hon’ble Commission, Petitioner will

suffer irreparable damage, injury and loss.

9.42. Hon’ble Commission vide Order dated 05.10.2018, has already directed the

Respondent to pay the amounts in terms of Para 46 (4) and 46 (6) thereof,

which works out to Rs. 19,81,42,512/- and there is no legal impediment in

executing the same. No stay was sought by the Respondent in its Appeal

filed before the APTEL while the APTEL has expressly permitted the

Petitioner to move this Hon’ble Commission for enforcement of the reliefs

granted in favour of the Petitioner. It is relevant to note that the said

amount has not been paid by the Respondent for the reasons best known

to it. It is further submitted that the same is in direct contravention of this

Hon’ble Commission’s order, hence the Respondent is liable for the

appropriate proceedings including for contempt of the Order dated

05.10.2018.

IV. GROUNDS

Re. Violation of Order passed by this Hon’ble Commission

10. KSEB in utter disregard to the directions of this Hon’ble Commission

contained in Para 46(4) and 46(6) of the Order dated 05.10.2018 has not

paid an amount of Rs. 19,81,42,512/-. The said conduct of KSEB essentially

amounts to wilful disobedience of the direction of this Hon’ble Commission.

22

10.1. Therefore, despite being aware of the aforesaid directions, KSEB has

deliberately refused to adhere to and abide by the directions of this Hon’ble

Commission which makes KSEBL liable for punishment under Section 142

and 146 of the Act. These provisions of the Act read as under: -

“Section 142. (Punishment for non-compliance of directions by Appropriate Commission):- In case any complaint is filed before the Appropriate Commission by any person or if that Commission is satisfied that any person has contravened any of the provisions of this Act or the rules or regulations made thereunder, or any direction issued by the Commission, the Appropriate Commission may after giving such person an opportunity of being heard in the matter, by order in writing, direct that, without prejudice to any other penalty to which he may be liable under this Act, such person shall pay, by way of penalty, which shall not exceed one lakh rupees for each contravention and in case of a continuing failure with an additional penalty which may extend to six thousand rupees for every day during which the failure continues after contravention of the first such direction. Section 146. (Punishment for non-compliance of orders or directions):- Whoever, fails to comply with any order or direction given under this Act, within such time as may be specified in the said order or direction or contravenes or attempts or abets the contravention of any of the provisions of this Act or any rules or regulations made thereunder, shall be punishable with imprisonment for a term which may extend to three months or with fine, which may extend to one lakh rupees, or with both in respect of each offence and in the case of a continuing failure, with an additional fine which may extend to five thousand rupees for every day during which the failure continues after conviction of the first such offence.”

10.2. Upon a conjoint reading of the above provisions under the Act, it is evident

that KSEB has acted in clear violation of the orders/directions of this

Hon’ble Commission and KSEB is liable to be punished as per the above

provisions of the Act.

23

Re. Legal Framework and judicial precedents

11. It is trite law that wilful disobedience to any judgment, decree, direction,

order, writ or other process of a Court or wilful breach of undertaking given

to a Court amount to Contempt. The same has time and again been

reiterated/affirmed by the Hon’ble Supreme Court in a catena of

Judgments.

(a) The Hon’ble Supreme Court in “Ram Narang v Ramesh Narang &

Anr”. (2009) 16 SCC 126, held as follows: -

“51. In order to maintain sanctity of the Orders of the highest court of the country, it has become imperative that those who are guilty of deliberately disregarding the orders of the court in a clandestine manner should be appropriately punished. The majesty of the court and the rule of law can never be maintained unless this court ensures meticulous compliance with its orders. “52. We have carefully perused the undertaking given by the parties to the Court and orders of this Court dated 12- 12-2001 [Ramesh Narang (1) v. Rama Narang, (2009) 16 SCC 631] and 8-1-2002 [Ramesh Narang (2) v. Rama Narang, (2009) 16 SCC 600] based on the undertaking of the parties given to this Court and other relevant facts and circumstances. According to our considered view the respondents are clearly guilty of committing contempt of court by deliberate and wilful disobedience of the undertaking given by them to this Court. In this view of the matter, in order to maintain sanctity of the orders of this Court, the respondents must receive appropriate punishment for deliberately flouting the orders of this Court. 53. Consequently, we convict the respondents under Section 2(b) of the Contempt of Courts Act and sentence them to a simple imprisonment for a period of two months. We further impose a fine of Rs 2000 to be deposited by each of them within one week failing which they shall further undergo imprisonment for one month.”

24

[Emphasis Supplied]

11.1. In yet another instance, the Hon’ble Supreme Court of India, in the case

titled as “Ashok Paper Kamgar Union v. Dharam Godha & Ors.,” (2003) 11

SCC 1, held as follows: -

“17. Civil contempt under Section 2 (b) of the Contempt of Courts Act means wilful disobedience to any judgement, decree discretion, order writ or other process of a court or wilful breach of undertaking given to a court. “Wilful” means an act or omission which is done voluntarily and intentionally and with the specific intent to do something the law forbids or with the specific intent to fail to do something the law requires to be done, that is to say, with bad purpose either to disobey or to disregard the law. It signifies a deliberate action done with evil intent or with a bad motive or purpose. Therefore, in order to constitute contempt, the order of the court must be of such a nature which is capable of execution by the person charged in normal circumstances. It should not require any extraordinary effort nor should be dependent, either wholly or in part, upon any act or omission of a third party for its compliance. This has to be judged having regard to the facts and circumstances of each case”.

[Emphasis Supplied]

11.2. It is submitted that since the KSEBL has failed to comply with the aforesaid

Order dated 05.10.2018 passed by this Hon’ble Commission, it is liable for

punishment in terms of Section 146 of the Act. In this regard, it is relevant

to take note of the following judgments of Hon’ble APTEL: -

(a) Judgment dated 05.10.2020 passed in Appeal No. 97 of 2020 titled

as Karnataka Power Transmission Corporation Limited v.

Karnataka Electricity Regulatory Commission

“92. The expression “civil contempt” is defined by section 2(b) to mean: “wilful disobedience to any judgment,

25

decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court”. 98. …A willful disobedience of a binding direction of superior authority at the appellate level, prima facie, amounts to civil contempt and since the facts at hand appear to carry the element of designed obstruction to the administration of justice, seemingly with the objective of skirting around or bypassing, yet again, the binding decision of this tribunal, as upheld by Supreme Court, ostensibly to sub-serve ulterior ends, it ex facie demonstrative of injudicious conduct, also appears to be constituting criminal contempt.

[Emphasis supplied] 11.3. In addition to the above, it is a settled position of law that Courts have the

power to execute their own Orders. The aforesaid position has been

confirmed by the Hon’ble Supreme Court in “State of Karnataka vs.

Vishwabharathi House Building Cooperative Society”, (2003) 2 SCC 412, as

under: -

“59. It is well settled that the cardinal principle of interpretation of statute is that courts or tribunals must be held to possess power to execute their own order. 60. It is also well settled that a statutory tribunal which has been conferred with the power to adjudicate a dispute and pass necessary order has also the power to implement its order. Further, the Act, which is a self-contained code, even if it has not been specifically spelt out, must be deemed to have conferred upon the Tribunal all powers in order to make its order effective. 61. In Savitri v. Govind Singh Rawat [(1985) 4 SCC 337: 1985 SCC (Cri) 556: AIR 1986 SC 984] it has been held as follows: (SCC pp. 341-42, para 6)

“Every court must be deemed to possess by necessary intendment all such powers as are necessary to make its orders effective. This principle is embodied in the maxim ‘ubi aliquid conceditur, conceditur et id sine quo res ipsa esse non potest’ (where anything is conceded, there is conceded also anything without which the thing itself

26

cannot exist). (Vide Earl Jowitt's Dictionary of English Law, 1959 Edn., p. 1797.) Whenever anything is required to be done by law and it is found impossible to do that thing unless something not authorised in express terms be also done then that something else will be supplied by necessary intendment. Such a construction though it may not always be admissible in the present case however would advance the object of the legislation under consideration. A contrary view is likely to result in grave hardship to the applicant, who may have no means to subsist until the final order is passed. There is no room for the apprehension that the recognition of such implied power would lead to the passing of interim orders in a large number of cases where the liability to pay maintenance may not exist. It is quite possible that such contingency may arise in a few cases, but the prejudice caused thereby to the person against whom it is made is minimal as it can be set right quickly after hearing both the parties.”

[Emphasis Supplied]

11.4. Moreover, the Hon’ble Supreme Court has also time and again held that

Judicial forums such as this Hon’ble Commission in deciding a lis between

the parties discharges judicial functions and exercises judicial power of the

State which has all the trappings of a civil court having the inherent power

to execute its own Orders. The same is also evident from Regulation 75 of

this Hon’ble Commission’s Conduct of Business Regulations, 2003 which

bestows upon this Hon’ble Commission the power to execute its own Order.

For ease of reference, the aforesaid Regulation is reproduced hereunder: -

“75. Enforcement of orders passed the Commission. - The Secretary shall ensure execution of the orders passed by the Commission, by the persons concerned in accordance with the provisions of the Act and Regulations and if necessary, may seek the orders of the Commission for directions.”

27

11.5. In fact, the Hon’ble Supreme Court as recently as on 08.10.2021 by way of

its Judgment in Civil Appeal No. 1843 of 2021 titled as “MSEDCL vs. MERC &

Ors.” reported at 2021 SCC OnLine SC 913, has reaffirmed and fortified the

well settled law that State Electricity Regulatory Commissions such as this

Hon’ble Commission are a substitute for Civil Courts and can execute its

own orders. For ease of reference, the relevant extract of the aforesaid

Judgment is reproduced hereunder: -

“205. It is now well settled by various decisions of this Court that an Electricity Regulatory Commission such as MERC constituted under the Electricity Act, 2003 has all the trappings of a Court. The MERC is a substitute for a Civil Court in respect of all disputes between licensees and Power Generating Companies. This proposition finds support from the judgments of this Court in Tamil Nadu Generation & Distribution Corporation Ltd. v. PPN Power Generating Co. Pvt. Ltd. 45 , Andhra Pradesh Power Coordination Committee & Ors. v. Lanco Kondapalli Power Ltd. & Others. 46 and Gujarat Urja Vikas Nigam Limited v. Amit Kumar & Others 47 cited by Mr. Vishrov Mukerjee. 206. As held by this Court in State of Karnataka v. Vishwabharathi House Building Cooperative Society and Others 48, cited by Mr. Mukerjee, Courts have the power to execute their own order. The impugned judgment and order cannot, therefore, be faulted for giving directions for payment of the outstanding dues of the Petitioner.”

[Emphasis Supplied] Re Payment of Interest on delayed payments

12. The Respondent ought to have made the payments to the Petitioner in

November 2015 itself. However, the same was not done. Thereafter, this

Hon’ble Commission by its Order dated 05.10.2018 had directed the

Respondent to make the payments.

28

12.1. As per the PPA dated 03.05.1999, KSEB was obligated to make timely

payments. In default by KSEB to make payments by due date, any payment

would attract interest at the Contract Rate of Interest as per Article 9.4 of

the PPA. Article 1.1 of the said PPA in turn defines “Contract Rate of

Interest” which extracted hereunder: -

“Contract Rate of Interest means a per annum time weighted rate of interest equal to the sum of (i) the prime lending rate applicable during the relevant period of State Bank of India and (ii) 2 per cent (%).”

12.2. Accordingly, the Respondent is liable to pay an amount of Rs.

10,21,59,022/- towards interest @ 14.3% (SBI PLR +2% for calculation of

interest as per the PPA) on the delayed payments in addition to the amount

of Rs. 19,81,42,512/- A computation of the interest amounts is set out

hereunder: -

Sl No Invoice No. Amount (Rs.)1 BKPL/KSEB/TY-15/2018-19/01 dtd 22.10.2018 2,68,14,853 2 BKPL/KSEB/TY-15/2018-19/02 dtd 22.10.2018 17,13,27,659 3 Total Invoiced amount 19,81,42,512

5 Date of invoice 22-10-20186 Date of receipt of invoice by KSEB 24-10-2018

7Due date for payment ( 7 days from the date of receipt of invoice by KSEB Limited as per original PPA)

31-10-2018

8 Date up to which interest is calculated 08-06-20229 No. of days by which payment is over due 1316

10 SBI PLR 12.30%11 SBI PLR plus 2% for calculation of interest as per original PPA 14.30%12 Interest for delayed payment @ 14.3% 10,21,59,022

Computation of Interest

Invoice details

BSES KERALA POWER LIMITEDComputation of interest on amount receivable from KSEB Limited

29

12.3. In this backdrop, the Petitioner in the interest of justice, seeks urgent

intervention of this Hon’ble Commission in the matter, and consequential

directions to KSEB to comply with the Order dated 05.10.2018 and award

interest on the delayed payments. It is submitted that for the non-

compliance, KSEB is liable to be punished under Section 142 and Section

146 of the Act. In addition, the Petitioners ought to be compensated for the

costs and expenses of lodging and pursuing the instant Petition.

12.4. The present Petition is bona fide and being filed in the interest of justice.

PRAYER

13. In view of the facts and circumstances explained above, it is most humbly

prayed that this Hon’ble Commission may be pleased to: -

(a) Direct the Respondent to pay an amount Rs. 19,81,42,512/- in

compliance with directions as contained in Para 46(4) and 46 (6) of

the Order dated 05.10.2018 passed by this Hon’ble Commission;

(b) Direct Respondent to pay interest which works out to Rs.

10,21,59,022/- on account of delay in making the payments due to

the Petitioner;

(c) Initiate appropriate proceedings against the Respondent in terms of

Section 142 and 146 of the Act, for non-compliance of the directions

of this Hon’ble Commission;

(d) Levy penalty/appropriate punishment upon the Respondent for not

complying with the directions of this Hon’ble Commission; and

30

(e) Pass any such further order(s) as this Hon’ble Commission may

deem fit and appropriate in light of the facts and circumstances of

the present case.

FILED BY





31

PROMOTt~S AG~EEM£NT

THIS A~R£EMENT m~d~ ahd ent~~•d into ~t Tri~andrum. this .~~ Z4th dav of Oeeember One· thousand·n1n~ hund,.~d and ninety ~1~< V l;u1een l~ERALA STATE WDUSTA IAL DEVELOPMENT CORPOR.A'r ION L IM:·re:o • ).1 ·:omp.sn>' re9.iste~ed Linder t;he Companie~ Act. 1tfSb and hav.in9· its -1~~i.·sterer.f Otfi~t ~t Tr1\l.indrum (h~rvina~tl'r l"i!1err~d to a·:s )'l~SIDC'' :.•1·,icM il~PrB;ion '$har°1 tu.her·e th~ conte::·t S•~ <ldmits or implie:; in·:lud~d its .aL1cces3ori; .and p~rmitted yss.~9n·s) of th-e One f~rt, ~nd DSES l.imi ted 1 a ~-:ompa.n~.1 re9i-st~re-d under th£- Comp.a.nles A~-:t,. 19~t ar.c: nav1n~ il;·3 P.?•ili·s~~r~d 0:1-Tii::e ar Na.;in M.ahal {6th

,_f~oor) I e;;, . '·'~er N.iriman Road, t11..:il1.b.a1 .:ic:i~t f.12ff Chttreinattel"" r ··ll'rred ·:~., 1s t:l-n~. "Pro1n1;,t!fr-" 111M.ir:h.·lf.l<prit..,;;;io1"\· ,::.hall 01here the

~.".f'- .;~:;~ so ,..~·flits or implie·s inc:.ltide$ ·1·:1;: s•.u.:ces-sors ·and f:>\:?r1n1t':'1•.::f .PJoi·~l"'·!l of t;h~ Other Pa.r':.

,~ t TNF.:sse:n·

CC#n1iequ.,nt. to ·Go•.•el"(lnHHlt c:.•1'·.t~eral.a's 'h.•re1na·'fter calle·d "GOV"·. •:>r.tr l'~o.G,O.M.S.No·. 7190/PC· ~ it;~d: t-~th Maa•.::h, tq9c,, J•:~t!:'C' h~.~r 1• .. cr.d•r.f t:o t;hE> Prom·:>~~,. .,, .. 1·d·t- t.-'~·t~r of Int-.nt d-~ted :-:;:,"'~ 11a1•c,.., t·~c;'c tau" ·i·~:Jid f1al· n·,;·3f•j p.-.111i·ts.;. P~·~J~.:t:'i of .,,!111\11 .:-10:~ thro:.s•;,!'\. c.:•11\pet:lti'1e. bi-ddir;9 .J>roc..-!.·.t· .urh·ich :..r#t to oe lo.:a·ttHl l:l ~·i"1"al~·'2n f:1.1lld, 01t1n .an1.1 t1pip•n •. f~ <BOO> t"~s1~.

C .:,ir1 !:Ji• :{1 .. 1.,; 1'1 "; to th~ F' I c\ nn i n9 .C ·:>1nrn: ;:,.~ i •.J.O •:i .:<• e rn:n ~ n t ~if t r11"1 : a 1•u.1r.11111) M.~\hd 5111-lL

0

i .. ·l-'1lhl~t· P.t'<..;·;:'!•::t; {10{ 1"$(0C. 1ntJ I s1.t:1C 'Jt•l-!!r.:tint'.I ESC:S 1'1 t:n., -:t;t"a~eQ°(:: .. p:t.r-':n~ .. 1.(JI' -!·~n~c·-•t:1on er .. d i1npl·~m11Pnt:\tion ,,:: t;t-.i-·'i Mi:>ehl•·O,~i.1tr Pr.;;;;.,ci:, ~:·slt·C 1•1\tt po1rtic\pl\t'l? in t-ht" e·=i~d+::t ·~:H t;he ·i'1od1?-l :='o•~.rr Pro,~c::t ·to .an e ,, i: I? ti 1: '·' f ~ & • : t1 c rs .

F'or dtH•.el~pm~nt.of the t1>10 Liqi.1id Ft.tel based po1•ier projec:ts and th~ M 1:>IJ~l PC\.ll'ir Projec.t,.·the Prb1'1'\ot:.fr has in~orp.orat11i:1 .3

Comp2.t"IY under the r.a.nt and $ ty.1 e o-f "f;:SES l<e r.a la Pc) .. 1e r Pr1·H te li•ili t~d 11 r~og ist9r>!d und~ r th11~ Al: t: 1 t Cf~6 <i::i-?ri?inaft;~:- c:al led "the C'~1T1par.~1"•). ~-

~t:; P{ . SKV LAVV OFFfCE ~T~~·.· ·~ B-50, Defence Colony

~ ,j • .;-....:··' '. .. New Oelhi-110 024 1 L.~'~· :'"· . . .'',.~ .. ~.-: .... : ~; .

ANNEXURE-P/132

//True Copy//

' t . ..1 t"' ·' t• •. - ~- ~ ••

·:;.'. h 11 r • ;n j.' r- .-;; J ~ .: t I \ '1 •

r h l !. :..CJ r -t ~men t t -:.

PL· r ch l ;, ~ :19 r •! ~ m <t n t i

·. ;; .. & .. (" (.. . .~'. ...... ~ ·:;;

r~r~~ ·\j .\- ' -: ;. J ·,• .,. ' r •.P ' ·~. '.J ~ •t ..#- :• , •• l · i. ~ · .: 1

• ~J

;h I :I•:•' ~"" . >'"Pl•"'';"' t, I r~.c:.i- t.h e

,;1,1b J ..... l b'-t_ t•.J-t·-!",,

t<~. •,ti\? <.: •j>r,pt. ion f:$-ES . . mo t:SEF.c.

~ t' ~i ..\ . l :- : ···~. i I "

1; "AQreement:• sh~11 me)': th~~ F'rcmo.trrs Ai;;r-ermerit

::'. "The. Cornp~ny'' ·~h<ll ~ 1n~•n "BSE5 i:;er-~l.i. Po;.1~r f>riv4te Limlt~d·.

4.

1 •

'"' -·

"P.i.rt~··" or "Parti ~s" >haU •M·•n ., p•rty or ·par+;ies ·to this AQree1nent i.ir. ·s-~e:s <i.nd l~SIDC_4nd 1o.1here11er thir conte:<t .$0

~dmi ts includ,.e · the'i r r~spcc'dve '!5UCC:t-s'5ors and permitt~d .. ~ ...

"Project" or "Projects"~ sh~ll .me~n ·ti.10. llquid 11.al -b~~~ pow•r p~cJe~t otl 4Q MW:e3ch ~w•rd~d th~ou9h comp~~itiv• biddin<J process t=ri t'SES by;.•~·sr-DG ~s pe_r. GOK's orde.r a.nd tht-Mod"',I ?01 .. rr- P·roj"'ct; to be· loca..tl!d in K"'rat~.

IT IS A~REED BY AND ElETWEEN THE PAATIES HERETO AS FOLLOWS : . . ~· . .

It is e~tima.ted by the·Parties th:itt the cost of the Pr-ojec:l:s m4y b~ ~round R5.~00 ~r6r~~ .and tht ~ame shall b~ financ:ed throu9h $h,re c•~it•l of ~h~ Comp~ny •nd loan~ tc. ~e borr9wed b)" the Cornpan>'• · · · ---···:· ·

rt is en.vis~ged th.at the .F>ha.r~ c:apit;;i.l' of the Compan·y m•y. b'e arc.Lind Rs. lZll cror"'s lnd .deobt . .ibout Rs.19c.1 c:ror:-es. The c4~it1l structur>? ot th~ C<:>mp.iny.$holll· ho111ever b~ 1in~1ly d~C:ld£'d .1fter prep.ar1·tiCln er det~ile.d project r-eport .and ;1fl·er d'iscus-sin<;i 1•Hth ·the f\n.•nciA·l institutic·ns .and l!oll,1.06r.ators -i.~. :.t ttie t.imt>.o1 t.in.in.::L~.l clcniin9.

CAPITAL P~RTict?ATION

....... "7"n-: eq1.dty c•p1t<. f-::;il lo1o1in~ t'fl:&nner -

1.:5 l DC Pro111ote·r .ind it5< ~ffil~at;ess' P1.1bl ic:/Priv.ite P-lace-me-nt · - . 1,. 0th~ rs -

- :t)!! ... -~·~Y.

2~:•%

t.s.t;!~i.~.i~\1¢..,~··•··'.t,):!;<~??~i~i'.'t~i'~~i~~~-$~~4:~-~l~-g~#A1l~~---.;. It any dHn91!- in th'? equi'ty·c~.ipit~l.--:..tru.c;h.1r·e (s n1tces~ita.t~d

at . .lr;y -time .ltt~r tl:ua At;Jr 1~f'ment is -~r)t'2'i-ed 1r1to dut to ch.in9e·; ,in- th~ -_ f:in_..inC::1n9 · p~~t"i.rn • ·ot · th~ Pr•::> j ec ts /o"'e r run I e :•pans i ~n/.11od e ;n i~i. ~) or1: or . tor- • .lny_ oth e ~ r~.lsor. 1 ttu, ch•ng~d p~tt.!rn ofe._qu!ty h.::ildin~ ~l'ull b·~

.1m .. Jt1.1.il ly ditcided bet ... 1ee.n- th.f: Partie.5 .lnd in tl:)e abse-nr::e of any "Jr.ittttn A9r.~ement t.o-. ':hot contJral"'.y 1 the terms ~nd cor;iditicns•of this A~reement_.v.1ill cont:inue to hol~ good, "'ith t;he · 1noi;H t-i<::.ltion that · the",Pr-ootioter 'sh4:rl be required t'o P.1.trc:hase in. ac:ccrdan.ce 1odth t:h-e t:.er'!1's ot· thiiJ At;;reemen"t: .any further ·•ha.re ii tak'l'n 1.1p by l:'SIOC~ .. · ·Th~ c:han9~s, how~vu·· sn•ll ~ b• subject to the condition.tha.t- Prom.ot:er ind it~ ~ffi liat~' to9~th~r sha.l-1 b~ ~n~itled ~o hold· not les~ than

51 'l.. f\' i) l-\.. -

I 1

33

33

.rh-1. Pr•."l1n•:>l.'.r.1 ,.'"Ii: l. "\\ .. '1·1 r1~ tt•r ''"•)•!111~n•.;,. f.l:- •4 . '"'.I '·'P t,~ • .! .. n•1r·~ '1.1nd.~ n~ .. •d1.'' f,:-•· .t.h~ r•1'.l.•c-c:.~ .. •-~·. 'T.l'i·~·;_f"\i,hl•r>c·,11-.~n!; ·.if

11.1n.:I > b.y I St~\": J." ~ t i. ·~·:l•"'"';_n•": "-' J. f t- .:- r ': h -t Fl' r~~or:I..) t ·~ 1· :-- \ i b r•:i.u•;tl i' 1n -:"~··: tJf it;: .. •1"'~: •.".::>n\.r.1t•;•L\ori.

l t \ J l~ I"~ "°.J •~\ .\ ~ ; ~"' ·.l 1 .\~•'l .,t .1 l •:J't . \C\": ih .l r '1 i; h,. i •,I

11l or Pr.:.m.:.t~r -\ ·.h1ll ... ot bf' <''tf~c:·t:~d "•IU~o1..1t q1pro·.1~l of t;h~ C·t.h-1r ·(or

b·· •. the

".', Aft:.?1' the e:<pir)' of the p~·rio.d.st1pul'a.t:<!d H1.P~l"a. 6 ibo 11 e.,

~i& The u:sro·: shall tir>t .gi.;e prefertnce to tht Promoter ~~~ buy·i.n9, of <Shar~·•_.held by 1:.StDC... ..·

for·

(.a} The Promcttr'.i '.ihill b~y"b•c.·1o;·;d\ or'.•11) -part of _the ~quity ·sha.re·s .i.cquir"ed by ll:SIDC wl"an of1e.r~d by K.Sit;>C a~ ~ predet.f·riftined pricP.

i:',or the purpO'ii.f of this c:l.iu-set

t 1 ~ Thoe d~"te o.1 1n:"~!.t•n~nt z.fu.t 1 mean the _dat' .. en '"hb:h Party $ha 11 .&dvancf' fund~ for· lnv11stmen t; in. the Cciinpany e i l;h~r· a·s -an ad•1anc:t b:; 'ihar'! appl ical:i.on .mon .. y or- il"I other rn an I"\ e r , "1h a t s (,-e v ·e- r • .•;· · ·

' .

T.he mal"b~t value shall 11'\~ln _prict' 111otl•:td "Out on the b"~sis Qf prii::\! iiun1n'1·""· n.:tio m~tl")od .t:akin9 .into_account"rfti/tur.pl'ofi.tabili t:,. i,hc or in l;he -~'.l'l!nt o(. Jist1n9 ·qf J the Co.np.i.ny' i E"'1ul ty Sh . .i.r~. on · thit Stec:~· E::cc:hU"H)~4, , the :avera9t 'ot pr-1.:es q•.t.;:)ttd 1n·'a11 Stec~: f.':q::h.1n9es ~•l•tr-e the S:l'lar1ts J.rt .1.:; t ,;,,., ly. !;r.id~·.1 f.-~r 1 l :• 11\Q'n ~h·i r' r 1 e'3'S whichever is h\~h1r •

• Tha Pr-'oinot1r shall mil.of ft.ill payment 01 th.- P.nc:e ·:>·t 'ih~r~~ purch.i.~t·.l tr9•n .J~StDC 111! thin 3(1 da:"-s fro.n the d.1.te r.Jf ~ner... ln ~ t~fJ 'l'"'f'nt .-;,f Pi;-om 0:>ter not mtkit'l_c;i . !Ul 1

pa~·ment of tht pri~-1• ~t. s.h.a.r>?~ uti t.hin. thr st..1pul:ated. ::1~ . lh)·~ fro.'fl tht ./:ht.>- f of1~r, !"SI.DC sh~I ~ t:a. fr,-. to ctit1 l

the ·5hlr-fs· to th1t :<t-tnt: t•;) th• _public a.t. -;;'.' ... .:h pri.c& .1~ '"a·y b• d~ttr1<11n•d bY. VSl!:•c. lt thj_ rasl· anci. rtsp·on.sibi lit:,.• ot the -Promot:t,r-. · 1 A_l l losses an•:! •:•ptns:-?.s i.t'lcu,rr•d by KSfOC in r~s1Hct;of 1 mak:in9 ~uc;tJ·sale o;.h4ll b.e recov~r"able fro11f·· the Pro.,..~:~r 1lt.h~r. directly or frc1tt t:he ·-security ava._ila.bt,· with i1(S!OC. or \.1nder .. thf. prov.ision5 ot the )(era.la. RevenU'! R.·~covE,tr')' ·A.e.I:; as ~tnend'ed 1<Y'..:)1TI l;ime to t.ime.

~,v

---:.....;.''\./\

34

!t )':' .n1d.\•"tl:.- l{rf""-tC 1.hH 1 .• ~!C•C ... r.d. ~hi' C:'orr16ter ;tr.a'~ :iUP\.h.;!"'; . .-1.:'°' 1:>ther u•.11·10°~ -:··~-t .:urr9-ni:.:; ·">f.lV:.ai· -~·,r~~,n~t~'; 1 :• .:,,~ :l~ ni1t.\<r!> comi:n·; VP b11fr..ir·t tht' Gfl"\~l"'d ~ody >;).f th~ Cc;npr·n:v.

I • • ~~NAGEmENT _. . . :

t;> i Tl"ie Me-mor•nduin ilrfc$ Art i c:: ~es of ~1aoc 1 ~ti O·"' of the ~Comb~ny fcirmul·a.ted a.ccordioq to thot C.::i.npa-tii~s Ac::t, 1956 1 sh~lli bl! s• .. d t ;bI;• .;il ~ered t~ a.dhe-~e. to tr,e fol !o;•dn~ ~~tters: 1 i

a) The !:o.ird of 01r-e::toi- .. ,sh<lll co1npr~5~ not tess than f;hr-ee and not more th.in1 t1.11elv.~ ·Direc:tor-s.· T~e;si:te of th.e Board ..

• 11d l l be de tli!r"J"if'ed t:y ·mutu.il· -c::ons>?nt· de~endir.9 on the si':e 01' the proJeFt• turoover",-etc; •.

. I I •

<bl The- J:'SIDC ~nd pr:omot~.r shal t·~a11e- the ri9ht to .nominate Dire<;'.tor-. to the E:~.l1°·::l'-in proportion t.o ·thei'r• re:speetive ~har-o? in .... estm~nts sub..fec::t to a- mini1nu111 of. one for ·t~SIDC. ln c·.i;;e the equit:{ capit.t.l of l(SlOC in .the. Company is b~yond l5~, KSIDC · wi_ll ha.ve the· right· to nomin~t;e a

) minirnull'I of• T\>>O .Direc:iors. One of th~ nominees of ·-'KSIDC sh.ill. be :.. lotlholetJme: director ·a·t the op'tiot'i. ot 1::sroc. Provided that a'll times the ma.jorit>" of Directors. sha.ll b~ th~ nominees of t~t! Prom~te~~ notwit~in9 ~n~thjng c:-ont.•inlfd in -'!iub-c::l·&o.1sE> ·<d> b~ro.... · ..

I.::) fh~ ,M.sn.~9inQ Dirt?.;t.::ir -;h~U be- •::>ne u'f thot nom.inies of t:Me promoter ~nd shaU no_t b• liable to ret~r~.·

.. -- ...... Cd) Each of the financi~! \nst:;tutiori'S'inc!udi

0

n9.l<SIDC. (foro term ~cans sanctionl'd by .t.tl st1.&11-.tu_ve the ri9ht to l.ppc,n't one .dirt!c;tcr ~a.:h 'for th~ 1i.n&.nC'i.a.l ."ssistanr.e :nnctio-ned by '"'•Y ·of term l'Can~ see.:1. C-'P.it;.l, if t~e $i::e of tntt' \oa:n so ju$tffies ~nd if th~ ~ondition of th:e. lo~n so" r~qu ire~, \."' l ~·$ ::- th(. tn"S ti to.it i or, h•~ reserved · the ;-ight ·to .appoint inore ci·irectors in·. its l~tter o_f 5anction in 'i·ihic:::h c.ise it sh.ill prev~i-1.

I~) ,.,r.- Oirect;or 3-h.ill ~).? r~Quired to hold ~n:r qu•l.if\c:~tion ;;h 11. r" s..

1fl No •oLe sill in~ a9~n=s sh~ll be appoi"t~d by ~h~ Company.

, r ......... 1\t tte'I! o't

S::q:~~nditur' inc:urr~d t:i:i e,ach party t..:>r p·r-oinot'.ion o.f the ProJectl.'5) ~upported by.·•ud'it\'d statpm-tnt. ot acr:i;>l.\l'\t~, ·$Ma·ll be r~i1nbursed by th~ Cbmp•ny %0 5~1c:h -::<t~nt •'$ ·,n~y be-

.• ~•Parat•ly· agreed to beto;eon '.f~)rties.

K

35

. ·-:··~··•1·•1 ~Jc~1·1r.~17 o~ .:.•'".i: ~c:- r.,,-.

i~rt-.. r1y1·, • ..,.,n_.r,t ~:i •• ?·I ~~ i•.-;.'-,1•"• ... • tt:•· t, ..... 1'-10r-:.1·.•nt C·."f '"h·· •· ... 1p~\:\l"~ ~-:>ir--:i:. ·:.>I '01:-·~·::to··;;. ·Ji ·M.~ F'ln1n n1d _;.11J.tt •:n•1'1'1 1nt•:i tor·•:t '"I t.h .. 1~,i:t from th" '=lJ.tt! 61 :.:i .... nunic:•~ion of the .\.:ipr-o·.1•l!i .::J'f .t.n~ :.lt·:1 8.:i . .ird-a _of D1rH·~or;,

The P.ir-ti·es to U·.is At;1r~rment. undert·1S.r. to \>er th•t propel" do•:u.11.ui't'~t1on i; Cl~n., on bth~t·f ,.,, th:~·C:of11p-.1ny tti'th"~ in 't_h~ ·" ,. I; i i:: ! e ~ ~ f As ~oc: 1 • t I en 0 ,.. 0th" ,. ... I s ... . to. c 11",.: OU t the pro':'isions of this. t.gruni'-nt,

This A~reement -shil 1 i'\oi 'b;e ::of:ls1d~r..r..q_.~6 gr.tnt. any ri9hts or impose •ny duty other th•n tho~~ s~ecifi~ally provid~d herein ~nd in thr e11rn·t of any matter:> ar1s1l'l9 dLtl'(nq the '>l•b&i>ttt·n.:e •ct th.i'!i A9r-t>~1nenl;,. "'h1ch 1.!> not -pro·~i-ded· for tier~1n; :;1.ic:h m.atte:rJ;.h•ll 1:.1'!. :1e~lt ••11th.by <:ommon r.:c;nsent of t.h\!; P.•l'." .. t 1 es h-tr~·tri.

141 All ·notices betwc.>en .and .imon9st the Parties hfretc sh.all if a•:1dr-~'iiS~d to J:SIDC bt addr~ssed t,;g ~~-er.a.la St:ah [ndustria.1 D;o vol opment Corpo:r .. · t ion 1.-td. . IU•s ton Ro.ad 1 Kou1d i ~ r • rriv.andrum 69!' 1303 .and if .i·ddr~s·s'!d t_o Pro1noter- be -addre-ss~d to f:SES L1mi ted, Nic_,i1' Hah.il (~th F'.loorl 1 · e2, V'fer ~hrimo·n Flo ld, · Hurnb al 4•)l' .t.,:i,i

I~· Ttus ~9r•em~n.t, .C:onsf1t•.1t-.s t;h~- entire· ~nd only 19r~'!mer.t b1t111~-tn. ·th~ P1rta~.h1r-eto r~la~1n·9 to ~h" subJ ... Ct • .natt~r h ... r-e.to .and SUPt?·i"Sedtt~ and C:U1Cl' }'>r. .it l .pi e'\1 10US AC}reements, n't<;,Oti1t;~on-s, .:o,,.;t1i ... not:'lt" an·.:t . .- ... pr ... sen:ta·t1on!i· tn r'1spttt.t ::-. .. r'ottp,. i1 _.:n;,- 1 ~nc1 tht~ .::19,.·if~frit>n.t r.hall not b,.. re\ta.a·sl!'d .:s1.lc:har9ed, .ib•n•j•!l"' .. d O.r.11iod1 f.l~d .in J.-n•/: 111.i.nne• -1,u-::ept; .by· &n 1n'ltr1.1111tont in 1o1r1t1ni; ·si9n:ed:~P:l • duly·_:.l:t.1thol'l3td_o1'fic:•r O·r r .. p r • s ~ n t • t; l .,, ~ o f <!' ac 11 o 1 • th t' P a r' t t t s IH ,. ~ to . . . . . . : '

~n .... o1 .,tn• p•,.t1es l'l'l'tto· m.t~··1 b;r l•ll"ltten notice othtr p.al"'t:;, •:tHl"I•;,<!' th~ add.r~'!'>l>. ~.;:, 1o1h1.:h·not1.Ct Or •h•ll bf dll"'~Ct•d:

to .th~ r t?.:iLt e i t

T,.., 1 i. A~ r <t 'ti71-f n t i l • ., ,,.-:: v t t::S in d ~t;p. l 1 t: 1 t ·, • Tl'\ r P 1 r- t; i·e IO tare t 0 &l'lil 1 • h ... ,. o,..,t .-.ich in•:l .,l· ;1;;,n-rd .:.::py .thtl.l b"' 1r. t:htt p·:i-:.•ess ion o~ the p,..o.r\ot·,.,. •uh-:i ,;,....,, 1: tr•t:'r•.1it·· thoP t-tme t;o thr-

.::o•np .tn:, fc.r .:>I:> :o.orr• . .-an~~ of th.i t ,•rmi;.

T£'Rt1HJAT?et·.

l ~. ca 'Th·l!: A~l"f'.Ptnofnt sh!.ll ~·in fo.,..c.• t.11\. s•.1ch' t11u l~SlDC ho-id• ,sh.t:-<!'a ,,, tt1t c0 ,11 p:tn)• ,r\.; sh_.ill' ~~ •. .&nJ l<#r1n1n.l~td 4ft;-er th~ 4.'l•~1 r-:r C!I ~t: •. 111·or1tn1t ·~ rorn. th" ·:Jd~

0

':lf pu.rc:h<i-se ·:>f sh.tr~s b~. th"° p./'otaoter- 0 ,... thirdipa.-tt_ •.ind-tr .:1aL1se- <7> ;bo•o1•, ' I

kJ

36

·~ ._.

in/ aS"j·~·r:1.:-:·~,.~ o;. ~•11~:tt': :¢.n.;ii,1.:• i .. •; .•'l"'

·~ r' 1:~· :i ,r:J . .' ·H h ft ~lY 1i,i'i'f.'.;tl;;~ 'tf'1 ,,: .. J 1 ~it~.~.- .:J .1):0 4,t; •

:~~i~iJ!l:~~1~lJ~I'~If ;f !f~,~Z~i;ifr1f ;~~f !::; 2~. _..; ...

,;-f~'-'S \.J.JHSRe"OF th~ .... <1-t.:1~ ~.a tht>s--:; p r "i ~.h t ::' 1: \..I f; . ..,._d

";o_ n.iv $p;~\::-~ b'?h-a ·~n t.he

// TRUE COPY //

37

CO VERN Klilll' 0 7 U!'V..L>.

. Ab.S~rac.t ·Pow·er Depart.~ent ~ :t;;mali power projects ·under li:me.r9encr' ~ct:.i.on P l,.an .,.. :KSIDC/BSES .project. .;. Shi~ting ·©f tne 4.'0 JtrW power' pr<;:ij ect. from Techno.Pai;:k! 'n'lii"\.lv-anu.nthap4I'am ;:o Cochin·- Ordere issued

. . - ~ - - - - - -.- ~ - -·- - ~·- - - - -· - - - - - ~ - - -.- - ..;..

NWER .. CB}.· DEPART><iirr ~ . G.o~·(MS)No.17/97/PD · Da.ted 1 Th1.r\lva~~nth~pUram 25 • ."4 •• 1997 - - - ~ - - - ~ ~ -- - - - ---.~ - - - ~-- - --~ - - w .Reads 1. o.o .. (ws)t10 .• l6/95/PD date~ 30•9~1995

2. o.O.(HS)~.7/95/PD .. d~ted l~r.3.'1996 , J. ~t:ter N'o.n/rPC/14.e/ss.&a/95-915/351 · dat.oo. 14. 3 .1997

trom the Q)air-man, xmm. . . . . . . ,

1. As per Gove.rnmer'i't O.t"d.er .read a.s Let pa~r above, Government hc:ive der.:dqed to hunch an. fmergency Action Plan t·o· ens~re· an "ldditiori~l power i;,enera~ton. t:o the extent o! 400 MW within S'.""9 months_ ~hrouQh sma·ll po~er projects in_ t;.he. priv.;ite sector. >.:ccor<lingly 15. l«>cat:.ions ~er~ all<?tt~d to X.era·1a St.ate 1i:l.~ctr1c~ty '.!k)ard and 10 -locations ·were <illotted to ~arole Sta.ts Indllstri~l ·bfveloprn.ent Corp<:)ration for establi.shinQ small power plan.ts .·t~r~ugh Competitive E,liddi119 Both -~~rala S.t_a te Electr:-icity ·Board .afd. _Kera la State . · . :tndustri~l Deve:lopment Corpcr.a.tio:O iny~t.ed tende.t'e to est~blish .powdr pl.ants in the location a:llot:.bed(tQ .t;:.hem,. ~u.bseguently they have forwarded their bid evaluation· reports t:.o O<>vernment for approvai. . · · ·

. .

2. · J...s ~r Oove.rnm~nt or~~r read as 2nd ~pe;r .above, . Government have approved the .bid eva if·at ion reports. · . >.ccordingly, t,\-10 loc~t~ons on? .at. ~edpno p~rk, ThiruYanant.hapur;

· an<.l an~t~aer one at. ~?kkami<J w~re allqlted t<:) }V:s. BOmbay · S~curban Elec.tric supplie~ Ltd.. G:ove.#nment have. approv~d PPA. form.at also. · · ·

3 .• Vide letter re~d as third pa!Per, t.he Olairman .. !::erala State ilectricity Board. has in(o.rnted that the site. selected j,,n Thiruv~nant:hapl..,l.raro/ ie o t re~hQQ park has Certain difficulties in m~I< ing nvailable ...,ateJ and fuel· supplies and hence thi$ project may ·tie .allowed to. }pe set up at J:och.1.

4 • Government have examined the Pl'la.t ter .in oet:.a il and az:-e pl_a~_sed tc approve the p.r~po$<:1l t·q shi~t. the ·40 M'tf power ,prcjecl oi:·iginally· propose<)• .to:· be. set ~up at Techno. ~ark; , Thiruv:.·.nanthapu·ram to ~<>C:hi. alon9 :wil:.lj t}1e 4.Q MW project prc~osed" in. ~he Tra~.anc;:pre CoChin· Chenpic;:als site Bubj~ct. to the condit:.~on that ic:erala $t.ate Elc;tct.rioj.ty Soard. B.houl<l negotiate ano brinQ about c.orresponc;!irfQ reduction in power t·ariff. · ·

(fal' OR.DSR OJ' mz ~vu.NOR.)

G • · r<_.1.J JJ;O.t.U. . PEPU"Tl'.SEcrutTA.RY.

ANNEXURE-P/238

//True Copy//

~2--

117 Ch~irman, Kar.ala .:st·ate Elect.t.1c:it.y :aoar9,· .Tvµi.

1./fhe ~=rna9ing Director, ~er~l.~ St.it.~ lndu.st,rial Develo~nC. ... . CQtl>Or~ tipn, 1'2'h1ru vana.n'~hapuram •.

Tho :tndust::.piea (H)' Department The ~inan.ce ( f'UA) Depart.ment:

The hcc®ntant Ge.ner;~l .'(>Jl:).:, .. Ji;:er.ala;· 'l'1hiru-Van~ntf'\apuraia.

'I'ije ~n~QinQ Direc~or," ·Tra:vancore·. Cochin Chemi~als~ !ltd •. - Un yo. g'a m.a. nd al~ ·Koch~ .: .. . .. _~

ir1rn ois tr let Collector,. Ernci"kulam~· · s~/0c. . •.

•• •• •• ~·~ ---: -1 ·.#~:.:

. .... ·· .

. Forwarded/By order·

(? . . ·1. . : . ~· ' . .0 . . . ~·~~

·_ . . .. ; . .,,. . section ¢!..f i_cer

// TRUE COPY //

39

Agreement with IOC Ltde :

For f11el allocation

ANNEXURE-P/340

//True Copy//

FUEL SUPPLY AGREEMENT

BET\VEEN

INDIAN OIL CORPORATION LTD

, BSES

FOR

107 1\J\V PO\VER PLANT

AT

KERALA

. OIL COORDINATION COMI'rUTTEE l\HNISTRY OF PETROLKUivl & NATURAL GAS

NE\V DELHI

41

INDEX

PART 1

GENER.\L

1. Definitions ....................................................................................... 2 2. Terms and Post Execution Negotiation ............................................ 12 3. Conditions Precedent and Effective Date .. , ...................................... 12 4. Key Dates and Information .............................................................. 13 5. Longstop Date ................................................................................ 13

PART 2

SALEANDPURCHASEOFFlJEL

6. Supply ofFuel by Eeikr ................................................................... 14 7. Quantity .......................................................................................... 15 8. _Quality ............................................................................................ l 7 9. Alternative Fuel .............................................................................. 18 l 0. Other Petroleum PrnJuct ................................................................. 19

PART 3 STORAGE AND HANDLL~G FACILITY

l l. Storage and Handling Faciliry .......................................................... 19

PART 4 MEASUREJ\:IENT AND SALE

12. Measurement. .................................................................................. 21 13 Transportation ............................................................................... 22

PART 5 COM1"1ITMENT CHARGE

14. Commitment Chari:;,~ ........................................................................ 23

42

PART 6 PRICING, C.UARGES INVOICING, PA YNIENT

15. Purchase ~ri~-e ........................... .-.... ;.~ .............................................. 25 16. Various Charges .............................. _.~ .. .-..... -...................................... 26

7 In . . ·p . 1 . vo1Cl.ng ana _ ::iytnent .................................................................... 28

PART 7 LIQUIDATED DAI\-1AGES

18. Liqui<i.:i.ted Darn.ages ................................ , ....................................... 30

PART 8 REPRESENTATIONS AND COVENANTS

, 19. R.eprt;Se:itations ............................................................................... 34 20. Cove11r;.r•ts ....................................................................................... 35

PART 9 FORCE a1AJEURE

21. Defintion .................... -..................................................................... 36

PART 10 Il\fPORT HANDLING

22. Import Handling .............................................................................. 39

PART 11 ASSIGNl\-1ENT

23. Assignment. ...................................................................................... 4{)

PART 12 TER..\UNA TION RIGHTS

24. Events ofDefauit ................................................................................ 41 25. Tern1irt1tion Procedure ···········--······················: ................................ 42 26. Notic:i:; to Financial.Institutions················'································-······.;:

43

PART 13 DISPUTE RESOLUTION

27. Good Faith Negotiation ................................... '. ... ~.: ......................... 43

PART 14 ARBITR.\ TION

2 8. .A.rbitration. ...................................................................................... 44

PART 15 l\1.ISCELLlNEOUS

29. Jurisdiction ...................................................................................... 45 30. Governin~ Law ............................................................................ .,.45 3 1. ~fisceHan~ous ....... -' ~ ....................................................................... .4 5

ANNEXURES

ANNEXURE 1 ........... MOP&NG's Linkage Letter ...................................... .49

A.NNEXURE 2 ........... Fuel Specifications ..................................................... 50

ANNEXURE 3 .......... .lmpon Handling Procedure .... : ................................... 5 5

EXPLANATORY NOTES

Calculation of Commitment Charge ....................... ~··········-·· ......................... 57

Other Issues .................................................. , .. : · · ........ : ........ ·.·:·········· ....... 58

44

... . _,· . \

·-...~~ ... : ....

This Agreement is exc<;uted at Chennai, this Seventeenth day of March One thous.:.:id nine hundred and ninety eight .

BETWEEN

Indian Oil Corporntion Limited, a Company within the meaning of the Companies A:t, 1956, and having its registered oflicc at Tndianoil Bhavan, G-9, Ali Yavar Jung Mt.:--g. Bandra (East), Mumbai - 400 051 and Regional Office at IndianOil Bha..-an, 139, Nungambnkkam High Road, Chcnnai 600 034, hereinafter referred to as the "Seller"

~ (which expression shall unless it be repugnant to the context or meaning thereof, oe deemed to mean and inr:!ude its successors and assigns) of the One Part;

AND

RSES Limited, a Cort1pany within the meaning of the Companies Act, 1956 and ha,7.'Jg its registered office at Plot E-4 (II), WDC Arca, Maro~ Andheri (E), Mumbai 400 C93 and its project office at Cochin hereinafter referred to as "the Buyer" (which expressl:>n shall unless it be repugnant to the context or meaning thereof. be deemed to mean t.id

include its successors rtr!'l pem1itted assigns) of.the Other Part;

/'

i /

\

45

\V HERE AS:

(i) The Buyer has been selected by Kerala State Electricity Board to design, build, finance, ov.11 and operate a liquid based power station (the ·"Power Station" as hereinafter defined) with a design rated capacity of 107.0 ?vf\V at Kerala in the State of Kerala.

(ii) The Buyer wisn.:s to enter into an agreernent for the purchase of Fuel (as hereinafter defineci) and the seller is willing to supply the Fuel on t.~e terms and conditions hereinafter appearing.

Now, therefore, in cons··Jeration of the premises and the mutual covenants and agreements hereinafter set fonh~ tht' 3e!Jer and the Buyer, intending to be legally bound, hereby agree as follows:

PART I

GE!'l'TRAL

1. Definitions

In the Agreement, uniess the conte>..1 otherwise requires, the follov•ing terms shall have the following meanings.

1.1 "Agreement" shall mean this agreement and shall include any recitals, schedules, a.nnexures or exhibits annexed hereto and any amendments and understandings made to the same by the Parties in \\Titing.

1.2 "Actual height Charge" shall mean the charge payable by the Buyer tc·

the Seller in accordance Vvith Clause 16.6.

1.3 "Agreed Quantity" shall mean., the Annual Agreed Quantity, the Quanerly Agreed Quantity or the Monthiy Agreed Quantity, as defined in

· clause 7, as the comexi: requires.

1.4 "Alternative Fuel" shall mean HSD/SKO/Condensate/ NGL in case o~ Naptha !laving the specification listed at Annexure 2

1.5 "Annual Guaranteed Quantity" (AGQ) shall mean a quantity of the Fuel determined based on the PLF mentioned in the PPA subject to a maximurr. of 80% PLF per Annum against the total installed generating capacity of the Power Station as under:

i) To achieve 68.49% PLF per Annum against the total installed generating capacity of the Power Station, AGQ v..rill be equal to 85% of the Annual linkage Qu.tntity.

2

46

·ii) To achieve 75% PLF per Annum against the total installed generating capacity of the Power Station, AGQ v.ili be equal to 93% of the Annual Link.age Quantity.

iii) To achieve 80% PLF per Annum· against the total installed generating capacity of the Power Station, AGQ will be equal to the Annual Linkage Quantity .

. However, Guarantee Charge of 5% will be levied as per clause l6.S.:. for A.nnu~ Guaranteed Quantity upto 68.49% PLF, 6% will be levied for Annuzl Guaranteed quantity upto. 75%' PLF and 7% will be levied for Annu:L Guaranteed Quantity up to 80% PLF.

1.6 "Annu;I Linkage Quantity" shall mean the annual quantity of Fuci allocated to the Buyer and specified in the Linkage Letter from MOP&::'.'-TG on the ~asis of 80% PLF. '

t. 7 "Annual Agr·eed Quantity" shall mean the quantity of Fuel to be suppiied annually in accordance with Clause 7.

1.8 "Administered Pricing i\tethanism (APM)" means the system and orders of the Government regulating the supply, distribution.. sales and fixation of prices of specified petroleum products. for sale to the consumers.

1.9 "Appiicsble Laws" shall mean the laws of India including, without limitation:

1.9. l any national., federal. or state statute. ordinance. law. regulation or bye·law or any rule. code or direction: and

l.9.2 any license~ consent. ciearance, f'ermit. authorisation or other approval (and any conditions attac::ed thereto) of any government age~cy, public ·body or aurhoriry, local or national agency, department, micistry, official. public or statutory person (whether alltonomous or not) which has appropriate jurisdiction (and whether 0r not relating to the emironment)~ and

1.9.3 any fiscal and social legislation and customs re~lations;

1.10 11 ASThVlP" shall mean American Society of Testing Materials or Instirnrn of Petroleum as the case may be.

t .11 "Buyer's Pipeline" shall mean the pipeline running from the Junction Point of Seller's Pipelir:e to the Buyer's On Site Faciliiio.s ..

l.12 °BlS" shall mean the Bure;:i1.1 ofTndian Star.dards.

3

47

1.13 "Change-in-Law" shall mean any of the following events:

Ll3. l enactment or issuance of any new approval Agreed rn be obtained bv the Buver or anv new law (includinu anv Act. rule.

• ... - l -" ~ - ...

reguiation_ notification_ order or instructions ha\.·ing the force cf law), er

I.13.2 .. the amendment. alteration, modification or repeal of any existing approval or consent. law or regulation of any Governmental ·instrumentality (including~ v,.ithout limitation, any law o-r regulation relating to any taxes. levies, duties. custoi!1s deductions, charges, withholdings, cesses, impon fees or assessments or any expropriation or compulsory acquisition), or

l.13.3 change in the manner in w~ch any Indian legal requirement is applied or interpreted by a competent coun. tribunal. Governmental Instrumentality or statutory authority. in each of cases 1.13 .1 through 1.13 .3 above corning into effect after tne date of execution of this Agreement.

l.14 "CIF Value" shall mean cost. insurance. and freight paid for lmponed Ft!el as defined and construed in accordance with the provisions of the l~CO terms 1990, provided, powever. that if any term of this Agreement coruiicts

· with the INCO terms 1990. the provisions of this Agreement shall prevaii.

1.15 "Commitment Charge'' sbll mean the amou~t referred to in Clause 14. i

1.16 "ConHact Period" shall mean:

1.16. l

1.16.2

1.16.3

the period commencing on · (and inclucf.tng) · the S~ppiy Commencement Date and ending on (but excluding) the Commercial Operations Date of the Project called the ''First Contract Period"; · the period commencing on (and including) the Commercial Operation Date of the Project and ending on· 'but excluding) the 1st April next following, called the "Second Contract Period")~ and each subsequent period of one year, the first such period commencing on (and including) the 1st April next f9!lowing (:1:

Commercial Operation Date of the Project and ending on 3 l st March next following such l st April and subsequent periods commencing on anniversaries of such date, each such period of o.1e :1r.a.r called the ''Subsequent Contract Period";

1.17 "Commcrci:ll 0;.r rntion Date" shall mean i.n respect of each Generat~".1'~ ~ Unit. the date on which such Generating Unit b°egins commerdal operatio1/\) \) as spe<;ified in a . tice given by the Buyer to the Seller in accordance W:tli .

~clause4! ~ ~-

48

l. l 8 . "Commercial· Operation Date of the Project" shall mean the date upon which the last generating unit begins commercial operation as specified in a notice given by the Buyer to the Seller in accordance with clause 4. L

I

l.19 "Day" shall mean a p!!riod of twenty-four- ·consecutive hours, beginning and ending at 00:00 (midnight) (Indian Standard Time) or at such other hour as the s~ller and the Buyer shall agree upon in ·writing.

l.20 "Dollar.;" or "U.S. Dollars" or "U.S.D." sh.all mean the lawfol currency of the United States of America

1.21 •·•tffe<:tive Date" shall have the meaning given to it in Clause 3.2.

L22 "Event or Default" sh.-tll mean the event of default set out in Clause 24 hereof.

1.23 "Event of Force Majeure" shall have the meaning given to it in Clause 21.1,, .

1.24 "Facilitator." shall m~an the role to be accepted by t.he Seller for arranging and assistbg in import of Fuel for the Buyer by employing the Import Handling Procedure.

1.25 "Financial Closing" ::hall mean the date on which the Buyer obtain~ its drawai rights for financial assistance under the Financial Documents which date is to be notified by the Buyer to the Seller in accordance with Clause 3.1.5 upon ·.vhich the Financial Documents have been executed between the

'Buyer and the Fi:iancial Panies .

1.26 "Finauci2l Documents" shall me.an the loan and other facility agreements. notes. inckntures, security arrangements, letters t":if credit and other documents relating to the interim and long term financing of the Project (including, without limitation., standby financing imd working capital) as the same may be amended or supplemented or modified from time to time.

l.27 .. Financial Insitutions(Fis)" shall mean any and all of the parties <other than the Buyer) to the Financial Documents.

1.28 "Fixed Charge" shall have the meaning indicated in the PPA or as permissibl~ in law by any notification/guideline/circular of any Governrner1ta1 Ir.strume:nlity, whichever is lower .

. 1.29 ttFO" shall mean Furnace Oil.

l .30 "Fuel" sh.all mean t~e (P.rirnary Fuel and the Alternate Fuel as the ca.i;e may be] having the specifications set out at Anne>..11re 2.

l.31 "Fuel Price" shall have the meaning given to it in Cl~use 15.2.

5

49

1.32 "Fuel Specifications" shall mean the parameters or criteria set out in A-inexure:.Z which will be applied to d~termine the quality of the Fuel.

1.33 •·Generating Units" shall mean ----1.34 "Governmental Authorisations" sbalrmean aII authorizations, approva1s:.

cc;isents, decrees, licenses, permits, sanctions, clearances, "no objectior •. ce:tificates", permissions; confirmations, waivers, privileges, approvals from, and filings and registrations with, all Governmental Instrumentalities.

l.35 ''Governmental Instrumentality" shall mean any ministry, department. political subdivision, instrumentality, agency, board, utility, corporation, cc:npany, entity, ~om.mission or similar person or instrumentality, excludir.g fr:e Oil Company, under the direct or indirect control of Government o·: ldia, ~ir any court or governmental arbitrator or other arbitrator whose de:ermination is binding upon the Parties, including any of its States. rr::inicipalities, cities and villages, and specifically including the Government o:- lndia. the State Government of Kerala ·and State Electricity Board of Ktrala. ·

1.36 ''Guara~tee Charge" shall mean the amount referred to in Clause 16.5. ~

1.37 "ESDi'<:sltall mean High Speed Diesel Oil.

1.38 "~CO Terms" shall mean International Commercial Terms as understood in :he Oil business and industry_

1.39 "lnfra~·~ructure Charge" shall ·mean the amount payable by the Buyer to ti:e Selicr in accordance with Clause 16.3 .

. l.40 "Inland Terminal" sh~I mean the storage terminal of the Seller (not being the Port T enninul) housing the Storage and allied facilities and situated ar

where the Fuel and/or Other Petroleum Products of the ------Seiler are received by pipeline or t.ank wagons or tank trucks and stored for making supplies to various buyers by the Seller.

l.41 "Interest Rate" shall mean, at any time, 2 per cent per annum more than the highest rate of interest paid during the year, by the Buyer for working caµital borrowings availed from Indian bankers.

l.42 "Imported Fuel" shall mean the Fuel procured by the Seller from· outside the geogl:aphic territory of India. ·

1.43 "Import Handling Charge" shall mean the amount referred to· in Clause~

l.44 "Import Handling Procedure" shall mean the procedure and activities set

~utmA~nemrey 6

\ ~

50

1.45

1.46

1.47

1.48

1.49

l.50

1. $1 I

'. I . 1.52

I. l

1.6)

1.54 .

"Junction Point" shall mean the flange joining the Seller's Delivery Pipeline and the Buyer's Pipeline.

"Kilolitre" or "KL" shall rn~~ 1,000 litres, the basic metric unit· of . volume of liquid as defined by the Inte~ational Bureau of Weights and Measures.

"Kilo Calorie" or "KCal" shall mean 1000 calories, the amount of heat required at a pressure of one atmosphere to raise the temperature of one kilogram ·ofwater by one degree Celsius (from 15 degree celsius to 16 degree celsius).

"Landed Cost" in relation to the Fuel shall mean the aggregate of CIF Value, custom duty, counter-veiling duty~ port & survey charge, actual demurrage, ocean loss and any other charge payable in respect of import and landing of fuel. ·

"Letter of Credit 0 shall mean a letter of credit established pursuant to ( Clause 1 7.3.

"Linkage Letter" shall mean the letter reference no. P-21018/85/97-D.ist dated 3.2.1998 issued by MOP&NG, authorising the Seller to supply 133750 :MT-of Fuel per Year to the Buyer, attached as Annexure 1.

"LSHS" ~hall mean Low Sulphur Heavy Stock.

1'LSWR" shall mean Low Sulphur Waxy Residue.

'11 MQnth~' shall mean a period beginning at 00.00 Hrs (Indian Standard time) on· the first day of a given english cale~dar month and ending at 00.00 Hrs (Indian Standard time) on the first day ·of the next succeeding english calendar month.

"I\.lonthly Agreed Quantity" shall rn·ean the quantity of Fuel to be supplied in a month to the Buyer as determined in accordance with Clause 7, for my particular mont~ equal to 1111 th of the Annual Linkage :Quantity v..·ith a v2.riation of+/- 5%.

1.55 l !'1\-iOP&NG" shail mean the 1'.1inistry qf Petroleum and Natural Gas, . ; . : · 1 ·'Gov~rnment of India.

1.56 "MOP" shall mean the Ministry of Power, ·Government oflndia.

1.57 "Metric Ton" or "MT" shall mean 17000 Kilogram and, for liquid fuels, shall mea.11 i ,000 Kilogram of fuel.

1.58 "Notional Freight Charge" shall mean the freight charge payable by the Buyer to the Seller in accordance with Clause 16.7.

7

51

11.59 "OIT-Spec" shall mean Fuel which is not On-Spec.

1.60 "Oil Company" shall mean each ofIOC, HPC, BPC and IBP.

1.61' "On-Site Facilities" shall have the meaning given to it in Clause 11.2 & 11.3 ..

1.62 "On-Spec" shall mean the Fuel which .has the Fuel Specifications set out in Annexure 2.

1.63 ·"Other Petroleum Products" shall mean petroleum products other than the Fuel or Alternative Fuel.

1.64 "Parties" shall mean all the Parties to this Agreement referred· to collectively, and "Party" shall mean any Party to this Agreement referred

· to individually or otherwise as stated in this Agreement.

1.65 "Payment Date" shall mean the dates mentioned in clause 17.2 as being the dates on which the Buyer shall effect payment of the invoices.

1.66 "Plant Load Factor" or "PLF" shall mean the. actual generation of power over a g1·1en period of tirne e>..--pressed as a percentage of the total installed generating capacity of the Power Station for the corresponding period of time, as certified by SEB.

1.67 "Power Station" shall mean the liquid Fuel based Power Station to be set · up by the Buyer \Vith a rated design cap?-city of 107 .Q M\V located ar Kerala in the State ofKerala.

1.68 "Point of Sale" shall mea.tl:

1.68.1 in case of transportation by rail to Buyer's on-site facilities the point in time. at the supply point, when the Seller completes loading of the tank wagons as per the relevant tank wagon calibration chan at the Supply Point and so noti£es to the concerned Railway official.

1.68.2 in case of ttansportation by Taruc Truck by the Buyer the point in time, at the supply point, when the Seller completes loading of the tank trucks as per the relevent tank truck calibration chart at the Supply Point and so notifies to the person incharge oftank:truck/s.

1.68.3 in case of transponation by pipeline, the Junction Point .

l.69 ''Port Terminal" shall mean the storage terminal of the Seller housing u'i~ Storage and allied facilities and siruated at Cochin where the Fuel· and./c.r Other Petroleum Products of the Seller are received

8

52

from a vessel or otherwise and stored for making supplies to various buyers of the Seller. ·

1.70 "PPA" shall mean the Power Purchase Agreement to be entered into between the Buyer and the (State, Electricity Board) for the purchase of power gen.erated at the Power Station. ' ··

1.7 l "Primary Fuel" shall mean Naphtha {Name of Fuel as per Linkage Letter)

1.72 "Project" shall mean the essential facilities required and used for generation of po~er at the Power Station. ·.

1.73 "Project Cost" shall mean the cost of Power Station as per the norms of CEA or PPA or as per the financial closure of the Project.

1.74 "Purchase Price" shall have the meaning given to it in Clause 15 which will be the cost of the Fuel to the Buyer at the Point of Sale.

l. 7 5 "Quarterly A greed Quantity It shall mean the quantity of Fuel to be supplied in a quarter as determ1ned in accordance with Clause 7,

1. 76 "Railway Administration" shall have the meaning given to it in Section 2(32) of The Railways Act, 1989. ·

1.77 "Rupees" or ''Rs." shall mean the l~wful cuqency oflndia.

1.78 "Scheduled Date of Completion"·means

1. 78. I in respect of the First Generating Unit, the date notified by the Buyer, from time to time pursuant to clause 4.1.2 as being the date upon which the Commercial Operations Date of the First Generating Unit is from time to time. scheduled by the Buyer .tc occur; and

1. 78.2 in respect of the last Generating unit, the date notified by the Buyer, from time to time, pursuant to clause4.l.4 as being the date upon which the Commercial Operations Date of the last Generating unit is from time to time scheduled to occur.

1.79 "Scheduled Bank .. shall mean any scheduled bank recognised by the Reserve Bank of India.

1.80 "Secon<;i .. <:: on tract Period Commencement Date" means the date so notified by the Buyer to the Seller on not less than IO days prior notice a<; being the date on which the Second Contract Period commences~

1.81 "Seller's Delivery Pipeline" shall mean the pipeline runrung from the Supply Point upto the Junction Point.

9

53

1.82 "Service Ca~rge" shall mean the amount charge referred to m Clause j 6. -t.

1.83 "SKO" shall mean Superior Kerosene Oil.

1.84 "State Electricity Board" or "SEB" .shalLmean the electricity board of the concerned State v.ith \.Vhom the Buyer has signed PPA.

1.85 "Storage Facilities" shall mean the tankage and allied facilities of the Seller used for the receipt, storage and delivery of the Fuel.

1.86 "Storage and Handling Charge" shall meaq the amount referred to in Clause 22.3 & 22.4.

1.87 "Supply Commencement Date" means the date so notified by the Buyer to the Seller on not less than f601 davs prior notice as being the date on which the Seller is to commence delivering Fuel in accordance with this Agreement provided that the date so notified shall fall no earlier than [24]

·months after Financial Closing.

l.88 "Supply Point" shall mean the Port terminal at Cochin and the Inland Terminal at,· . . designated for making silpply of fuel to the Buyer, or any other Terminal belonging to the Seller or any other Oil Company from where supply of Fuel may be made, as the case may be.

1.89 t'Transporter" shall mean

1.89. l in case of transportation by Rail, the concerned Railway I

Administration;

1.89.2 in case of transportation by road, t.he person pro\.iding the tank trucks and undertaking transportation:

1.89.3 in case of transportation by pipeline, the ov.-ner of the pipeline.

1.90 "Transportation Cost" shall mean the amount referred to in Clause 16.8.

1.91 • "Weighted Average Landed Cost" shall have the meaning given in cluase 16. l .

1.92 "Year" shall mean the period of 12 coriSecutive Months beginning on 1st April of each year and ending on 3 Ist March ofthe_following year.·

1.93 . Interpr-'!a:tion

I. 93. I the sins'Uh.r includes the plural and vic.t; versa, .and in particular (but \.\ithout limiting the generality of the foregoing) any word or

10

54

expres~~on defined in the. singular has the corre!\ponding meaning used in the plural and vice versa,:

l.93.2 a reference to persons in.eludes.natural persons. bodies corporate;· limited liability companies. pannerships and other legal entities·

1. 93 3 a reference to any gender includes the other gender:

1.93-4 a reference to a Section, Anicle, Clause, Subclause. Paragraph, Subparagraph, Appendix. Exluoit. Schedule or Recital is a reference to a Section, Article, clause, subclause, paragraph. AppeT'~ix.

Exhibit, Schedule or Recital of this Agreement.

l.93.5 a reference to any agreement is a reference to that agreement and all exhibits, schedules, appendices and the like incorporated therein, as the same is amended, modified, supplemented. waived. varied. added to. substituted. replaced. renewed or extended from time to time.

1.93.6 a reference to any leg.al requirement shall be to such legal requirement as amended. supplemented or modified and in effect from time to time. or any other legal requirement. as may be the case, in substance substiruted t.herefor:

l.93.7 the tenns 0 inc:lude" and "including" shall be deemed :o be followed by the words "without limitation", whether or not so followed.

1.93.8 any r~ference to a person or entity shall include such person's and such entity's successors and assigns. and shan include all Ntural persons. corporation5.; companies. limited liability comp:n.:es. partnerships and .other legal entities:

1.93.9 a reference to "writing" includes printing, typing, lithography and other means of reproducing words in a visible form and any reference to tlin writing'\ "written consent" or "written notice11

shall include telex and facsimile communications.

1.93.10 terms expressly defined 'in th.is Agreemenr by reference to definitions contairied. in another agreement, document or instrument shall have such meanings; and,

1.93.1+ all expressions used in this· Agreement (but not defined herein) which have meanings commonly understood in Indian trade in the Fuel.shall be deemed to have the meaiiings so understood.

11

55

2. Terms and Post E:tecution N e~?Otia tion

2. i: Save as ofoerwise pro\ided in this Agreement, this Agreement will be effective from the Effective Date until the date falling Fifteen (7 Years/ 15 Years as per MOP&NG's Linkage Letter, as the case may be) years (plus any further period agreed under .clause. .. 2.2) after the commercial Operations Date of the Project (the "Expiry Date").

2.2 The term of this Agreement can be extended for a further period PRO'VIDED that

· 2.2.1 a written notice of such e>."tension is submitted to the Seller not later tb.~n Ninety days prior to the original Expiry Date; and

2 .2.2 such extension, along with tenns and conditions applicable thereto, is mutually agreed upon by the Seller and the Buyer, and

2.2.3 such extension shall not exceed the terms of the PP A or any. extension thereof; and

2.2.4 the Buyer has the requisite Govemme~tal Authorizations for the extension.

3. Conditions Precedent :md Effective Date

3. 1 The provisions of this Agreement and the obligations of the Parties heteund~r shall not come into force and .. effect until all the following conditionsprecedent have been satisfied:

3 .1.1 the Seller shall have received a copy (ceni.fied as a true copy by a duly authorised officer of the Buyer) of a resolution in fonn and substance satisfactory to the Seller of the Buyer's board of directors authorising the execution,. delivery and performance by the Buyer of this .Agr~ement.

3. 1.2 the Seller shall have received a copy (certiiied as a true copy by l

duly authorised officer of the Buyer) of the Linkage Letter and t11 '.

Governmental Authorizations Agreed by the Buyer for the Proje-:-t in form and substance satisfactory to the Seller.

3.1.3 the Buyer shall have received a copy (certified as a true copy by a duly authorised officer of the Seller) of a resolution in form and substance satisfactory to the Buyer of the Seller's board of directors authorising the execution, 'delivery and perfonnance by the Seller of this Agreement.

3. 1-4 tre PPA shall have been entered into and become unconditional in · ;all respects (except for any condition concerning the effe.ctiveness

12

56

ofthis Agreement) and a copy of the PPA shall have been delivered to the Seller.

3.1.5 Firuincial Closing shall have occum;d.

3 .1. 6 .. Cash Commitment Charge" .as .. p~escribed in 14 .1.2. l. I has be!.."l paid.

3.2 Upon the satisfaction in full of the conditions set out in clause 3. ~ .1 ar.d 3 .1.2 the Seller shall notify the Buyer and the conditions set out in clause 3 .1.3, 3.1.4 and 3. l'.5 the Buyer shall notify the Seller th.at the conditiots have been so satisfied. The .gffective Date sh.all be the latter of tl:e aforesaid two dates.

4. Kev Dates and I~fonnation

4.1 The Buyer shall notify the Seller of the follov. .. ing dates:

4.1. I its anticipated date for Financial Closing and (within one wee..~ thereof) the actual date of Financial Closing.

4. 1.2 each Scheduled Date of Completion.

4.1.3 the Supply Commencement. Date and the Second Contract Peric:i Commencement Date~ and

4.1.4 the Commercial Operation Dates for each Generation Unit.

4.2 Within (60) days after the date of Financial Closing the Buyer shall provic: to the Selier a written notice specifying the date upon which the Supp;! Commencement Date and the Second Contf4Ct Period Commenceme:-.: Date are then currently estimated to occu,r and such dates shall be:

4.2.1 not earlier than Fifteen months nor later than Twenty four mont.b after Financial Closing in the case of the Supply Commenceme::~: Date.

4.2.2 not earlier than Eighteen months nor later than T~nnty six montb after Financial Closing in the case of the Second Contraet Peno: Commencement Date.

5. Longstop Date

If Financial Clo~ing does not occur by 3 months. this Agreement rr.ay be terminate:!. either by the Seller or ile Buyer on not less than (15) days prior written notic: given to the other pany with no liability upon an~ pan provided however that th:: panies may agree. at their discretion., to a later date for achieving Financi~

Closing.

13

57

PART2

SALE AND PURCHASE OF FUEL

6. Supplv of Fuel bv Seller

6.1 Sale and Purchase of Fuel

The .S~Uer shall sell and the Purchaser shall purchase Fuel at the Purchase Price in the quantities and of the quality as set out under this Agreement and u.pon the terms and con~itions of this Agreement.

6.2 The supply of Fuel under this Agreement shall be made by the Seller in · accordance \\.ith the principles of pooling of resources. averaging of the landed cost of the Fuel at an the Pon Terminals and providing hospitality to each other. by all the Oil Companies.

6.3 During the validity of this Agreement, except in a:cordance with the terms . of this Agreement and except as agreed by the Seller. the Buyer shall not procure the fuel from any other supplier.

6.4 It is clarified and made clear to both the parties a.nd all concerned that the supply of Fuel under. this Agreement sh.all not be governed by· and be outside the Administered Pricing Mechanism ( A.PM1 and the pricing and 1

· the Terms and Conditions of supply of Fuel shall be as per the terms and 1

covenants under this Agreement oruv, irrespective of the source of supply, whether indigenous or imported.

6.5 Restrictions on dealin2 of Fuel bv Buver

The Buyer agrees that the Buyer shall

6.5. l use the Fuel purchased from the Seller hereunder for the purposes of the Project and for no other purpose:

6.5.2 pending use of the · Fuel as aforesaid shall keep the Fuel unadulterated and unmixed with any other substance;

. 6.5.3 in the event the Fuel becomes Off-Spec while in storage at the OnSite Facility or generaUy while in the possession or ~ontrol of the Buyer, deal with the Fuei only as provided in clause 6.6 3 and in no other manner~

6.5.4 not sell the Fuel to any person provided that the Buyer may create a security upon the Fuel in favour of Financing Parties so that the Financing Panies shall have the right. subject to ~II Applicable Laws, to dispose or· procure the disposal of such Fuel following the enforcement of their !:::..:uriry, so as to ensure that provisions of clause 6.5. l arc fulfilled.

14

58

6.6 Off-Spj!CFuel

6.6.1 In the event the Fuel becomes Off-Spec while stored in the On-Site Facility or generally while in the·p·ossession of the Buyer l{ut before·-· use for the purposes of the Project the Buyer shall immediately upon discovery of the Fuel becoming Off-Spec, notify the Seller or" the same and v.111 not sell and /or deal with the same in any manner what so ever without \Vritten approval of the Seller.

6.6.2 Upon receipt of the notice referred to in clause 6.6.1 the Seller and Buyer sfull discuss methods by which the Off-Spec aspect of :L~ Fuel should be rectified or otherwise dealt with.

6.6.3 Any rectification or dealing referred to in clause 6.6.2 shall be done only under the advice of the Seller and at the sole cost and expense .of the Buyer.

6.7 Seller to '!ive notice

In the event the Seller is unable to supply Fuel or is able to supply only a pan oLth;e Fuel agreed to be suppl~ed hereunder. the Seller shall notify the Buyer in ·.vriting within 72 hours of such inability.

7. Ouantitv

7.1 The Seller hereby agrees to se!l and the Buyer hereby agrees to purchase. subjec..: 10 the tenns hereof, an annual quantity of Fuel not less than the Annuai Guaranteed Quantity.

7.2 The Seller may agree to supply the Fuel over and above entitlement against the Annual LiI"!~age Quantity, to the Buyer, on the basis of spe~iric recommendation and certification by SEB or Central Electricity Authority for erubling the p·ower Station of the Buyer to operate at any specified PLF for a specified period. ·

7.3 The Seller agrees to sell to the Buyer Annual Agreed Quantity, Quanerly Agreed Quantity or Monthly Agreed Quantity, which shall be settled and reduce in writing, between the Buyer and the Seller on the basis of a notice by the Buyer as set out in clause 7.4 below and agreed to be supplied by the Seller . ip, accordance with the procedure given below and subje' ct to the other c6rditions in this Clause.

7.4 The Bu ;'.er shall,

7.4.1 at least 3 months Pds:u: to the Supply Commencement Date specify in writing to the Seller the monthly required s_uantity for eac~ month in the First Contract Period;

15

59

7.4.2 at least 3 months prior to the Commercial Operation Date specify in writing to the Seller the monthly required quantity for each month in the Second Contract Period:

7.4.3 at least 3 months prior to the; corr,..~encement of each Subsequent Contract Period specify in writing to the Seller the annual required quantity for such Subsequent -Contra~t Period:

7.4.4 at least 3 months prior to the commencement of any quaner in ea~h Subsequent Contract Period specify in \\-Titing to the Seller fr1e quanerly required quantity for each quaner in the Subsequent Contract Period~

7.4.5 at least. JO days prior to the commencement of any quaner in each Subsequent Contract Period specify in \l.Titing to the Seller the monthly required quantity f Of- each month in such QUMter. _

7.5 In the event the Buyer fails to specify the monthly required quantity, qti.ari~rly required quantity or the annual required quantity as required under clause 7.4 then the Seller shall be entitled.

7.5. l . for every month in respect of which the monthly required quantity was ta be (but was not) specified. s_upply a quantity of Fuel not le~:;

than I/12th of the Annual Guaranteed Quantity.

7.5.2 for every quaner in respect of which the quanerly required quantiTies was to be (but was not) specified~ supply a·quantity of Fuel not less than l/4th of the Ann~ai Guaranteed Quantity.

7.5.3 for every Subsequent Contract Period in respect of which ihe annually required quantity was to be (but was not) specified. supply a quantity of Fuel not less than the Annual Guaranteed Quantity.

and such quantities shall be treated respectively as Momhly Agreed Quaraity, Quarterly Agreed Quantity and Annual Agreed Quantity.

7.6 Not'Nithstanding anything to the .contrary contained herein nothing conta.in~d in this Agreement shall oblige the Seller to supply.

7.6. l Monthly Agreed Quantities or Quarterly Agreed Quantities or .4.nnual Agreed Quantity of Fuel aggregating for any 'continuous period of 12 months to more than the An_nual Guaranteed Quantity~

7 .6_2 During any Subsequent Contract Period Fuel aggregating to more tha..-i the Annual Guaranteed Quantity.

)

16

60

. 8. Qualitv

8.1 The quality of the Fuel sold under this Agree-::aent shall meet with the minimum quality Specifications set forth in Annexure 2 hereto.

The proauctwise·'broad sp1!Cifications are as under:

8.1.l Naphtha

8.1.2 HSD

8. 1.3 SKO

8.1.4 FO

8.1.S LSHS

As per Japan open spec with minimum gross calonhc value of. lO,?no Kcal I Kg (Trace metal contents not guaranteed).

In the event the average GCV of Naphtha supplied during a given period as agreed between the Buyer and the Seiter is less than

_ U.2.QO KcaV Kg, the Seller shall supply additional quantity which may be more than the Annual Guaranteed Quantity in order to achieve 68.49% or 75% or 80% PLF. as the case may be, on the basis of calculation and_ certification by State Electricity Boards (SEBs).

As per SIS specific~ons with Sulphur content. of0.25% max.

As per BIS specifications.

FO as per BIS specification with average gross calorific value of 10,500 K_cal/ Kg.

Trace metal contents not guaranteed.

In case due to any statutory requirement to restrict sulphur content in FO or in case the PPA stipulates use of FO with a reduced sulphur content. the Seller shall supply FO \!with minimum 2% sulphur by mass.

In the event the average GCV of FO supplied during a given period as agreed between the Buyer and the Seller is less than l 0,500 Kcal/ Kg, . the Seller sh3.n. supply additional quantity which may be.·more.than the Annual Guarantee.d. Quantity in order to achieve 68.49% or 75% of 80% PLF. as the case may be, on the basis of calculation and certification by SEBs.

1

: per Refinery Control Specificatio~

----·

61

8.1.6 LS\VR

8.1.7 >:GU Condensate/ Light Crude

As per specifications quoted by oversr,c..s supplier.

As traded in the market

Any iiabilities arising out of non-conformity of environment laws shall be at the cost of the Buyer.

8.2 The Bu~:er. shali have the right to inspect the Storage Facilities at reasonable hours, a.i:1d io perform such tests at the Buyer's laboratory as are reasonably necessary to verify the quality of the Fuel being held in storage for sale to the Buyer. The· Seller shall be entitled to wimess such tests. For carrying out such quality tes1s. a minimum of three samples would be dra\\1l at the option of Buyer from the Storage Facilities before loading the tank wagons or tank trucks <.H commencement of the pumpi~g into the Buyer's pipeline. as the case may be.· The samples will be sealed and countersigned by the representatives ~f the Seller and the Buyer. Two of the samples will be kept in the custody of Seller and the third v.ill be tested by the Buyer. The Seller shall retain the aforesaid two samples until the time the Buyer receives the Fuel in its sccr.,i:;e tanks at the On-Site Facilities. but in ~o event beyond two weeks. The Seller has the option to test one of the samples in its custody. ln the event nf a dispute. o: if the test results exceed reproducibility limits. the third sample will be jointly tested at an independent laboratory and the results v.ill be binding on both the Parnes. The cost of such independent test shall be shared equally.

8.3 Non-Confonning Fuel

If at any time the Fuel being held in storage by the Seller for sale hereunder fails to conform to any of the Specifications set forth in Annexure 2 ("Non Confomi.ing Fuel"), then the Seller shall notify the Buyer of such deficiency and may. at the Buyers option refuse to accept delivery of such Fuel pending correction by Seiler. Immediately upon learning that the Fuel stored at t~.e

Storage Facilities fails to conform in whole or in part with the Specifications set forth in Annex.ure 2 the Seller shall. without interrupting the supplies to the Buyer. correct such Non-conforming Fuel so that it meets the Specifications set forth in Annex.ure 2 hereof: before it is sold/delivered to the Buyer. The Seller shall v.ithout causing any interruption in supply of conforming Fuel to the Buyer. remove all Non-confonning Fuel from the Storage Facilities and replace the same with confonning Fuel.

9. Alternative Ft•!tl

If for any reason: the Seller is unable to supply Primary Fµel at the Supply Point either in full or in pan~ the Seller shall give a 7 days prior written notic·e of such inability to the Buyer and v.iil offer Alternative Fuel to the Buyer. If the Buyer refuses to accept t.he' Aitemative Fuel offered by the Seller, the obligation of the Seller to supply fuel hereunder shall be considered to have been fully discharged. If

-~ 18

62

the Buyer accepts the Alternative Fuel offered by the Seller, the Seller shall supply Ahernativ~ Fuel to -achieve the same PLF.

10. Other Petroleum Products

The Seller is willing to sell to the Buyer Other Petroleum Products. The Buyer agrees that the Buyer shall in procuring its requirements of Other Petroleum Products, give preferetce to the Seller over other suppliers of the same and purchase Othet Petroieum Products from the Seller. The .terms of such sale 'Will be as agreed to between the Parties. ·

PART3

STORAGE AND HANDLING FACJLITIES

11. Storage and Handling Facilities

11.1 The Seller shall store in its Storage Facilities at the Supply Point, an inventory equal to atleast I/24th of the Annual Linkage Quantity.

11.2 The Buyer shall develop at the Power Station, in accordance with Applicable Laws, tankage and allied facilities having the capacity to receive and store at least lll 0th of Annual Linkage quantity at a maximum utilisation of75% of the tankage capacity including:

11.2. l In case of transportation of Fuel by rail, the Buyer shall provide tank 'Nagon unloading faciliti.es to unload mice the average number of rc~il rakes receivable per day.

Prov~sion of decantation facilities namely tank wagon siding, gantry, etc. shall be constructed and commissioned by the Buyer with prior approval from Railways so as to be able to decant the rake within free time. Seller shall have no liability or obligation on account of this arrangement. ·

11.2.2 In case of transportation of Fuel by pipeline, pipeline capable of receiving atleast'21365lh of the Annual Linkage Quantity during a period of 8 continuous hours.

The Buyer shall enter into an agreement \vith the ovroer of the main pipeline for design, connection, operation, maintenance and any other allied activities on mutually agreed terms and conditions to e·nable the Seller to make deliveries within terms and conditions of this (Fuel Sunply)Agreement.

11.2.3. in c1.Se of transportation of Fuel by road, the unloading facility ca.pable of unloading atleast 2/365!h of the Annual Linkage Quantity

. ill 8 hours of operation during a day.

19

63

collectively;referred to as "On-Site Facilities!•.

l l.3 The Buyer shall develop at the Power Station On Site Facilities in accordance with Applicable La\vs to receive and store adequate quantities of Alternative Fuel.

1 L4 The.Buyer shall store in its On-Site Facilities an inventory equal to adeast l/121h of the Annual Linkage Quant.icy. Corresponding to the nonnal transit period for transponation and well in ahead of the day, when the inventory stored at the On-Site Facilities may reach a quanticy equal to l/12lh of the A.onual Linkage Quantity, the Buyer shall immediately inform the Seller in writing of its requirement for supply of Fuel to maintain its inventory level at I/12th of the Annual Lirikage Quantity. ·

For supplyfo·; pre-corn .. 'TI.issioning trials during the first contract period. the Buyer sha.H:place order 3 months in advance for a quantity upto 20% of the Annual Linkage Quantiry, and the Seller shall make best effons to suppiy the above quantity, whicl:i Vvill be beyond the Annual Linkage Quantity.

Buyer shall .al.so place ot.der .b.efore or during the first contract period. 3 months in advance of Conunercial Operation Date for supply of Fuel equal to 30 days inventory, which Buyer is required to maintain vide Clause No.1 I.:i:I at the Buyer's On~site Facility and the Seller sh.all supply the above quantity, which will also be beyond the Annual Linkage Quantity.

11.5 The Seller, may at the Buyer's request, agree to develop and/or erect the On-Site Facilities (other than r:aiiway sidings) of the Buyer as contracted on a rum-key basis at the cost of the Buyer (hereinafter referred to as "Job").

The Buyer shall. in such case. keep deposited ·with the Seller. the estimated cost of such job at the commencement of the Job, to be adjusted on the

· completion of the Job and in addition, the Buyer shall pay in advance a sum equivalen*_to 16.5% of the estimated total cost for construction of such OnSite facili~e~ (other than railway sidings) as remuneration of the Seller to be adjusted O,n the basis of actual total cost incurred. The detailet.fterms of the foregoing arrangement between the panios will be

. mutually agreed to between the parties.

11.6 The Buy,!t' shall provide and en.!ure adequate and necessary lighting facility and road facility within the. Power Station up to the Fuel unloading points, as approved by the Governmental Insµumentalicy.

20

64

PART4

MEASUREMENT AND DELIVERY

12. Measurement

12.1 The unit ufmeasurement for Fuel shall be as under FO in KL HSD in KL SKO in KL Naphtha in l\.IT LSHS/LSWR in MT C~ndensate in l\.IT NGL in MT Light Cmde in l\.IT

To determine the weight of Fuel in Metric Tons (Naphtha/LSHS/LSWR), the volume of the fuel at natural temperature will be converted into volume at 15 degree centigrade and then. into weight ~IT/KLs) Qy using ASTivI

I table taking into account the density. and temperature of Fuel as per prevailing practice for product accounting by Oil Companies.

12. 2 In case of delivery of Fuel in tank wagons, the quantity of Fuel sold by the Seller shall be determined by a dip rod certified by the Weights & Measures Department of Kerala Government and volume calculated by using calibration chart for the tank wagons provided by the railways, as is the prevailit1g practice of product accounting within Oil Companies.

12.3 In case of delivery of Fuel by pipeline, the quantity of Fuel sold by the Seller shcll be determined by measuring tape stamped and approved by th·e Weight:; & Measures Department and volume calculated based on the dip measurement of the storage tank in the Storage Facilities before ana after pump1r.g and using the calibration chart for the storage tank issued by the statutory authoiity for such purpose or as per the reading of auto aerro gauge provided on the tanks.

12.4 In case of delivery of Fuel by tank. trucks, the quantity of fuel sold by th~ Seller shall be determined by using the calibration chart issued by the Weights & Measures Department for the tank trucks after filling of the tank trucks.

12. 5 . The delivery of product quantity will be as per net meter reading wherever Oil Comparues have pro\-ided metering units duly stamped and approved by Weights and Measures with a provision of check cq.libration through master meters/proving meters.

21

65

12.6 The B;,iye.r sr..all°have the option to depute his personnel for witnessing the filling operation at the time of filling of the Fuel or the pumping of the Fuel as the case may be. ·

12. 7 The qu~tity of Fuel so calculated shall be accepted and binding upon both the parties: as conclusive evidence of the Fuel ~old._

· 13 Transoort:uion

13.1 Deliverv and passing: of risk and oropertv

The Fuel will be delivered by the 'Seller to the Buyer at the Pain~ oi 5ale. . resulting in the completion of the sale of Fuel. At the Point of Sale. the risk and property in the Fuel shall pass completely to the Buyer and the Sell:'~r shall in no way or for any purpose whatsoever be liable for any less 1 .r damage caused to the Fuel or in the quality thereof caused to the F:.:el af~~r delivery of the same at the Point of Sale.

13.2 Oeliverv bv Tanlc \Vatrons

If for the transportation of Fuel sold, by the tank wagons, the Buyer seeks the assistance of the Seller, the Seller shall assist the Buyer~ make necessary arrangements with the Transporter and co-ordinate to ensure timely i:ransponation of the Fuel sold to the Buyer's On-Site Facilities, v.ithout prejudice to the pro\isions of Clause 18.1 on Liquidated Damages payable by the,Seller, implying that if tl:e ~uver !s unable to maintain the prescribed inventory of 120 hrs laid down ir:. ~.1.6 due to transit delays, and th.is s~ortf"all leads to loss of generatton of' power sp~ified in Claust-18 .1.3 .3, it wilt be deemed to be a failure of the Seller for the purpost. uf Liquid.ated Damages and provide assistance to the Buyer in dealing Vtith Raiiways for commercial rnaners, but only in the capacity of an unprud agent of the Buyer and entirely at the ris~ cost and consequence of the Buyer. The Seller shail, as such agent incur no liability or obligations etther to the Transporter or to the Buyer and the Buyer hereby indemnifies the Seller for any cos~ charges, claim or litigation incurred by or commenced against the Seller in respect of or arising out of its activities as such ag ::Jt. A separate agreement will be entered into between the Transporter and the Seller in regard to the above.

13.3 Deliver.- bv Tan~~ Trucks

ln case of transportation of Fuel. sold, by tank·trucks, the Buyer shall be responsible for providing and/or arranging adequate number of tank trucks (which hold statutory licences/approvals for such transportation of pettole?m product) for such transportation.

22

66

PARTS

COMJ\<fITl\fENT CHARGE

14.1 Commitment Charge

14. l. l The Seller agrees to arrange /develop/procure, operate and maintab various infrastructure facilities required for supply of fuel.

The Buyer shall , pay to the Seller an amount, towards commitment for using the infr.a-s~ructure facilities of the Seller, called 'Commitment Charge' as specified and in the manner set out below.

14.1.2 The Commitment Charge shall be a sum ofRs.1284.00 Lacs to be pai:i and! or secured to the Seller by the Buyer as under:

14.1.2.l Rs.535.00 Lacs (Cash Commitment Charge) being part of the Commitment Charge shall be paid by way of demand draft b favour of the Seller in two equal instalments as under:

14. 1.2.1.1 the first instalment, of Rs.267.50 Lacs shall be p~.i within 7 days ofFinancial Closing;

14.1.2.1.2 the second instalment of Rs.267.50 Lacs shall~ paid \\-ithin 6 months of the Financial Closing.

14.1.2.2 Rs.749.00 Lacs '(Secured Commitement Charge) being tl-:e balance part of the Commitment Charge, shall be secured to tt;e Seller by the Buyer, either by way of Cash Commitment Charp or by procuring in favour of the Seller, an uncondition~ irrevocable, renewable and on-demand bank guarantee of l

Scheduled Bank acceptable to the Seller and in substance auj fom1 acceptable to the Seller, with in 6 months of Financi::.1 Closing.

14.1.2.3 The bank _guarantee referred to in Clause 14.2.2 shaJJ:

14.1.2.3.1 be maintained during, the full term of this Agreem_e=t a,nd all extensions thereof

14.1.2.3.2 be issued for su~cessive periods of one Year each. 14.1.2.3.3 be extended atleast one month orior to the date,cf

expiry of the period referrea to in Clause 14.1.2..32 for a similar peri'od.

14.1.2.3.4 be invoked_if the extension referred to in Clause 14.1.2.3.1, is not provided withinJhe time__prescribed therein.

23

67

1.4.2 Refund of Committment Charge

14.2.1 The Commitment Charge referred in Clause 14.1.2.1 will be refunded to the Buyer through a rebate on per ~IT/KL basis, called Refund A.mount, on the total ·qu:intity of Fuel sold to the Buyert which shall be calculated on the basis or'18% gross rate of rerurn·to ·cover the payment of rotal cash Commitment Charge in a p'eriod of 10 years. on the basis of Annual Link.age Qtiantity, from the date of commencement of supplies. -

14.2.:. The Buyer si1.all be given the rebate of the Refund Amount only for a period of 10 years or such shoner period \\ithin which the Buyer's total off-take reaches equal to 10 times of the Annual Linkage Quantity, from the commencement of Fuel supplies, pro'wided th.at if the Buyer has not been able to recover back the full amount of cash Commitment Charge in the manner indicated in 14.·2. l, the Seller shall extend the rebate of refund amourit to such funher period v.ithin which the Buyer's cumuiative offtake would reach 10 times of the Annual Linkage Quantity.

14.2.3 On the writ:ten request of the Buyer. the Seller shall undertake to pay the Refund Amount, monthly or quarterly, as desired. directly to the FinanciaJ [nstitution, on behalf of the Buyer 2.gainst repayment of any loan advanced to the Buyer for explicit purpose of the payment of the Commitment Charge to the Seller.

14.3 Recoverv & Forfe~t\~Ee in case ofTerminat1on I EXJ>irv

In the event of t,he Termination of this Agreement by. the Seller on any of the grounds specified in Clause 24. l or in the case of expiry of the Agreement, if the Buyer has not purchased the quantity of the Fuel equal to l 0 times of Annual Linkage Quantity, the Seller shall be em.itled to recover an amount equal to Infrastructure Charge on the shortfall qua.'1tity not purchased by the Buyer, from the balance amount of r:ash deoosit and the bank guarantee deposited as Commitment Charge. ·

And the Seiler s~all be entitled to retain and receive for its own absolutely the monies thus realised as referred to in this Clause.

In the event of termination of this Agreement by the Buyer on any of the grounds specified in Clause 24.2 or 24.3 or in the case of expiry of this Agreement, if the Seller has not sold the quantity equal to I 0 times Annual Linkage Quantity, the Buyer shall be entitled to get the complete refund from the balance amount of cash deposit and the ban.k guarantee deposited as Commiunent Charge.

24

68

PART6

PRICE. CHARGES. INVOICING. PAYMENT

15. Purchase Price

15.1 Against supply and sale of Fuel, the Buy~r shall pay to the Seller the Purchase Price which shall be the aggregate of the "Fuel Price" set out in Clause 15 .2 and "Sta;utory Charges" set out and described in Clause 15 .3 below.

15.2 Fuel price

Fuel Price shall be expressed in Rs.Per .!\IT/KL ( normal sellimz unit) and - .

shall consist ~:,f the following:

15.2.1 \Veighted .\\.":'rage Landed Cost;

15.2.2 Import Handiing Charge~

15.2.3 Infrastructure Charge

15.2.4 Service Charge;

15.2.5 Guar'-!ltee Charge;

1.5.2.6 Actual Freight Charge or Notional Freight Charge (as applicable)

15.3 The Buyer ~h411 also pay and remain liable to pay all applicable cesses. taxes, duties: ar.d lev1es, surcharges and other charges and assessments. if any, levied or demanded by any Governmental or any local body Instrumentality (hereinafter referred to as ·Statutory Charges') in effect, on the date of delivery, as assessed and payable by the Setler.

15.4 The Seller shall determine, on the basis of the factors listed in Clause 15.2 and Clause 15.3, the Purchase Price for the Fuel sold during any Month in the Contract Period. Pending the final determination of the Purchase Price by the Seller, the Buyer shall pay the Provisional Purchase Price as defined in Clause 15.5.

15.5 The provisbnal Purchase Price of the fuel sold during any Month shall be calculated as follows·

15.5.1 Subject to Clause 15.5.2 until the Purchase Price for the Fuel sold during any Month is determine~ the Purchase Price at which. Fuel was sold to the Buyer for the immediately pr~eding Month shall be

25

69

used to caicuhnc the provision;u Purchase Price ("the Provisional Purchase Price") for the Fuel sold during that l\fonth.

15.5.2 Until .,th~ Purchase Price for the Fuel sold during the r..fond{ beginning on the Supply Commencement Date is determined. the Purchase Price, at which Fuel was sold in the immediately preceding Month,

15.5.2.1 by the Seller to any other buyer for the purposes of an inde;:endant power project of that buyer, or

15 .5 .2.2 (if the Seller has not made any sale as is referred to in Clause 15.5.2.1, then) by any Oil Company other than the Seller to any buyer for the purposes of a independant power project of the buyer._

shall be used to calculate the provisional Purchase Price ("the Provisional Purchase Price") for the Fuel sold during that Month.

15.6 On final determination of the Purchase Price for any Month

15.6. l in ~he event the Purchase Pri~I"' .i<:. more than the Provisional Purc~e Price paid for that Month, then an amount equal to the diff~'r:ence between the Purchase Price and the Provisional Purchase Price including taxes and levies shall be paid bv the J;3uver to the SeU<tr within 7 days or receipt by the Buyer of the F1nal Invoice.

15.6.2 in the event the Purchase Price is less than the Provi~inn~I Purchase Price paid for that .Month.. then an amoun1: equal to the difference between the Purchase .Price and the Provisional Purchase Price including taxes and levies shall be pa.id by the Seller to the Buyer within 7 days of receipt by the Buyer of the .t'mal Invoice.

l 5. 7 Petroleum Products other than the Fuel including Alternate Fuel, sold by the Seller shall be at the price as fixed by l\10P&NG, under Administered Pncin~ if any, or the Seller's normal selling price prevailing on the date of · supply. ~

16. Various Charges

16.1 "Weighted Average Landed Costn sh.all mean weighted average of the actual Landed Cost incurred by all the Oil Companies in importing the Fuel, in any paJ::ti¢ular Month, in all the Port Termfuats of Indi~ as the case may be, in accoraance with the formula given hereunder:-

(Ql x LCI) + (Q2 x LC2) + ........... (Qn x LCn) w = .. ...;..·------------------

QI+Q2+Q3 ............. Qn . W means the Weighted Average actual Lar1ded Cost of Fuel

26

70

Ql, Q4 .. ;; .. Qn means the quantity of Fuel imported in each parcel.

LCl, LC2 ..... LCn means the landed Cost of the Fuel imported in each parcel.·

(QlxLCl). (Q2xLC2) .... (QnxLCn) means the quantity of Fuel imported in each parcel multiplied by the Landed Cost of such parcel.

16.2 Import Handling Charge shall be the amount equal to 1.5% of CIF value of the quantity of Fuel Imported.(Irnport Handling Charge)

16.3 Infrastructure Charge The Buyer shall pay to the Seller an Infrastructure Charge as part of Fuel Price calculated at the rate of Rs.608 per normal selling unit of Fuel sold during the term of this Agree.ment. (Infrastructure Charge) ·

16.4 Servic.e Charge

For providing storage and handling services, at Port Tenninal and/ or Inland Terminal, as the case may be, and fo1 incurring stock Joss, inventory carrying cost and other incidental charges, for the supply of Fuel, foe ·Buyer shall pay to the Seller an amount, calculated and chargea as Rs.per 1'-1T/KL(normal selling unit) calculated @ 3. 75%, in case of Naphtha· or its Alternative Fuel and @ 3 .5%, in case of FO or its Alternative Fuel, of the Weighted· Average Landed Cost on the quantit:r cfj Fuel sold by the Seller to the Buyer.(Service Charge)

16.5 Guarantee Chnrge

16.5.1 The Buyer shall pay to the Seller an amount, as part of Fuel Price, against the committment of the Seller to supply Fuel to the Buyer, in accorda.r-:"! \Vith the terms cf Clause 16.5.2 and Clause 16.5.3.(Guarantee Chnrge).

16.5.2 The Guarantee Charge shall be paid in Rs. per MT/KL and shall be paid on every IvIT!KL of Fuel sold by the Seller to the Buyer and subject to Clause 16.5.3 and Clause 16.5.4 shall be an amount equal to 7% of the aggregate of the following elements of Fuel price :

16.5.2.1 \Veighted Average Landed Cost. 16.5.2.2 Import Handling Charge. 16.5.2,3 Infrastructure Charge 16.5.2.4 · Service Charge.

16.5.3 If during a Contract Period of one year, the Buyer does not make any claim for payment of liquidated· damages as provided in Clause 18, i-le Seller shall, at the end of the period make a refund of 25% of guarantee, charge received during that period.

2- 7

71

l 5.5.4 The amount of guara."itee charge payable shall be reviewed. once for every period of 3 years by tr•e iv10P&NG and MOP and their decision in. the matter shall be finai and binding on both parties hereto and first such. reviewed guarantee charge will be. applicable to the Buyer after 3 years consisting of first Contract Period. second Contract Period. both being treated as one year for this purpose and the two subsequent Contract Periods.

16.6 Actual Frei2ht Charge

In case the delivery 9f Fuel is made from an Inland Terminal. being a suppiy point or other.vise. the Bliy~ · shail pay to the Seller. the actual railway freight and/or road freight. incurred. by the seller in transponing the Fuel from the designated Pon Terminal to the Inland Te:-r:Unal -.vhich shall form pan of Fuel Price.(Actua.f Freight Charge).

16. 7 Notional Freight Chan?e

In case. of supply of Fuel from a Pon Terminal other than the designated Port Terminal or Inland Terminal or through pipeline or by road for whole or any pan of distance of transponation. the Buyer shall pay to the Seller Notional Freight charge which will be an amount equal to the freight that would have been payable by the Seller to the Railways at the prevailing railway tariff on the date of despatch as if the Fuel has been transpoi1ed from the designated Pon Terminal to the Inland Terminal or Buyer· s On-Site Facilities. by Rail. Notional Freight charge shall also form pan of Fuel Price.(Notional Freight Charge)

16.8 Transoortation Cost

16.8. I The Seller shall recover from the Buyer any costs and charges paid by it. to the Transporter. to effe:t transpon· of the Fuel from the Supply Po.int to the On-Site fc.cilities of the Buyer referred to as'"Transpori:uion Cost''.

16.8.2 The Seller shall recover the Transportation Cost from the Buyer either in advance before delivery of the Fuel or pursuant to delivery of the Fuel as may be agreed between the Panies.

I 7. Invoicing and P:tvmen~

17.1 Invoicing

The Seller shall deliver to ihe Buyer, three days ~nor to the date of the invoice ~the Payment Date") the Provtsional Invoice. The Seller shall make three Provisi:Jrta~ Invo1c;.es each Month. The Payment Date of such Provt'S'fonal 1nvoices shall fall on the Fifth (5th) day, Fifteenth (!5th) dav and Twenry fifth (25th) dav of each Month (or in the alternative the Seller may make t we> ?rovisiona~. Invoices e'ach Month penaining to the Payment Date falling on the Seventh (7th) and twenty second (22nd) of such Month~

28

72

or (ti) one Provision.al Invoice penaining to the Pavment Date. falling on the fifteenth (1 Sth) day of each Month).

The periods to which the Provisional Invoices will pertain are as follows:

17. l. l The Provisional Invoice pertaining to the (fifth) 5th day shali relate to the quantity of Fuel supplied for the period beginning on the first (lst) day of that l\-fonth and ending·with the tenth (10th) day of that Nronth. (In the alternative., the Provisional Invoke pertaining to the Seventh (7th) day shall relate to the quantity of Fuel supplied in the first fifteen (15) days of the Month and the Provisional Invoice pe~ajning to the 22nd day (22nd) day shall relate to the quantity of Fud supplied in the last 15 days ofthe Month.

l 7 .1.2 The Provisional Invoice pertainitlg to the fifteenth <I 5th) day shall I relate to the quantity of Fuel supplied for the period beginning on the eleventh (11th) day of that tv1onth and ending \vith the (twentieth) 20th dav of that Month.

l 7. l.3 The single Provisional Invoice shall relate to the entire quantity of Fuel suppiieu in that Month.

· 17.1.4 The Seiler shall deliver to the Buyerthe Final Invoice in respect of [such Month or the previous Month].

17.2 Pavment

. The Buyer shall effect payment of the invoices by way of Le~er of Credit (as defined in Clause 17.3 below) before closimz of bankimz hours on the

. - -date of the invoice.

17 .2. 1 ~enr Date

The Seller shall present the Letter of Credit to the Scheduled Bank (being the bank which has granted the Buyer the Letter of Credit Facility) on the Payment Date and obtain payment of the amount stz.i.ted therein.

17.2.2 If any amount remains due and payable by the Seller to the Buyer under the terms of this Agreement, the Buyer shall. at his discretion. recover the same from the Seller by withholding the equivalent of ~nch amount or any portion or percentage thereof from any amount that may be paya?le by the Seller to the Buyer under the terms of. this Agreement.

17.2.3 1f any amount.remains due and payable by the Buyer to the SeUerunder the terms of trus Agreement. the Seller shall. at his discretion.. recover the same from the Buyer by withholding the equivalent of

29

73

such _2rr.ount or any ponion or percentage thereof from the amount that may be pc.yable by the Seller to the Buyer under the terms of this Agreement.

17 .2.4 In the event the Buyer defaults in effecting payments of the invoices , it shall in addition to the amount payable thereunder be liable to pay interest @Interest Rate as defined in 1.41.

17.2.5 In the event the Buyer defaults in enecting payment on the date of the invoice and for seven days beyond the same., the Seller may in his discretion suspend the supplies of the Fuel till receipt ·of payment.

17.3 Letter of credit

17 .3t l The Buyer shall at its 0\\-11 cost and expense. at all times. maimain a one/two standby, irrevocable, revolving and without recourse to dra ... vers open L.etter of Credit for the sole benefit of the Seller \i.ith a Scheduled Bank acceptable to the Seller ("the Buyer's Scheduled Bankn)_

17.3.2 The first Letter of Credit shall be established and issued to the Buyer 1 5 days prior to supply commencement date. The second Letter of Credit shall be established and issued to the Buyer- fifteen days prior to the Supply Commencement Date and shall be maintained consistent herewith by the Buyer at all times during :he term of this Agreement.

17.3.3 The value of the Letter of Credit shall be:

l 7 .3 .3. I in the case of the first Letter of Credit .. covering for an amount equivalent of 15 days of forecast {Agreed Quantity) of the month.

17 .J.3 .2 in the case of the second Letter of Credit .. 1.5 times the value of the invoice issued on the Payment Date immediately preceding the date of such Letter of Credit.

PART 7

LIQUlDATED DAMAGES

18.1 Liauidated damages paYab1e bv Sefler

18.1.1 In the event the Seller fails to supply the Annual Guarantee~

Quantity in any Year ~d there is no material breach menrionec\ hereunder by the Buyer. the Seller ::h;l]l be liable to pay liquidated damacres to the Buver~ to b~ calcuiated in accordance with the

~ equation specified in. ~:use 18.1.2 on the shonfall quant:;tu:___

74

which 1~ the difference between the Annual Guaranteed Qu.\ntity and the quantity of Fuel actually supplied by the seller to the f3..iyer in that Contract Period. subject to the overall limit ~pecificd in 18.1.4.

During First Contract Period no Liauidated Damages shall be payabfe either by the Buyer or the Seller. j

During the Second Contract Period, for the purpose of calculation of Liquidated Damages~ the guaranteed quantity shall be worked

. out proponionately from the date of commissioning to 31st March ·afthe Second Contract period.

18.1.2 The liquidated damages referred to in Clause 18. l. l shall be c-..alculated in accordance with the following equation:

LD= A+B+C+D x . s Annual Guaranteed Quantity of Fuel

Where. LO- means the liquidated damages payable in R~. per f\IT/KL C":n the

Shonfall Quantity.

S - means the difference between Annual Guaranteed Quantity and the acrual quantity of Fuel $upp1ied during the ~aid year.

A - means the weighted average interes: paid/payable on long tenn loans taken by the Buyer for financing the fixed assets of the Project.

B - means one-half of the iowest of the following amounts available. claimed or incurred by the Buyer on the Operation and Maintenance (O&M) of the Power Station:

( 1) The amount permissible towards O&M expen·;es as per CEA norms .

. (2) The amount permi~sible towards O&M e:-cpenses m the PPA.

(3) The amount provided for O&M expenses in the Financial Documents.

(4) The actual amount _expended by the Buyer on O&M Expenses as per the Audited accounts of the Buyer for that particuiar year.

31

75

C - means the amount equal to 100~-·o ccpreciation claimed by the Buyer as per Electricity Supply Act, 1948 as amended from time to time, on a straight line method.

D - means the amount equal to 100% of the insurance premium paid by the Buyer as per the audited acco:.ints of the Buyer for the risks of fire, natural calamities, strike and riots.

18. 1.3 No liquidated damages shall be paid by the Seller to the Buyer in the following events:

18.1.3. 1 where the Seller has supplied Annual Guarantee Quantity.

18.1.3.2 if the inability of the Buyer to generate power is not attributable to the Seller's default in supply of the Annual Guaranteed Quantity;

18.1.3.3 if the Buyer achieves a PLF of 80% or more during the Year;

18.1.3.4 if the Buyer recovers the full Fixed Charge froin the State Electricity Board or any other agency;

18.1.3.5 if the Alternative Fuel option is not accepted by the Buyer~

18.1.3.6 if the Buyer fails to ta.1.:.e effective action for maintaining inventory equal to I/12th of the Annual Linkage Quantity at the On-Site Facilities.

18.1.3. 7 if the Buyer delays in the unloading of the railway tank wagons for more than 24 hours within the preceeding 30 days.

18.1.3. 8 If the Buyer fails to transport the Fuel by road or by Buyer's Pipeline on supplies being offered by the Seller during the preceeding 30 days.

18.1.4 Notwithstanding anything contained herein, the liquidated damages payable by the Seller to the Buyer in any year shall not exceed 17% of the Project Cost of the Project.

18.1.5 The Buyer shall notify to the Seller his intention of invoking the liquidated damages clause for the Shortfall quantity in writing on a month to month basis wherever Shortfall occurs as per 18. 1.3.

32-

76

18.1.6 Notwithstanding anything contained herein.. liquidated damages can be invoked only if the Fuel inventory at the _ On·Site Facilities is d~pleted to l"!~S than 120 hrs coverage of the operation of. the Power StatiurL. for the reasons attributable to the Seller.

l &:2 Ligu-idated carnages pavable bv Buver

In the event~ the 8 uyer fails to purchase the Annual Guaranteed Quantity and there is no material breach mentioned hereunder by the Seller.

18.2.1 the Buyer ~hall be liable to pay liquidated dam.ages to the Seller calculated in accordance with the equation specified in Clause 18.2.2 on the shortfall quantity of Fuel which is the differenct~ between Annual Guaranteed Quantity and the quantity of Fuei actually purchased by the Buyer from the Seller.

18.2.2 The liquidated damages referred to in Clause 18.2. l shall be calculated in accordance \vlth the following equation:

LD = X + [ + Y + ·z

Where LP-: me-.ans the liquidated damages payable in Rs. per MT/KL on

.. - the Shortfall Quantity.

X,. means the Import Handling Charge.

l , means the Infrastructure Charge.

Y means the Service Charge.

Z mean:; the Guarantee Charge.

18.3 Pavment of liquidated damages

18.3 .1 Pending finalisation of liquidated damages at the end of any Year based on clause 18.1 or . 18.2~ as the : case may be. liquidated damages will be determined and paid/adjusted provisionally every month. on the basis of 17% of the project cost annually, on prorata basis, in case the Seller fails to supply or Buyer fails to purchase 1/12th of Annual Guaranteed Quantity in an.y panicular Month.

18.3.2 .-1.t )'.1e end of the Year, the final liability of liquidated damages l)ASed on clause .18. l or 18.2. as the case mat be~ shall be d~termined and the amount paid as liquidated damages per Month as 'ilentioned above will be adjusted~ and if any excess amount has been p-aid in the particular Year. that amount shall be refunded 10-

t!ae Buyer or Seller. as the case may be. within 30 days of the end of ~:h-at Year.

33

77

'" ...

PART8

REPRESENTATIONS AND COVENANTS

19. Representations

19. l The Seller represen~s and warrants that:

19 .1.1 it is a statuJQry body duly constituted and validly existing under the laws of India with p.o.wer and authority to execute this Agreement and to exercise its rights and oerform its oblil!ations hereunder: .... . . - .

19 .1.2 to the besr. of its knowledge and beiief, there are no actions suits or proceeding~ pending or threatened aga.ln~t Gr affecting it before any coun or administrative bodv or arbitral tribunal which mit?ht rnateriallv adverse!v

" w ,, ..

affect its ability to exercise its rights and perform its obligations under this Agreement~

19 .1.3 its execution and delivery of this Agreement has been duly authorised and \ltill not contravene 2.IlY provision ofor constitute a defauil under any o-ther agreement or instrument to which it is a pany which would thereby adversely affect its ability to exercise its rights and perform its obligations

· under this Agreement;

19.1.4 it shall obtain and maintain all Governmental Authorizations Agreed under Applicable .Laws to perform its obligations hereunder.

·. : ..

19 .2. The Buyer represe~ts and warrants that:

19 .2. l it is corporate body duly constituted and validly existing under the laws of India Ylith power and authority to execute this Agreement and perform its obligations hereunder~

19 .2.2 to the be-st of its knowledge· and belief, there are no actions, suits or proceedings p:nri.rig or threatened against or affecting it before any court of administrative body or arbitial tribtmal whir-!: might materially adversely

34

78

affect is liability to exercise its rights and perform its obligations uncier this Agreement~

19.2.3 its execution and delivery of this Agreement has been duly authorised and v.ill not contravene any provision of or constitute a default under any other agreement or instrument to which it is a party which would thereby adversely affect its ability to exercise its rights and perfonn its obligations under this Al!reement~ and

19.2.4 it shall obtain and during the term of this Agreement v.rill have and maintain all Government~ Authorizations Agreed under Applicable Laws to be held in connection with the development. construction, operation and maintenance of the Power Station and as otherwise Agreed for the performance by the Bu'yer of its obligations hereunder. The Buyer shall promptiy . notify the Seller of any actual loss. revocation. tennination amendment or breach of any such Governmental Authorization or of any

· actual ~reach o of any Applicable Laws related to perfomiance cf' this Agreement.

:w. Covenants

20.1 The Seller Covenants that:

20. l. l it shall obtain, have and maintain at all times all Govern.'"':".enta! Authorizations under the Applicable Laws to be held or Agreed fer the perfomtance by the Seller of its obligations hereunder:

20.1.2 it shall promptly notify the Buyer of any actual loss. revo~tion.

termination. amendmem or breach o of any such permit. licensee or approv~L or any actual breach of any Applicable Laws relate:i to perforr.ian.ce of this Agreement.

20.1.3 it shall take all action Agreed under Applicable Laws in connection \\ith its operations and activities under this Agreement including without limititi•) ":. compliance v.rith any reponing or notice requirements under Appli:able Laws relating to environmental matters.

20.2 The Buyer Covenants that:

20.2. l it shall obtain. have and. maintain at all times all GovernmentcJ Authorizations under the Applica~le Laws to be held or Agreed fDi the performance by the Buyer of its obligations hereunder:

20.2.2 it shall promptly notify the Seller of any actual loss. revoc2!1on. termination, amendment or bre~h o of any such permit. licensee or approval or any .actual breach of any Applicable Laws related to performance of this Agreement.

35

79

20.2.3 it shall ta.~e all action Agreed under Applicable Laws in connection v..ith its operations and activities under this Agreement including without limitation compliance \ltith any reporting or notice requirements under Applicable Laws relating to environmental matters.

PART9

FORCE MAJEURE

21. Definition

21.1 . "Force Majeure'1 shall mean the events stated inciauses 21.1.1and21.1.2 and any other event . or circumstance or combination of events or circumstances that materially and adversely affect the performance by either Parry (the "Affected Parry'') of its. obligations pursuant to the terms· of th.is Agreement (including by preventing, hindering or delaying such performance). Any events or circumstances meeting the description of Force Majeure which have the same effect upon the performance of either Party's contractors shall constitute Force Majeure. with respect to such

. ?any ..

21.1. l "the following non-political circumstances and events"~ ·

21. L 1.1 the effect of any narural calamity or other act of God, including but not limited to any storm, flood, drought, lightning, eanhquake, cyclone or other natural diSa.ster,

21.1. l.2 fire, acciden~ breakage of facilities or equipment, strucrural collapse or explosion attributable to a cause other than (A) inherent defectS of any equipment or (B) circumstances -within the reasonable control of thl: Affected Pany or its contractors;

21. l. 1.3 strikes, work to rule actions or similar labour _difficulties;

21.1.1.4 epidemic, plague or quarantine~

21. 1. l. 5 air crash or shipwreck; and

36 J

80

2 l. l.2 "the: following political circumstances and events (occurring \\ithin or outside fodia affecting procurement of Fuel by the Seller and supp:y to the Buyer")

21.1.2.1 War (whether declared or undeclared)~· acts of sabotage, terrorism or act of public enemy (including the acu of any independent unit or individual engaged in activities in funherance of a program of irregular warfare), acts of belligerents or foreign enemies (whether declared or undeclared), blockades, embargoes, civil disturnanc~ revolutio~ rebellion or insurrection, exercise of miiitary ~r usurped power, or any attempt at usurpation of power;

21 ..i~ai2 radioactive contamination or ionizing radiation;

2 l.b2.J strikes~ work to rule actions~ go-slows or similar labour difficulties~ or other labour action caused in whole or in pan by agitation or unrest;

2L l.2.4 any delay or direction or order on the pan of any Governmental Instrumentality or denial or refusal to grant or renew. or any revocation or modification of any Agreed Governmental Authorizations or [Project Consents], provided th.at $UCh delay, modification. denial, refusal or revocation was not for cause~

21.1.2.5 a Change in Law (including Applicable Laws)~

2 l.1.2.6 any event or circumstance of a nature analogous to the foregoing.

21.2 Burden of Proof

In the event that the Panics are unable in good fahh to agree that a Force Majeure event has occurred to an Affected Pany, the Panies shall resolve their dispute in accordance with the provisions of this Agreement. The burden of proof as to whether or not a Force Majeure event has occurred shall be upon the Patty claiming that the Force Majeure event has occurred and that it is the Affected pany. ·

~ l.3 Effect of Force Mai~

If the Buyer or Seher, as the case may be is rendered wholly or partially unable to perform its obligations under this Agreemem because of 'Force Majeure', the Buyer or Seller as the case may he sh.all be exn 1 sec1 from

37

f

81

whatever performw1ce is 3.ffected by the Force ?-.fajeure to the extent so affected. resHlting in actual shortfall of performance. on prorata basis

The foregoing pro¥isions of this Clause 21.3 are subject to the following provisos:

21.3 .1 tlre non-performing Party w1thin five (5) business days after the~ occurrence of the inability to perform due to a Force !vfajeure event provides \Vl"'inen notice to the other Pany of.the paniculars of the occurrence, including an estimation· of its expected duratio~ and probable impact on the performance of its obligations hereunder and conunues to lurrusfi fitne1y regular reports with respect thereto during the period of Force Majeure~

: 21.3 .2 the non-performing Party shall use ail reasonable efforts to continue to perform its obligations hereunder and to correct or cure the event or condition excusing performance as soon as possible

'.::.1.3 .J the suspension of perr""ormance shall be of no greater scope and no longer duration tha..'1 is reasonably necessitated by the Force ?\-iajeure;

21.3.4 the :t'}on-perfonning Party shall pro\ide the other Party with prompt noti~e of the cessation of the Force ?-.1ajeure event giving rise to the e;(ctise from performance or relief from damages and shall promptly upon such cessation resume performance hereunder.

· 21.3.5 the non-performance of any obligation of either Pany that was Agreed to be completed prior to the occurrence of the Force Majeure event shall not excused as a result of such subsequent Force Ma;eure event:

21.3:6 ·save as otherwise provided herein. the occurrence of an evenr t'I~··

Force Majeure shall not relieve either Party from its obligations tC>

make any payment hereunder for performance rendered prior to the occurrence of Force lvfajeure or for partial performance hereunder during periods of Force Majeure; ·

21.3.7 the Force Majeure event shall not relieve either Pany from its obligations to comply with Applicable Laws;

21.3.8 the non-perfonning Pany shall exercise all reasonable efforts to mi\igate or limit damages to the other Pany

21.4 Insurable Force Majeure

21.4. l Each Party shall be obliged to effect insurance ~over in respect of ~.ny Force Majeure included within the ci>?firution of Force Majeure specif'ed in Clause 20. 1. 1. 1 to the extent that insurance cover is

38

-~-

82

available in the worldVYide insurance market from reputable insurers at reasonable commercial rates and \Vi.th re~onable deductibles at the time ~uch Force Majeure arises plovided that the relevant Pany has had both reasonable notice that such insurance is available and reasonable opportunity to effect such cover~. Insurance cover shaJl not be deemed to be available to the Buyer at re.ason3ble commercial rates if the cost of effecting such cover would result in

. the allowance for insurance at the relevant time in the 0 & M and .. Insurance Expenses (as defined in the PP A) being exceeded by _:payment of the costs of effecting such insurance cover.

21.4.2 On the 'occurrence of Force Majeure in respect of which the Affected Pany shall have been Agreed to effect insurance pursuant · to Clause 21.4 .. 1 the Affected Party shall be obliged to use an

· a.mount equal to the proceeds of such insurance as should have been effected to put the Parties (so far as possible and equally) in the positions in which they would have been had that Force Majeure not occurred.

PART 10 ·

ll\1PORT HANDLING

22. Imoort Handling

22. l During the currency of this Agreemen~ with prior written consent of the Seller, the Buyer may itself impon the Fuel from outside India instead of purchasing the Fuel from the Seller under this Agreement. subject to the following conditions:- ·

22.1.1 (a)

22.1. l(b)

22. l.2(a)

22. l.2(b)

The Buyer shall give at least 90 days prior written notice to the Seller ofits intention to impon Fuel direetly. lfthe Buyer wants to avail of the facility after having purchase Fuel from the Seller under this Agreement, the balance amount of the Commitment charge in Cash or Bank Guarantee will be forfeited in favour of the Seller. Once the Buyer opts for this facility of direct import, the Buyer:- can stan purchasing again the Fuel from the Seller under tl:is Agreement only after Expiry of minimum of 6 months from the date of commencement of impon of Fuel as mentioned in Clause 22.1 above.

The Buyer may, without having._ agreed to purchase !ro: -rue) from the Seller opt for itselfimponing the Fuel.

22.2 The Seller may undertake impon of the· Fuel, on behalf of the Buyer in accorc.anc(~ with the procedure and carrying out activities for import of

39

83

Fuel as described in Annexure 3, on pa)1llent of Impon Handling charge by the Buy~r. as defined in clause 16.

22.3 Unless otherwise agreed by the Seller,

the Buyer shall use the facilities provided by the Seller for receiving the Lrnponed Fuel from the Vessel and for storing the same at the Port Terminals or Inland Terminal or any other storage facilities advised by th!':: Seller and will have to pay an amount consisting of the following.

i) Infrastructure Charge

ii) Storage and handling charge inciuding Stock Loss charge. for (a) Naphtha or its Alternative Fuel @ 3% & (b) for FO or its Alternative Fuel @2.75%, of the Landed cost.

22.4 lf the Buyer wants to . entrust the sourcing of the Fue!, Ocean transportation and Pon hand.ling and also use other facilities inciuding storage as mentioned in 22.J, the Buyer shall pay to the Seller.:.for the services as Facilitator. the folio\viniz charizes ;-. - -22.4.1 •· Impon Handling Charge

22.4.2 Other charges as specified in 22.3 namely

22.4.3

i) Infrastrucrure Charge~

ii) Storage and handling charge including Stock Loss charge for (a). Naphtha or its Alternative Fuel@. 30,'o

& (b) for FO or its Alternative Fuel @. 2.75%, of the Landed cost.

Any other charge as mutually agreed upon.

22.5 The Buyer shall enter into a separate agreement with the Seller for availing of import and other services as given in this~ on the detailed terms to be mutually agreed between the parties at the appropriate time.

PART 11

" ,, ASSIGL'i'?vtENT

23. Assignment

23. l Except as c~..herwise provided in !his Clause 2.3., the rights and obligations . of the parties under t_his Agreement., including any rights for moneys or

40

84

2~.

payment~~ ·may not be assigned by either Party except upon the express written c()_risent of the other Patty.

23 .2 Th~ Buyer shall have the right after written notice of thirty days to th~ •1 Seller to assign any or atl of its rights and interest under t~us Agrt:ement w

the Financing Parties as security for its obligations under the Financing Documents, which assignment shall not relieve the Buyer if its obligations under this Agreement. The Seller shall execute all such consents andfor acknowledgments of any such security granted by the . Buyer to the Financing Parties, as the Buyer may reasonably request or as may b~ Agreed to make such security effective .. The Buyer shall have the rig}· assign all its rights and obligations under thi$ Agreement to an affiliate of the Buyer (when~upon such assignee shall be deemed to be anc ::~·::~·. ·::

23.3

23.4

24. l

Buyer thereunder) subject to the consent of the Seller not to be unreasonably withheld.

The Seller shall have the right to assign all its rights and obligations under this Agreement to any Oil Company as defined in Clause 1.60, where upon such assignee shall be deemed to be and shall be the Seller subje:t to consent of the Buyer.

Each Party shall promptly notify the other Pany of any proposed assignment pursuant to this Clause 23.

PART 12

TER1\1Ti\ATION RIGHTS

Events of Default

Seller's right to terminate on events of default by the Buyer:

The Seller shalt be entitled to terminate this Agreement on the occurrence of any one or more of the following of events (Events of Default'):

24.1.1 failure by the Buyer to make payment of any amount due to the Seller under this Agreement, which failure continues for a period of 30 days days after notice of such non-payment is given by the Seller to the Buyer;

24.1.2 if the Financial Closing does not oc:;cur by 16.6.1998 ;

24.1.3 if tha Commercial Operations Date does not occur by 16.3.2000;

24. l .4 any cancellation or withdrawal of the Linkage Letter which makes it unlav..ful or illegal for the S~lier to, or 'vhich prevents the Seller. b accordance with practice, from selling the Fuel to the Buyer;

24.1.5 difsolution·or liquidation of the Buyer;

4- (

/\

85

24.1.6 any repudiado~ of its obligations he:-eunder by the Buyer;

24.1.7 the termination of the PPA by any party thereto;

24.1.8 any material breach by the Buyer of its obligations hereunder;

24. l.9 the assignment or attempt to assign by the Buyer its rights and/or the transfer or att..'"lnpt to transfer by the Buyer its obligations under this Agreement without the written consent of the Seller.

24.2 Buyer's right to terminate on events of default by the Seller

The Buy~r shall be emitled to terminate this Agreement on the occurrence of the follov.ing Events of Default:

24.2.'l the failure by the Seller to supply the Fuel in accordance with the terms of this Agreemebt. ccxrtinuously for a period of 2 months;

24.2.2 a.tly cancellation or withdrawal of the Linkage Letter which makes it unµiWfu} or illegal for the Buyer to , or which prevem.s the Buyer • in a~rd.ance practice. from buying the Fuel from ¢e Seller.

24.2.3 dissolution or liquidation of the Seller;

24.2.4 an;y repudiation of tt.s• obligations hereunder by the Seller;

24.2.5 any material breach by the Seller of its obligations hereunder;

24.2.6 the assignment or attempt to assign by the Seller its rights and/or the transfer or attempt to transfer by the Seller its obligations under this Agreement without the written consent of the Buyer.

24.3 Buyer's right to terminate this Agreement to switch over to LNG/Natural Gas as Fuel:

During validity period of this Agreement.. Buyer has the option to switch over to LNG/ Natural Gas after giving six months notice in writing to the Seller.

In such case. th.is Agreem~ will be termin.a:ted at the end of six months or such other date as.x;nu:wally agreed between the Buyer and the Seller .

. In case the'Se.Uer offers to supply LNG/ Natural Gas as Fuel, the Buyer should give preference to the Seller over other suppliers to siipply the same.

25. Termination Proeedure

25.1 Upon the cx.:curreoce of any Event of Default the Seller c.:- tb1.;; Buyer, as the case may. shall serve the defauhing party with a preliminary notice of terrniruttion ("Preliminary Termination Notice'') giving the defauhlng party a period 1.1£' 30 days ("Remedy Period") to rectify the Evertt of Def::rn:~.;: wtth a copy to Financial Institutions (Fls) of the lPPs. ··

42

86

25.2 In the event af'~rthe expiry of the Remedy Period the Event cf Default has not be recrified the Seller or Buyer, as the case may be. may terminate this Agreeme:nt by giving a written notice ("Termination Notice".) to the

· defaulting Party and this Agreement shall terminate on the d.4te of such T ermin.ation Notice.

26. Notice to the Financial Institutions

26.1 The aforesaid right of termination mll not .be exercised without giving 6 months prior. notice in writing to Financial Institutions; if any financial assistat1ce given by them is remaining unpaid and/or unsettled till such date;

26.2 If within 6 months ·after the receipt of such notice. such Financial Institutions:

26.2.1 pay the unpaid amount payable by the Buyer to the Seller for the Fuel; and

26.2.2 identify and propose to the Seller. in writing., a substitute person who is ready and willing to take over the rights and obligations pf the Buyer under this agreement,

then the Seller shall not terminate this Agreement and upon assigrunent of this Agreement shall recognize the substitute buyer as the Buyer and supply Fuel to the substitute buyer on the terms and conditions contained herein, provided all the Governmental Authorizatiom for substitution of the Buyer and to purchase Fuel have been obtained by such substituted buyer, provide9. tunher that the other rights accruing to the Seller on account of Buyer·s 'default. such as forfeiture of the cash Commitment Charge I encash!n~nt of Bank Guarantee. etc. shall be enforced .

PART 13

DlSPUTE RESOLUTION

27. Good Faith Negotiation

Each Party sh.all designate in writing to the other parties a representative who shall be authorised to resolve any dispute. disagreement or difference (each a "Dispute•) arising out of or in connection with this Agreement~ including any questions regarding i~ performance. exis'enc~. validity, termination and the rights and liabilities of the· Parties to this Agreement. Unless otherwise provided for in tl-js Agreement. the following provisions shall apply to the resolution of any Dispute:

. ·' ~

43 n

87

27 .1 Tne Dispute shall not be subject to the provisions of this Agreement dealing \1.-ith arbitration or to any litigation unless and until the provisions of paragraphs 27.2 and 27.3 below are fulfilled.

2 7 .2 Each Party shall give to the other Party written notice setting out the material particulars of the Dispute and requiring the designated representative of the parties in Dispute to meet personally (if necessary} .in Chennai within five (5) business days of the date of receipt of such notice by the relevant Party to attempt in good fai~ and using their best endeavors at all times, to resolve the Dispute.

27 .3 If the Dispute is not resolved as evidenced by the terms of the settlement 'being reduced to \\Titing and signed by each designated representative of the Partiesjn Dispute within fifteen (15) business days after the date of

're"'...eipt of the.: notice described in clause 27.2 above by the relevant Party, such disputi! shall be referred by the designated. representatives to a senior officer designated by each of the parties in dispute~ who shall attempt in good faith, ~d using their best endeavors at all times, to resolve the dispute within a funher period of 15 days. Thereafter the provisions of Clause 25 $hall apply.

27.4 If either Party fails or refuses to. meet as agreed by the notice described in paragraph 27.2 above or if any senior officer fails or refuses to meet as described in paragraph 27 .3 above the provisions of Clause 26 shall apply.

27.5 The Parties agree to provide each other with reasonable access during norm.al business hours to any or all non-privileged records, information and data penaining to any such dispute.

PART14

ARBITRATION

28. Arbitration

28.1 Except as otherwise provided in this Agreement, any Dispute shall be referred t~ and finally resolved by arbitration the proceedings of which will be in accordance v.rith the provisions of the Arbitration and Conciliation Act 1996 and any enactment and/or amendment thereof. This Agreement and the rights and obligations of the ?arties hereunder shall remain in full force and effect pending the award in such arbitration proceedings which award shall determine whether and when ter.mination of this Agreement shall become effective.

28.2 The place of arbitration shall be Chennai.

44 Q . ...

88

28.3 The panies shall jointly appoint a sole arbitrator to resolve the dispute. In the event the Parties do not agree upon the Arbitrator within two weeks after one Pany has claimed for an arbitration in written from by two arbitrators one- to be appointed by each Party with power to 'them to appoint a third arbitrator.

28.4 The language of the arbitration shall be English.

29. Jurisdiction ·

PART 15 MISCELLANEOUS ·

The Parties hereby agree to submit to the jurisdiction of the competent Cout;ts in Trivandrum ('State capital in which Buyer's plant is situated), in all matters arising out ofthis agreement.

30. Governing Law

The Applicable Indian Law shall govern the interpretation. validity and performance of the terms of this Agreement.

31. Miscellaneous

31. 1 Indemnification bv the Seller

The Seller shall indemnify and hold harmless the Buyer for ioss of or damage to property, death or injury to person (or any claim against the Buyer in respect thereof and al expenses relating thereto (including without limitation reasonable legal fees) suffered by the Buyer in ·connection with the Pr9ject resulting from any negligent act or omission of the Seller its employees or agents, v..ithout recourse to the Buyer and hold the Buyer fully indemnified in respect thereof Provided that such indemnity shall not extend to any loss, damage, death or injury (or any claim in respect ther~of) or any expenses relating thereto to the extent that it was caused by any act or orrtlssion of the Buyer and/or any·or its contractors or the failure of the Buyer to take reasonable steps in mitigation thereof;

31.2 Indemnification bv the Buver

The Buyer shall indemnify and hold harmless the Seller for loss of or damage to property, death or injury to person (or any claim against the Seller in respect thereof) and all expense~ relating thereto (inCluding without limitation reasonable legal fees) suffered by Seller b c.::-nnection with the Project resulting from any negligent act or omission of the Buyer

. and/or any of its contractors or this respective employees and agents, without recourse to the Seller and will hold the Seller fully indemnified in respect thereof Provided that such indemnity shall not extend to any loss,

~-. j . .

45

0

89

damage, death or inJ~ry (or any claim in respect thereof) of any expenses relating thereto to the ex1ent that it was caused by any act or omission of the Seller or the failure of the Seller to take re:lsonabte steps in mitigation thereof;

31.3 \\'aiver No delay in exercising or omission to exercise any right, power or remedy accruing to the Purchaser under this Agreer.ient shall impair any such right, power or remedy or be construed to be a waiver or acquiescence thereof, nor shall the action or inaction of the Purchaser in respect of any default on the part of the Vendor or any acquiescence by it in any such default, affect or impair any right, power o:- remedy of the Purchaser respect of any such other default.

31.4 Ser.·ice of Kotice

31.4. l Unles~, otherwise stated any notice, L.otification, information or request to be given or made to the Seli~;:- or to the Buyer or to any other party shall be in writing. Such notice or request shall be deemed to have been given or made when it is delivered by hand or facsimile or within fourteen days after it is dispatched by registered mail or telegram to the pa.rty to which it is Agreed to be givefl or made at such party's address stated in the title of this Agreement and or below and or suer. other address as may be notified by the party. In the case of ar;y .notice to the Seller or Buyer, a copy of such notice shall also te delivered to the Seller or Buyer at the fottowing addresses I fax numbers or such other . addresses/fax numbers as may have been notified by the Seller/ Buyer in writing:

31.4. Ll. Seller's Address TNDIAN OfL CORPORA TIO'{ LThfTTED

·' Indianoil Bhavan 139, Nungambakkam High Road, Chennai 600 034.

Attn.: M.K. TY AGI, Chief P&S ~fanager, SR Telefax No.044 8253768.

31.4.1.2 Buyer's Address BSES Lllv1ITED Plot E-4 (Il) · rvrrDC Area, Maro1, Andheri (E), Mumbai 400 093

Attn.: P.S. KHIRW ADKAR Tech Advisor (Gen) Telefax No: e"}..:i_ S > ':/-s '3 '?-;

46 f

90

3 1.5 H eadin 1!S

The headings of various clauses and Pans in this Agreoment are insened for convenience of reference only and shall not affect the construction of the relative provisions.

31.6 · Amendments

This Agreement may be amended or modified only by a written instrument signed by the Seller and the Buyer.

·3 L7 Expenses

Jl.7.1 The Buyer shall determine and pay all stamp, documentary and sale and transfer taxes due in India which may be payable in COMCCtion

with the execution, delivery and performance of this Agreement.

31.7.2 All other taxes .. if any, resulting from the transactions hereunder shall be determined and paid by the Buyer.

31. 7.3 Each Party ,,.,,;u pay their respective legal and other out of pocket expenses. including any legal fees of advocates/solicitors and other expenses relating to the negotiation, execution of this agreement documentation and consummation of this transaction and all legal and other expenses incurred in connection with any future waiver .. con.sent or amendment (whether or not any such future waiver. consent or amendment is given or consummated).

31.8 Publicity

No announcement concerning the transaction contemplated by this Agreement or any matter ancillary thereto shall be made by either Party hereto before Closing.. without the prior written consent of the other Pa."t)'. provided that nothing herein shall prevent either party from makinSt in consultation with the other pany, any announcement or filing Agreed by law or by the rules and regulations of any stock exchange on which it is listed.

31.9 Sellers obliaation

Notwithstanding anything contained herein, the Seller's obligation to supply Fuel under this Agreement will commence only after the completion of 24 months on best effort basis, from the date of payment of the first instalment ?'> pr?vided in Clause 14. l hereinabove; provided however that the Seller may agree to commence the supply of the Fuel on the request of the Buyer from a period earlier th.an 24 months on best efforts basis and in that case the obligation to supply fuel will conunence from that date resulting in advancing of the commencement of Second Contract Period.

47 ()

91

IN \V1Th1ESS \VHEREOF the Parties hereto have executed this Agreement on the day first hereinabove written.

SIG1\f£D, SEALED MTD DELIVERED by the within named Seller fNDIAN OTL CORPORATTON LP.vf1TED by the hand of its du1y authorised signatory Mr. A. CHMTDRASEKARAN EXECUTIVE DIRECTOR.

in the presence of: r<J • ') 0 M '-' K_ \) ~ 1 A-e,,tz. C j (2

I ~frJ JJ y C., r-') f \ rSl> I &'rJ 0 \ I.....

Cout-'r' SIG1\f£D, SEALED Ai.~ DELIVERED by the \vithin named Buyer BSES LTI'vfTTED by the hands of its duly authorised signatory :t-.1r. P.S. KIDRW ADKAR TECH ADVISOR

) ) ) ) )

)

in the presence of: 1 .N . ·Ai-J..P..NT l4;::.. Sf\-/ ft tf Pt j'il) •

GENE C..T'IL MAN p.. c..i:; P._

L\ N\' \2.D \ 3 S c S . k. E (<:.,_ ~ L Pt pc. .N ~<::.:..

\<-ac..~ \ .

48

// TRUE COPY //

92

,. --· . . .· ·~·~ ..

F.r;om:

. .:Sti;ln~ :lo~,.;~~~ ·GOr:nb~n~ .~J;~. ~~e,t:··.~p·~:e.c·t b.T:-'·'Mf.s a ·.S..,.E·.S...,l(eJ::aa.a l!o~ -Ltd - ea:ear-~nce-. 0£ -~~pi:- :tinam: ~-e(;!i::,t(l)n . .t~ . . t;J~ ·t..he· . -~~t:r.lcJLb'y~ ·:<~PP.l-Y.J ~~t.1-· :1:_9.~~a·.- :~8f1;•

,. . .

•••

'l 6-S:. 6.Mrf- @.~;tce4 fycie.- ·P9'!"ez-· ProJeet .at J;l.oor, E;r.Jla>W.J~~'· D.iqtlt:~~-~:;

. '

ht.~·~. O .... ~ .... ~·:·· .·_. . -- . . ~-

c..J _\ ~~ 0..1.).\).~~ .A FBA:N\l~:s i

Jo .. 1N:r· :-~~~AR::t --re :.a~·· _ FOr :pr;11:lo'.ipal ··seor.e.tci:fy .tro: ~- ..

!P. {j.:/.:J.)'a.<1in,,~1r

~,/1'r;(<1U

ANNEXURE-P/4

// TRUE COPY //

93

P(JVVER PURCHASE AGREE1VIEN1"'

BETV/EEN

KILRt\Lt\. S'f ATE ELECTRICITY BOARD

AND

BSES KERAIA POWER LTD

FOR

C()~1BINED CYCLE POWER PROJECT

ELOOR, KOCRI

May3, 1999

ANNEXURE-P/5

94

//True Copy//

POWER PURCHASE AGREEMENT

This Power Purchase Agreement is made and entered into this 3rd day of May, 1999 BETWEEN:

.KER!\.LA STATE ELEC.fRICITV BOARD, constituted under the Electricity (Supply) having office at Pattom, Thiruvananthapuram (hereinafter referred to as the

.. ,,,."'"··'-- (which expression shall, unless repugnant to the contex"t or meaning thereot: incku:le its successors and as party on the first part, AND

BSES .K.ERAI~A PO\VER LIMITEDP a company formed and incorporated in India under the Indian Co.n1pa11ies Act, 1956 and having its registered office at Puthiya Road, Lidyogamandal P .. O., Kochi - 6.83 5017 hereinafter referred to as the "Company'' (w'hich ex1rm:~ss1on shall~ unless repugi1ant to the context or meaning thereof, include its successors and permitted assign.'>) as party of the second part.

Each of the Board and the Company shall be referred to herein as a "Party" and col~ectively as "Parties". · '

: "' .:. \VHER.EAS the Board and the Company had signed se;parat-e Power Purchase Agreements on December 24~ 1996 to develop, procure,, finance, ~nstruct., own~. operate and maintain nvo Project.<> of 40.5 MW Nominal Capacity each to he located at Kochi and Thi:ruvananthapuram,

Whereas the Company had undertaken ti> ext.ind the operations to Comb~~'

"'r<t"~-e:..x..--:_e.,'.\~:;' ~·-·

95

KSE.B • BS£S KERALA POWER LIMITED- POWER PURCh~4SE ACR.EEMENT May, 1999

Whereas as , as per Govt of Kerala Order No. GO.( M.S)No.18/97 /PD dated 29th AW"il 1997, the PP A approved by the Govt. Of Kerala as per GO. MS No 30/96/PD dated 16-~2-96 was extended to Model Power -Plant to be established by the Company at the TCCL premises. Accordingly a Power Purchase Agreement for the Model Power Plant was entered into on April 23, 1998,

Whereas the Board and the Company acknowledge the techno-economic benefits to locate the three Projects at a single site located at TCCL premises and convert the Open Cycle operations into a Combined Cycle mode,

Whereas as per GOK order GO (MS) No. 17 /97 /PD dated 25th April '97 the Govt. * agreed to relocate the 40.5 MW power plant from Technopark Thiruvananthapuram to Kocbij

Whereas the Company has submitted its proposal talcing into consideration the! benefits accruing to the Project considering relocating all the three Projects at one site and cqnversion of the same into Combined Cycle operations, ;

Whereas the Board has accepted the Company's proposal and.

WHEREAS, the Company proposes to develop, procure, finance, construct, own, operate and maintain the Project and sell el~ctric energy generated therefrom to the Board and the Board proposes to purchase all such electric energy, as per the terms and conditions of this agreement, from the Project for the entire term of the Agreement, -

And whereas the Company and the Board agree that this Agreement supercedes ttle Power Purchase Agreements dated December 24, 1996 and April 23, 1998 and both partiesi agree to terminate the agreements for open cycle operation with effect from the effective date of this agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants and c~nditions set forth herein, it is hereby agreed by and between the Parties hereto as follows: i 1

v \

PAGE 2

96

f<.$£13 • 8SES t<E.CiiALA PO\!VEF? Lii41TED - POWER PURCHASE AGREEMENT May, 1!199

ARTICLE1

DEFINITIONS

1.1 Definition~ : In this Agreement, the following words and expressions shall 1~ve the respective meanings setforth below : .

"Affected Party" the Party claiming relief under Section 13.1 or Section 14.1 hereof.

"Affiliate" m_eans in relation to any Party, a person that controls, is controlled by, of _is under common control with such Party. As used in this definition the term "control" mer.us, with respect to a person that is a corporation, the ownership, directly or indirectly, of more than fifty percent ( 50%) of the voting securities of such person, and, with respect to. a person that is not a corporation, the power to direct the management or policies of such person, whether by operation of law, by contract or otherwise.

"Agreement" means this Power Purchase Agreement dated as of the date hereof, as !the same may be amended, supplemented or modified from time to time in accordance with ~rms and conditions hereof. ·

"Availability Declaration" means the declaration of. capacity available given by the Company once a day at the specified time pursuant to Schedule 5, to be demonstrated by the Company, if required by the Board, by actual generation su~ect to there being no restriction on evacuation and the operating parameters being within the Technical Limits.

"Billing Date'"' shall be the business Day immediately after the last Day of each Billing · Month.

"Billing Month" means the calendar month ending with the Metering Date and shalll include any hours frol!1: the previous calendar month not included in the previous Billing Month.

"Buy Out Price" is the purchase price of the Project payable by the Board to the ¢om.parry pursuant to Section 15.7. ·

"Change in Law" shall have the meaning set forth in Section 12.2.

"Contract Rate of Interest" means a ·per annum time weighted rate of interest eq~l to the sum of (i) the prime lending rate applicable during the relevant period of State Bankj of India and (ii) two percent (2%). · ·

nnate of Commercial Operation" means with respect to each Generating Unit the date on which the Generating Unit marks entry into Commercial Service and with respect to the· Project, the date on which the Project marks Entry into Commercial Service.

PAGE 3

~ ( VJ \

/

97

!(SES - 8SE$ KERAl..A POWER UM!!Tf3D • POV'v'E.R PURCHASE AGRESMl:NT May, 1999

"Date of Completion" means with respect to each Generating Unit, the date on which such Generating Unit synchronises with the Grid for the ·first time and with respect to the Project, the date on which the Project synchronises with the Grid for the first time.

"Day" means the twenty four (24) hour period beginning and ending at 12:0u \midnight Indian Standard Time.

"Declared Capacity" means the net generating capacity (measured in kW) at ~e Inter Connection Point declared by the Company to be available in accordance with the A ~ailability Declaration as mentioned else where in this Agreement.

"Deemed Generation" shall have the meaning set forth in Section 7. 7 hereof

"Default Notice" means a preliminary termination notice given pursuant to Section 15.2 and 15.3 hereof.

''Despatchable" means modulated generation as _per Board's instruction, Prude11t Utility Practices, and Technical Limits (as specified in schedule 2), subject to Availability D~laration issued by the Company in terms of Schedule 5. · ·

"Depreciated Historical Cost', means depreciated value of fixed assets of the P~ect as . . reflected in the relevant records of the Company.

"Directive" means any present or future requirement, instruction, direction, order, regulation or rule of any State Competent Authority or Gol Competent Authority which is legally binding or which should be observed by a reasonable and prudent owner, operator, designer or contractor(s) of Project.

"Dollar or USD" means the lawful currency of the UnitedStates of America.

"Due Date of Payment" means 7 Days from the date the designated official of tJP.e· Board receives a Tariff Invoice or Supplementary Invoice.

"Electricity" means the electrical energy in kWh supplied by the Company to. the Bo+x"d at the Interconnection Point.

"Emergency11 means a condition or situation affecting either the Board's electrical stystem .or the Grid System which threatens the safe and reliable operation of such system or which is likely to result in disruption of safe, adequate and continuous electric supply by the Board or the Grid System ·or could endanger life or property, which .condition is materially adversely affected by the continued deliveries of Electricity from the Project.

"Entry into Commercial Service" shall have the meaning set forth iii Section 4.2 heijeof.

PAGE - 4

98

KSEB - BSES KERALA POV11ER UMITED • POINER PUf?CHASE AGREEME.Ni May, 1999

"Exchange Rate" for a given Day means the currency exchange rate between Rq.pees and Dollars quoted by the State Bank of India for the sale of Rupees for Dollars at the close of business hours on the business Day immediately prior to such Day. I

''Financlal Closing" means the signing of the Fin. ancing Documents for Project final(lcing and the fulfilment of all conditions precedent to the initial availability of funds thereunddr and the receipt of commitments for su.Ch equity as required by the Company in order to satisfy the requirements of the Lenders, provided however that the Company has immediate access to funds (subject to giving the required drawdown notices) regarded as adequate by the fompany and on terms regarded as satisfactory by the Company. .

"Financing Documents" means the loan, notes, indentures, security agreements and other documents relating to long-term financing (including refinancing).of the Project or1any part thereof, as such -documents may be modified, amended or supplemented till Date of Commercial Operation.

"Fixed Charge" shall have the meaning setforth in Section 7.2 hereof.

"Force Majeure Events" shall have the meaning setforth in Section 13.3 hereof

"Foreign Debt. Service Charge" shall have the meaning setforth in Section 7.2 hereof

"Fuel" means Naphtha. ·. or any alternate fuel pursuant to Section 7.6 used as the primapr fuel in the Project for generating Electricity. I

"Fuel Supplier" means .a public sector company or any other agency approved by tiie Board which enters into Fuel supply contract with the Company. . [ ,

"Generating Unit " means one set of Gas Turbine Generator or one set of' Steam turbine Generator, ancillary equipment and facilities that are inStalled by the Company for th~ purpose of generating electricity. · I

"Guaranteed Capacity" means with respect to each Generating Unit the gene111-ting Capacity . (net of auxiliary load) of such Generating Unit and with respect to the Project g¢nerating

capacity (net of auxiliary load) as determined in accordance with Section 4.3, guaranteed by the Company to the Board at the Interconnection Point, subject to the ceiling of Nominal Capacity. I

"Gol" means the Government of India.

"Gol Competent Authority" means any agency~ authority, department, inspectorate, or statutory person of Gol. "

1

PAGE - 5

99

KSEB - BSES KERALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999

r:ol Owned Eutity'' means any statutory (;orpo:ration <1r company of vefhi\iih (fol cir c:omp~:tent Authority owns a ma,jority .:1f issued share~ or has pr cus~cnnarily exerdhSies the to v,intn:1i the compos:idon ot.decisfons of the B<:iard t1fqiirect1.r:rs or 'IJJ,'l~g¢~leJ;it.

''CoK Gu.i:n·~i:nte1l' rnc:arL<> the Guarantee to be issuedhytheGoKt'il'thet'.t:in;p~} f:Jt11~1~arH to

\\lu:..:h GuK s;1'iall guamnti:::e .rill o;f p~ymer1t obHgatkms the Board

"hulhn1 Guve1~t1ment~ti lnsn'lm1e11taHty0 1neans (}Q\/et1tmem Qf India; the Govcni:m.em [,.~;;.uci rnK! ministry, dep~1rtrnem or ii~rnt~ur,ni::ntality, Qr

1.:urnmission of Go[ ur Gt)K.

11 f nfinn p O\\'•Cl"1 r mcarlS the elecLricitv generated bv each :Gcrieratin!l. Utdt and delivered to the

Lfoard priqr to Di.m; o:f Co1nrne.rch:I ()pcradon dr suc'lt Genetath:iiUrut. . ..

H 1 ntcr c on:rw.ctfon F acmcy ,, rn.eans the JacUities to be install~·t?Y ('.~J". f-Or ~ Board.on the Bo;trd's the ln.tcr-Conne1;~tfon Point to ermblt.• lhe. niJ~ to ~~Ye. power :frorn the Proji::i:..a in ac.;:ordance \Vith this Agreement.

''h1tei~ Cl)u?H:etion Point'' shaJl mean. tl1e:poiut or¢h~'.!;$wh~>:re &no KV lines furmingpmt , )f tht: Pro}ccct jnin the Kalamassery -'ICC ff:AC1 .. anl:t ... ·~(t.Lrl;ll)ttsse:ry ..,LaClCHZ 110· KV lines frnni tilt: Kalan1.asse1~v Snbstation ofKei~l'lfa State-El~ciit~ityJ,'c"'m:.l

1 '~ J.:nd.,,rt• mean$ an) Indian or fbri:.ign instituxirn:i, c0~t1~~~iPn, .. pr;:rtr1:emsh:lp( firmprndividual or urg;:mi:sation debt at \VOrid:ng ca.pit-id to the Ce.m}ria:ny,

·· :\h1h1 Energy J.Vleters•i· mero:15 metet(s) 0'W11e,d by tb~: (:<:nnpa:ny t:o record· ·the d'l:llivery and of I:'.lcctrfoity,

~',VlaFkct ValueH slwU mean the fair pri~e of die ,f~t;oj~<S,Stts:sec;;sll!d jointly by a rc~puted .fitru of ~1:ccourrrnn1s and a rep.med finti 0f.tech111cid c10.nsti1tiu,~ts;;lcc;::;;ptab1~ t<) ltH)tb based on :I1c NPV oftht: C;ash now expt.:,cted fi:(lm the Jl'yeject '

100

KSEB • BSES KERALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999 --·-----------------------------------------------------------------------------------------------------------

"1Vletering Date'' means approxilnate.Iy the midday iJ:ftue.1as:l Day ofthe®end:ar monthto \vhk:h the energy generated or Deerned Genet;.;1ti6t})~~~ when the :i:neters ·:are actually n::ccirded at the e.nd ofcalendar month~ · ·

"\tdering Point" means the Point at v,·hich the Ifa~ ~livered is rneu:rcd. foc~d m: tile Uuv.:ioor gantry of the Prc~C('L ·

"Monthly Fixed Charge Pnyment'' shall have the·J;ti~ .. ascribed fhereto [n Section 7 "2 hl'fC(lf .

'1.Montbly Foreign Debt Serde~ P;1y1uent" sh:nH h\ilve: the n:,ieaniug asc:rihed theretu

Stcttmi 7.2 htl!'Cof.

" Monthly Od1e:r Fixed (.:barge P:ayruent" shall have the iµe[tni~ :;,~er1bed .)e1;:tum 7.2 her:et)f.

'' J\'limthl)· TariffP1.1ymcnt1!' mi:.~ans all payments d11e: by th1:~.Boari:lto the Co:n'.l!pany uudierthi.s

f\gr0cn1enL \Nhich paynK1J::i'ts ;;huH i11dude, -.vithout lim.hatk>n, t'.i1if'l'J.ii~ed Ghw~~ J?~yirue:rlt ~:m:l the Variable Chm:ge Payment each as c.aIC1.:1latcd pui!:fuanJto Artic'f'~7he~f.

,.:\,loutbly Variable Charge I'~lynu~nt~' sbaH !Jave th¢ t11e.r~r:tg~t:rlbe4.therdo inSecri..cm 7,3 iic:rcof

"Monitoring Periodu mem.i.s the time dudng 1,vhich llw Hoard prt;1pnses to Inurtlf()f the Gcnctating l)nit or Project to ascertain the Declared {)J'. t'eviseci U{"..:.fared c~ipacity th~ Gi;encrailng Unh or Project.

"Net Met:ere.d E.nergy~· n1~..ms the £lei;:'lrichy supptied by the Com}'r<mY to the Board 111 the lnterconncctlon point

Numimil Capacity't mNu'.13 with respect to a gas tutbit~e· [email protected] tht: n~t ~enemtmg capacity. ar hltercom1ei::tion Point. of'495 tvfVV. '.vimte~P~'tQstewniurb~~eGetieratinglJnit the net generating. capacity, at Jnterconnection Pbitlt, of35.5 .lV1W and with respecl ro the Prq,iect rhe net generati~l'ti Capacity at lrm;r~C m:mecti9Xl, JJ(.)ir11~ .of 157 ~1f\1i/ under the P:ni{j~c;, site condition~ and frequency ·vmatim1 bct»vix:n 475 llz and 51,.SHz {.:~t 32"C and ut 65 ~··ti rd,~tive humidity}. as fumi.she-0 by the m#fiufo~~n.:i.rerf'~pHer fo the p.urchaseocontract with the C rnnpany and after deduction of au..'Xilittry consrnnpticn:

"l}t~nt1its" me:ans ctn)' and aH for:maJ or infbrmal p:ermits.: c'leararn::es., H~s,, authorisatfons. c.:•ns(·ms. di;crees. waivets. privileges, approvals or fi:lirigs., uf or re~tiixed hy any lndi.ai1 Governmental lnstrUJne.>Jtality in connectkm \vitl1 the devdopooenl. ~tablishmt::nt. c•.>nsrr:.tttion, maim<nance, "'penuit)ti,, o\vner~;hip or finattdng of the. Project.

f -~·-;-·

!,,Cf

()'j '1i f

101

KSEB • BSES KERALA POWER LIMITED· POWER PURCHASE AGREEMENT May, 1999

"Plant Load Factor/ PLF" means with respect to any period I Tariff Period, an amount expressed as a percentage and equal to the following:

(NME + DG - RG) ------------------------ .x 100

GCxHR

NME = Net Metered energy supplied during such period I tariff period without 4educting Start-up Power, in kWh.

DG =Deemed Generation during such period I Tariff Period, in kWh.

GC =Guaranteed Capacity, in kilo Watts

HR= Total Number of hours in such period I Tariff Period

RG =Reduced Generation during such period I Tariff Period pursuant to Sectiqn 7.8; in kWh.

"Project" means. the Combined Cycle, powe. r station proposed. to· be establi1 by the Company in TCCL premises· Bloor, District Bmakulam in the State of Ke India, comprising three gas turbine generators, three waste heat recovery boilers and o e steam turbine generator, ancillary equipment and facilities suitable for generating Nominal JCapacity and shall include all plant, machinery, overhead BHV line upto the Interconnectio~ Point , land, buildings (including staff quarters) and infrastructure and other facilities, anc · lary and related establishments, equipment and conveniences, and references to the Project sh l, where appropriate, mean the Project.

"Project Site" means any and all parcels of real estate, rights-of-way, easements aitd access roads located in TCCL premises, Bloor, Bmakulam District, Kerala, India upon '1fhich the Project and its related infrastructure will be located. ·

"Prudent Utility Practices" mean those practices, methods, techniques and stanf.ards, as changed from time to time, that are generally accepted internationally for use in elect:pc utility industries taking into account conditions at Project Site, and commonly used in prud~~t electric utility engineering and operations to design, engineer, construct, test, operate and maintain equipment lawfully, safely, efficiently and economically as applicable to power stati~ of the size, service and type of the Project, and that generally conform to the manufacturers' ?peration and maintenance guidelines.

"Revised Tested Capacity" means the net generating capacity of the Unit and or thF Project in kilo Watts at the Interconnection Point and as measured at the metering point as d~ermined by the repeat performance test after Entry into Commercial Service pursuant to Se tion 4.3, carried out as per the procedures set forth in Schedule 1, subject to a ceiling of the omjnal Capacity. .

1 (}

If

PAGE - 8

102

· KSEB - BSES KE.RALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999

~·Scheduled Date of Cnmpfotkm H means v1iii.h resp~~t:~~ t}a~ ~l'St(~J,'i~tkiag the date ~m . C:\~mpletion of days, <.vith respect to tbeseccmd a'~~~t:il1g.'1.Jriktt{'.ii.¢'\'l~~~.011 co~rfietk:in ·+85 ib P~spect to the Thi.rd. g;ener~tlng U11tt;~~.·~1ate, ·~xn ~~:npted{)t), Cl<f {;Ind with r<1 Ole Prnject the .. cl.ate CJ:t1 Con:1p[etio11,pf 6:3$ eLt:J:ZPS! tl'<: oc:e;Ulre:nce h1 I tilmen1 Qf c.::mdhfons precedent ptn-suant to set.1:ion.:;Lt. · ·

"Sciu:dufod Outage" means d planned in1etn.1pti~i'l<~If ibt'; ge)::i.e,1tl=:tting ctpabihty th2ir:. (a) has betn scheduled in adv:;ince 'b)Z.}lie Co~-n~y Is fcrr inspection,

preventive maintenance, c~m:rectlve n1airm:sna;1:1~~·· r~i"iS);:)'eplacemen.t or·hn;prnvi;;::rnent of thl'· Urdts/P1"0je.;::'L · . .

"St:n1~·u11 Pon'cr0 mcm1s po'l.'i't.':r. supplied the 1loa:rd t('l the Unit! Plrt.Jicct !X} stoxt , . . ·' .·.··. '• ' ' ' .. ' .,,..

(epecati.ons in m;cQrdru.1ce \vi.th Sc.hedule·fi.

"State Com1H~te:nt Autllor.ity'~ rne!itn!kany agency, a.i.tfhoih:i:'• de:p,u:#l11er~t~ .1.r.1:;:;J'>t:tt:tonrte s1a1utm)· person ofGovemmt.'1'.!t of Kert:jfa:,

nr

''State Owned· Entity" mea:rns any statutory t(>JJ)t•rati{}n: Q'J: OQmp~triy ofwllich GoK or <tny State Cornpi.:tent .Amhi)ri:ty ·C>\'irns a i:n~j9rit.Y ofi:ssliedsh~;es9rlu:1s:<)r cu;)1r)null'ity ex-ercise:s the dghtto <:onrro! the cm:nposition or decisions of the.Boataof<iirec(i;}1·s or~ment.

. .

''Sup])lcnua:ttary lnv-0ice11 m~eansthe invaicer>.:forred~m,1-\J:ficle~tt arid 9.2 ber.e.ot:

"'Tariff Ikat Rtu.e"~ mean:.> tb.e amount offucl ei:ier~::reqqjred m Kil~:ories, per k\\Th l.)f

E lcclricity despatched pursuant to Section 7, 1, ··-· · · -

'''fadff Peti1Jd''i \\'ith respect to Open Cycle ()pL,>rttti{}nsi.slµlU ~anijJeperh:>.d··corunJ;erlcittg from rhc Date Qf Commercial Ol~-..µ;i:tion of the:frrst Ggistmbine·Generating Unit and ending wirh day prior to the Date of Co:runriereial ~~ti® o:fthc P:rgjg_~t at),d \<,.•·rth vespect tfa

C"ombincrl cyde (iperatiuns commencing from. the b~1ttf ot;; $tm:tmerc:hil Oper.ation o:f the Pn:~jeet and ending '<\i:1hthe last Day ofilie ct1rrespondingpte\~Q:llS:tn(lnli1.in:the next ·(talend.ar yei:1r and every peri<.:)d of OJle year thert!~Uer,.durin,g thc.·termofdlis t~i®n1er:tt

'''rcchnkal LitnitsH mean the Ernits a11d con-sttaiitts c;le-S~he:_4'ih Scib.e~'lle 2, .~ W> rnay be ;;ub:sequendy modified mutually, relating to the operations. n:~teriarK<e:and'~ata.h of the Ptoj:;'.'Ct.

''Te1•111ittatittn NtniJ;i';" r11e21:ns th{~ nntiee oJ 1'.Emnmati<*tt{1Ul'$Uant ·ti:;} S®tti)U 14.<i aoo 1.55 hereof ·

f) '

l'

103

"Tested Capacit.y;• rneans the net generating 0a\j~¢.~t;:i c!f.:~t~i:: <3'An~1-a11J:xg Uri.it and/or tile Pn:~ject in at ltnerccrnnectfon Pbim· and ~s n~~ur¢d~at the·.· Metering Points~ as determined by tl1G initial perforrnance re."~ carded ()1ttf~ 1~ the :tilro~µt~s sci forth i.n Schedule l. rnarking the Generating Unit'$ and/Qrthec~:i~t's E~y into.t-01tul'Wtcial Service tl3 the case rrtay'be~ subject to a ceiling :6fthe Nomi:nhl~Ca_pac-icy'.

"Tra1'isfer Date-~ shall mea.'l the date on \vhich the Buy Out Price ~~ 'C'on:qj}e~ety paid h;," the Board to the Company,

'"lh1scbcdufo<l Outage~' 111eru1s tmy interruptfon !,i;(;:fl,err;1'til.lg~~~ility nm a Sch~duled .Ontag{!.

{h)

1.)1;1(1; .. ;)•:i. mhenvise s1M1::d" all 1·~f:ete11i¢~s l"ftad:o in thisAg.:i:eeme:nt t~) "1\rt.ich~s.11 , ~·s.ecth::n::rs'', .JJ1d "Sch;edu!es··" :shall refer, respe.c:ti:vely, to Al1.it':iles of~ .. ·· .. am.ta S·cheduI~s to, this /\~n-:ement, The Schedules tq ·this .Agr¢eri1:C:tjt.~(~nn ¢f tbis l\gree:mt::'.tH .ilnd wiU be of fuH force an.d dfoct as thoo;gh they were -~~preiss1y set out h:1 the oody CFf this /\ grtXi>!ll ent

/\·,1~rct:r11er1t1 unk:-;;s the comcxt 0thervitse -~¢fi,t~ires (i) tli.¢ sjngyJar sh!.lU -indude a.nd vi('.e. versa~ (ii) words denoting n:a:turai· ~rsorJS S:h.ali. h'l'Crode ;pam~$hips,

tlnns, ('{Jmp<Hnics, corpomtiQns, joiut ventu;re-&, ti.:1s.L'1,, '~cim;~9~lS,. 0s:p.J!Ilisatit1ns or other kg,R~ emities; (Hi) the words "inch1d,~1 ' and 'ri,1~9,fodji;1~'. 1 :ani~.,io l:te £',qns1:ru.oo \Vithoui limitm.~nn and (iv} ~t reference to any part_y i~ ~hi.it,.46C~tm.~ni foch:i:dt-~. that party's :;;uccesszn:s t1nd ~rrniWed a:>$it:;ns.

.~ . . t; Kl

104

KSEB - BSES KERALA POWER LIMITED· POWER PURCHASE AGREEMENT May, 1999 ,., ....... .., ___ ,. .. .,.,,,. ................ ~ .. -~.-~--- ............ ______ ,.......,..,,,.,,, .. _____ ......... , __ .. ______ ~~-------------... ....----... ""'------..,------.;-,.... .. -.... -... -----.... .... --............. ....,, ..

ARTICLE-2

CONDITIONS PRECEDENT

2.1 Conditions Precede_nt : The obligations of the Board under this agreement excluding those mentioned in Section 3 .3 ( d) and the obligations of the Company under this agreement excluding those mentioned in Section 3 .1 ( d) are conditional to the occurrence of following .in full:

(a) The GoK shall have executed and delivered to the Company the GoK Guarantee.

(b) The Company shall have acquired valid title to the Project site and also shall have received vacant possession of the Project Site.

( c) The Company shall have received the Clearance from the Ministry of Enviromnent & Forests.

( d) The Company shall.have received the draft format of the Letter of Credit Agreement in the form and content acceptable to the company pursuant to Section 9 .3 along with the commitment from the issuing bank.

( e) The Company shall have completed a feasibility study of the Proj~ct Site and satisfied itself that the Project Site is suitable for combined cycle operation of the Project in conformity with all applicable regulations and environmental standards and shall accept full responsibility as between the Parties for its condition (including but not limited to its geological condition, any toxic contamination or archaeological remains on the Project Site and the availability· of adequate supplies of water) and agrees that it shall not be relieved from any of its obligations under this Agreement or be entitled to any extension of time or financial compensation by reason of.the unsuitability of the Project Site.

(f) The Escrow Account Agreement in terms of Article 9 shall have been entered in to between the Company, the Board and its Bankers.

The Conditions Precedent mentioned above from (a) to (f) shall be met by the respective Parties within 90 days of signing of this agreement and both parties shall make their best effort to get the Ministry of Environment & Forest clearance also within the same period.

Any of the conditions precedent setforth in this Section 2.1 may be waived by an Agreement in writing between the Board and the Company at any time.

PAGE·- 11

105


2.2 Notice of Fulfilment of Conditions Precedent

On the date on which the Company becomes aware that any of the conditions precedent set out in Section2. l has been satisfied in full, it shall promptly give notice thereof to the Board.

2.3 Non Fulfilment of Conditions Precedent:

It is desirable to fulfil the conditions precedent set forth in Section 2.1 within 3 months from the date of signing of this Agreement. However, if the conditions precedent have not been satisfied in full or waived within 180 days of signing this agreement, either party shall have the right to terminate this Agreement by 21 days' notice. in writing to the other party given at any time thereafter but prior to such conditions precedent being so satisfied or waived, and upon expiry of such notice this Agreement shall lapse. Neither party shall have any liability to the other whatsoever as a result of such termination.

PAGE· 12

106

KSEB · BSES KERALA POWER LIMITED . POWER PURCHASE AGREEMENT May, 1999 -~-----~--------- ... ___ ._ ____ ...... ___ ,.. ______________ ,. ________ .. _______ .;. _________________________________ ,.. ___ ,.. _______ ._ ___ ..., _______ _

{ t.:

.,.,,, .. ,.,.,.,. cont:n1l imd pant.~ls

up Grid Systt:tm requiterm:nls. ou its s~.d¢ t)f

subnLir to the Board a cnrisiructkrt}.sclii\li.:h;tle 1<:> qa,~ptt<lY ~~ll '""''""''·'·' ·~1rc1~~~~$$· ~""'~'Jk''·" t:tJnstructicm {)f fhe . . to the . . 0n lhe i,'frst dil:Y e>f e\fety c:aler1dil1:r Datt: ·nf Co1n1nercia[ Onennion ru:id .shall ttqtifv ti{~''Ili.J:~lo:f .mxy :mat1et'fo.I c,n:wrif;e:s tii;J, dvz ('.ot!strw:tinn ~c:hcdule in a dme:iy manrre-r. ·~yQrn1~~·slu1U ail{J'W the Bi.'>&"'ti to iua.ke ph;·sicai inspcc·tfons of the Projc-i;:t during aµd .~~;t~1e ~etiWl of coostructinn of tltt.<; project subjeet to Company's satecy ruies and re~on.~.

The Company shall eause the date ()f Firni:ndal «::!iosing ro occur in a ~rkid not ~~~;ce.e:cHng 90 days fron1 the ciate.Qfocc~eo'ti1ltih'l1¢ld:~fct>nditforl.$ ~;re~ent ,,,, . """"""H ~o Secfam 2. l .. Jf the: ffo~t~~ial Cl()s~g.~-.no~¥~hi:ev:e:d within 9{) days a.~ :S"taled hi~:rein, the Board .right to ten:nin1ne ., . .,,.., rn"' to !.hi;; and upon the expiry

sh.all have any liability tt1 the ott1er a$;f11Jrt:St;tlt.:<# 1;tn¢~, t~tnt'Ltu;1u1Jc;tl,.

rhe Cmnpany hhaB cause the Entry into COH1111C~ia! ~tice ~the G~ing IJnlt or thi.: Project to occur not lu.k~:r tluln JO days after ~~l:'l'.l«i!~d ~e of (!o:Ittpl(!tt~}n f.)f th~

'n11 or the Project · ·

;;vcrn of d.e!ay of b~y~®the Sc:heduJecl Jw:; h:; {>{Jrce M~jeur0. or to any reason .attpll)utabl~ tit) tit.VJ:: C@n1party :sh~ll.

to the B(futd liquidat~d darr1ag~ at the mte ofRtlpees i]}t7ee11:ioµStmd Fht~fluxldfet.t (R~ . ... # "i{H per of N1)r;1;1in:rd C:apru:ity (<:if eru'ih G:,.T.in the ~~ r1fa Unit ~nd Nt1mi:noJ '"" L · b' ··· · r i . • - 11 · · .~·t. !') · ·'" · P n · >" tur me t1cneratQr m 9~>c·~ 't\.1e pr03ee:t} ~~r ea~H , · ay *' ro .. 1m;v1tl:g

CtJn:iµ!-¢ljt11~· s;ubjett ·t<, :a· r:11aximun·~ pi::.1:ll±!l;y

.. B

f\ 0 \<}' l

107


---·--------------------------------------

Tb: I tcp,1idated pursumn to this St:{>ih.m 1 nto Con1mcrc1;;:J. Operation of the "

wquld ·p.e ~paid· \)tit.hin 2 l days Project ·~f' 20 l dayii aft¢r Schedtded

Cmupletion, Yvhjcf1ever is eu:di.:Ct«

It: ~ht: Entry into Commercial Service is delayed beyn~ t 8\f Days ()f Seih.t,'dult;i! • Pa1:e of Cu:rnplmion, -except duet{) Force ~iajr~ure or due t() any~iSQtX m:ti:ibmable r;o tbe Board~ the Board :>hall have the right to terminate the Agreement ·

\~:i The Bnnrd. sbaH 1m1ke aH r1ec1:)~sm,;y arrangetntjtits at its cxVi'ti e:qst ... . thie de:+ign. engin.eerin,g, ... finarn:ing and coustruetiou. of th<' fn:t~~ottn~cti~;;i:_n· Facilities., The· cotlistm.Gtk;.xi 1,f the !nter·Ca:irnecti1Jt1 shall be ·C:om.ple1:Cd 30 l'Jh~ys,pth'.'Jr.l(J.ti)e Schled:t1l~d. Date Cnt1~pk1forn ·Oft.he first Gcnera6ngU~iit · ·

{bl rhe Hoard shall allow the Crn:ri.pan,y t~:l h1p const1:µc~p11 pt"fVrl't'1'.. fl'.Cf!ll §. S1Jtit.£1J:lle point .in the Systern within 30 days receiving th~ c<nt~.;.lie;~(l11 ii¢~cl:uie lt'On1 ~he Coi:up:a.rr;y

pw:;~u~mt to Section 3J(a). The taritl~ oh~trg·ed hy . ···· ..... · .. : · .. ·. ·.· .. · . '.· p()Wlil:'.F ttful'ffl be : H\ the sarne lines as bv the Board for0the:ri11dtisi:ci.~r.c:,('.l:nsuu;ler.i:t The tr-a.nsmission lirv.':' mid Oiher faicillties re·qui)'.ed for the: p~n-po~. ~~~'.l'l?:i fa1s.~ by nte C~an:r· at (\impany\~ Cl.:1st

1,; I rncrconrmctlon Pofat: In case the I.ntercom1ecti<rnp(!int .is ata di$4"U1c:e of more than JOO rrtei.c.C:'; frorn the Step up transformer of the l?i·o_i~t, the. ~·~ t'\fiU boor the cost 1;,f

in:u1smis:>ion lines beyond 300 metres.

Th.e Bo:ard sh<.11.l use re<:tSonable efforts U1 assisting the C{)mpany to obtain approviils, cleara11c~s. permits, mid fimmci~l undi::1r~'t:itional d~ti:tegardi~g·u1e B.().l;l}d req:ufre,d for the Project

(e i rhe Board shall provide all necessary as:;~$tance for<>bX~tluiug.,a,l~appJ;'ovalsinclt1dmg right of ;v1~y for ~onstructfon and n;aintcnru.1cc of tr;ar1s,$i$;.si~ lltµe,s: b~tv:~n th~ Company's g~unry and the lnrnrconnectionP.oint · ·' · ,

~n In c(l£t:: Fi,i.~J Supply Agreement,, U. r<::qµirei' )O be approved .·by the Board. such <}pprQval .shan b~ intirr:utw:.'(,t to the Comt·><'ttiy wimin:tbirtw days ftom the date of: submission of the sa.me to the BQrt.rd.

~. it .; } .. ll ,/ ;J \'.I

108

In 1he event that me Entry int<> Comrnereial Service is delay~d bey.O!:lt1i., $ch~~ul¢d .J:)~U:~\ C mnnktkm due to ttH.'! Board's failure t:o eonstrucrt ii$ fatetccririect~ l~'acilitv inac:ot).t~me with :~(t<!tton 3.J(aJ hereof; C:.\,Cept due to Force Majeure.ofdoo-1Pantre~dnatbtlhntahfe~ the Comp~my, 1h.e Board v:ould be req~u.i.ri::d Jo give Ifi:~jj Wren~ratioir fo.r payn~en1 ~;f Ei.x.ed C k.u-t:.es ;;tt 8\Ji}~l PLF vvith reference trx the Nc;mitml,,,f:Apacity for Open C~ie operatk~n: pu.n;,uam to Section 7.7 hcre{1f. JOO M()ntnfy Fixt;d ·)~~}ment payabie by tw~ Board to

th~ Curnpan;' during stLcb pc1ind of' delay in the S~diited. Date .of Completion shaU be as if thi:.~ Dat~~ \1f Commerc.k!l.()pern.tionliat{to}~~'Ltftedontl~ 4ale itwot1ltl o:thenvfae

lrn.vi~~ •.)t::curred but fur su.ch d.day as desctfbcd herein. Tb-fsm,t'l<llmt·shall be adjusted pro~.t'ata if lh\.: initial Tc:ste:d Capadty is tban Nominal Cap~1~~~.Jiow--.:-vet, i.f the Comp.any fails tt1

1.:mer into Comn:1:erci:al Service within 90 ;;fay;; ofc{m.stfootien<.>ftn::t« C,")1'il,l£~tion Faciii°W bv the Bomd, it shail reirnhun;c the im1ount reeel:v<;ti t)y· ~L~1der t:his Sec:tion 3A to the Buar~l •,vi thin da;,v;;; fron1 the Datt of Cmrunercietl{)perf.:t:ioii. < · ·· · ·.

:'?.5 .Lhhe c011:s~.:rTlCli.tm pc1wer pltr5uantm Sectkn:t 3.3 {b}isr~tt.1Jadea\~lable ro th~ Company t:? tl:le B<Jard, e.ath clay such delay, day by day exte.U$[oa w9tdd be pr{Jvided f(.)r in the S.cbedttled. Date of Cotrrpledcn. · ·· · · ·

109

KSEB - BSES KERALA POWER UM/TED - -poWER PURCHASE AGREEMENT May, 1999

Th.;; Cnmpany shall~ at least 7 days in advance. gi;Ye'~'Briatd notice uf and -shall invite Board's repn:!jentativcs to ~mend perlb.f:t1lrulce tt:&18-~1l\~:~ta¥:m~~ te$ sruill bec(m:ducted a.'> perthc pro~-e?:s~tom in Schedule_L- -- -- - -- -

of the (}enemth:ig; Unit .am.l/or be i:il(!lcfifuetl t1:_i. enter inw cominerda! ~---"-''''-'''" afiti::T the Cornpi1n;. den:10.nstrated Fomt<.::-e.n D~y;·s C<).rJ:tinuotm qperatk>n such

the Projei.::t an~l during sup:h petjQd-it aehi¢'\r:i;.s Ti.j:stit;;q C~t:p!acity ~>fat least nini::t:v sc:v¢n the Nomi!lal Capacity at teastibr se,ve:rtty two (72) oon:seu.;:;u'tbt\::

w'ithin t:h~~ ek:>e:tricaI ;~ys:tem d:i.a.:a~Leristic!> _ _ _ the fti~:cil-cu:t~i ~J?ll<;iJi,~tio:1~~ ftSi sp:e<;:-Hi·ed in Schedule 4,, provided ;s,dd !:i:;strietions. are nc>t -impcise~]' and the gricl. frequ~m-oy i~rrdts lrn:iding: tht• g1;~n.erat:ing -:io1atfo:n at 97 'Vii load eo.nti11uortsi:y fur 'hours;Jn:-fhe event ~hat the fi0n;::r;:ninb» D!' the l?tojt->el cm1 1Jot (lperat:e ax kii:ld' ,~;CttiltnU~\Jsly for 72 h(mrs due to L:-rid or li~qi.K~ucy variafrons h::•yontl ccd}iQical limits" the Ge:ti~J:Liug Unit or

d0~i:ned w ::mered into Comm1::.~rcial.:$~rvice ifit-f.>~~"} at97% toad tbr th_c· . during wh:ic,h th1.;;.re are no frequency variatio~ bryt)r.dte"d:utie~I, limits \liiith in the Jfon::smd 72 boux~L

IJ Tt:skd Capacity pursuant to S:e'ction .Jt.2 is tU'C!relhail. pr ec{µal to Nmnimtl C~hy~ Gu<trnnteed C<:lpacity shall h-~ equal to the Noni.in.al :(;1£1.imcitt•

Ii frsted CapachJ i~ equal to or greater tban the 'Notxtin~Ll Capacity l:mt less 1J1:J,n Capach:y if the Cornprmy fa:iJs, within 4:5 Da.'fS .Qf entry in t(,,-(~t'fmme.rci;.11 Service,. to ReYise'.-d Capacity t::-qual to- <Jt: greater thatti the N~)tnin21:1 i:c

to BtJard Uqui:<lated dt'trnag.cs in tt}Sp~~t,,O:f~9-~ dit1,~~nc~ be~we:en Jhe ;.·\ic)rni:n.:.11 C•.tpacrty and iJ.-i:e- fhwJ Revised 'fested Capadty achiey~'.! tli;t._the rate Rs:,. 8000 perK·w.

ln sui;h a ca~e, ti~ Nominal Capacity shall be te..;h,1c-t.-d 'by the dj:ft-er:enc~tQfl'-kHJ.'ti:nal Capacity and the fin.al Revised. Tested Capacity at the en4 Qf 4-5 d~ alter: tl1e date of Comrnt::rci~d <Jp<.:ration and this reduced i;;~tpacity \vill be the Oo.arant~ ~a:c:iry.

h'r th<: puqx~se <:>f this Artidc the Nominal Capad.ty ).\ril\be the Nomir~al Capacity of th•e respective Gr~3 Turbine Ge:nemt-(>r for t11ellnit .rmd Steam:Genemitor-~the P1-0j:c:ct.

110

A RTtCL.E: - 5

SALE ANUPURCJ:l;AS~·~~;,~i~ll~GY

5.l Frorn and after. the Date of Comrnercfo1 OperatfoJ.i ~f1he fi.rs.t Gcmerating, Unit, di~~ Cum.puny shall supply. and tht~ Board shaU purr£fias~~:aca1ltim;~s~ .ti:~ ~the crimider<Uio:n fon.b iu Artid.e 7 llereof, the entire: Electrl~ity genera~~~ ~J?'roJ~tm:idmEide -availah.l~ .ztt the lnrercormection Poinr,su~Jeet tc) the.rem1s and c:Qndit;i~us<lftlit'i .. ~~¢iu. · ·

l t b understood and agreed by mid betwe~n tht: pa.rtJ.~ th~t the Pt~ject\vill be t)per~l c>i'i Dt.:spa1ch1:TJk basis and that the company shall operate the Project :at Guaranteed c-:apacity U'f

kss .. as directed by the B<wrd, slibjec-t to Tecb11i¢a{~J.,im~; ~?:rtui~t Uliijib'. Px~a;qticet;,, i\ 1»aihtbffay Ded.ru:ation b;. the Company. and at .a po~"'~~ f~ctb::r~trf not less than 0.8 ktg ru:1d w\lh i:r1 a frequency n';i,nge' bctwm:..-n 475 Hz and 515 Hz.

5.2 The Comptmy shaH .seH and tfw Board also sh.'111 p~~ha.i:se Infirn:i· Pt1\vet' gen;;:rat.ed by th!!''. Unild1 r~je-::t aftt·r its syncfutJni~atitJri. Sucb pcrwer s.halKb(:): bilfod:artcl paid :for at llie acn1ru fud i:OSL::;. i.ncnrred by ti1t..: Company.

To a.sce;rtain t.he lrifirm power delivered by a G~tuig Unit :prfor to the Counnerda! Op~ratiun of1he Project the Net ~Ie~ered Energy silaJl~~P.P6~hn~:Witbre~1Jectto the U>tai e.ni;;rgy g.euCt''<Jtecl each of Ihe Ge:neJ:~ting Uni.1s Ss; n1easur.e<i at ihe nt::n~fflt'{Jf Tettniuats rtspectively.

53 The Board sh~tU allow the Cornpany: to t)btain c91~~t~cti9n p<r~vcr pursu..9.rtt to Section 3 .3, fh(' Bo;;trd bill the C,;ornpariy frH' such ptPNer :~t a::~lt;.e p~rst~ntito s-ection J.3 d:ttring the <:(1t1SH\1ctfon period, For supply of power thercaller lhe·~-~i;i!U:P~,~y #b.4! · lti;tonthly bin:;; on

I .,: ,.;..., ·(

111

KSEB - BSES KERALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999 ---------------------------------------

ARTICLE6

6. ! Ope:r:1tion of the Project

Supp1:. of electrical ertergy ro the Board shr1.H he in,~~gr~ ivith the instrn.ctions .of the Bo;.1~-crs load de-spatching centre. Howe\'.ery rheC<t~)'·;i~~· ret11Jitecl to qperate .and n1aintain th.e PtPject in accordance with Prudent Utiilt~,f Praences :and ·\vitliin the 'lecb.ni{:a} Limits as stipulated in Sbhedwe 2 and subji;ctto A.v~1ihtbility ~l~ti:0n by the Cmnpan,y, Th~ Con1pany is not obliged to mn the Proj~c.:t c)utsi~le the frequency lirrilts specified in

Schedule 2. ·

!be foll.owing procedures and f{.'qUirernc:ms shall be 1:nu~nany it~ed to by t11e Part.ie$ as soon ;.i~;, possib!~. but in no ewnt later. than 90. (ninety) d(l.ys·pri9rt{) the S~IY.;duk~d .. Dtlte. of C.; )mp!etion of th,.:: fixst Gem.~rnting Unie {l) detailed pn.1.:edu:re Jbr the co- or,Pination (Jf inter Com1cctinn Facility and 1r~u1snll:ssion facilities including int6:r-trippn1g schedules, (ii) ·>huHlmvn and start-up prooedtrres, (iii) cor:nmi.ssfoning am! testLng arrangemcrns~ tiv) dc'sp::ucJittI1'.g prrn::ecJures. (v) procedures for rnalntenang.p o.fre:cords,.Cvf) l~metgem:~y plans ~vu} :;nf(;:ty ruk's and prn1:edure and {viii} meter reading st11.teOO.:ent~forrnat •

•

1, ;1 'i ll1...: Comp.any sb;.1l! submit. a written schedule w ~~.oard of' its des.ired Scheduh:d Om.age ni:riods. at least 60 davs before the commenc.emenLt'ifeac;h Ta:di:'f{lcriod. \Vithin l 5 davs of ;he ri:.::iclpt of the s<u;1e, the Boa.rd shall r10tify th~)po~pany in \Vriting: if the r~qu~sted Sch<:duled Outage periods are not acceptable t\> ·~ ~d:}f1he'r:e llre an)" requc~;tttd SdH.::dul~d Out,age periods d'llit th~ Board cru:u1ot ·~f;f>t. .t!Je .Bv~ shall ad~ise the (\;,rnpnny 1he t:irne period vihen such proposed: SCb.tt4ul~d Ou~~ .can be r.;:sclredukd. which t'eschedu.te-0 frrne periods shaU be of equal dttratfotiS. aS:}itie Sclici:lilied Outt1;ge perfo.d pn1ptiscd by the C<Jmpany. The Board may.cm!y .• ·.te~u~~[a revisi~.to 1ne .. (:'.t):mpany's propos,:d Sd1eduled Ournge h1 accon:unodate the ~t:u"tble :r~retnerit of tl;ie BOlird and the Grid Syste.m. Subject to Prudent Utility Frantic~ and this Agreemextt, the Company ~; hi:1ll use r1;:asf1n~i\,l.c effort~ to acoommoda:t"C all .th;' i¢asonablc ~1.1u¢s~ of ih.e Boord. The Cornprmy reserves die rig.ht.,. P.<)V<cver. not toacceclet();such re.q~s, ifS®h: i-equests could h11v0 an ;,,1dve·rse imp.act·(m the.Un.it/Prqjcct. .. lf tlv~ ~~ddo~s.r'¢11.n\')tify.the·Comprury in \Vf~ting \Yilhin I 5 davs ofi~ceipt of the written schedule of.desirecl ScbOOuled Outages, ft shat!. ~·b.: ,k~eme.d t; have cmi.'rented to tfo:~:. d(:-sire:d· .. ··.~ Ou!age •as pt:~r. the written ::.dicJ.ulc. /\. rniniruum of fifteen day's notice :shall be given b:y the Company io !l:M.> Bomi! prior to 1akix1g the shutdovvn for maintcnane~ afthe P.toj¢t.

112

. ( b1Eith~r pmty Jnay,. upon '»Vri!te:n norkc g.ivil,'fti .pot 1~~· d~930 ,q~vs. t?dor IX) a, Scht:.•dulcd Uutag0 .. n::qur;;•st the rescheduling.· .. such $chedt;~~ 0~~1ge. Ariy .rescheduiitig . ~ Scheduled Oumge in accordance '>Vi th this Seciion ~.J(P').~afnl!·ti~;ut~}ectr:tp .. a1tr~cital ·~tp,pru;;~l 1.1f th:e Partie<S~ whkh·a1:iproval shaU ·nnt tx~ unre~son,~hty:~~:µh~lP'.q;1rcl~layed. ·

. . .

(1.:)-rbe Company ·Shall use reas(mab!e efforts to give ~td\!~¥f nO~it:e .. to,tht\ . .Board c~:xLern :feasible· of any Unscheduled Outage i1nd shaU. pr~~1~~'t'~ .Sq~~ ~\li~h.~ eStt1:n~Lte the dunttion aml scope of sucJi FoJ h:w,·ing ~~l1\}' tjnsi;.l")eclt\:J.~!;';'~ 0'\Jt~~t; tlhe C(Jtnp,r,m.y .shaH ust:: reas·onable efft)1:ts to retum the .equiprnent . Uni.t/Ptejl.%t iaS s.:1011 ;as l'\::'.Zt.,'mni1lhl}'

practicable wthe~ level of g.eaera.tfon intmedfar~1ly prioj•to s.itbh Ut~,S!CL~~h'.1lJ:!d (~ttt:rtge.

( d} Exct:pt v,:hcn the eciuiprnent of the station is under ~~ ·shutdo"vn or is under Sehedwed { Jut.age, such equipment or any nuxiliades or V.'l1:rks fa i~afion the1·cm .shall not be taken out r~H· irn1intenarn::e. v.:sfing or overhaul resulting in ~)Utages ur reduced generation oole">s rnunmlly agr~d Upt'.:ta by both the Parties. ·,· jl

\D:·: · ....... / \' ~:

113

TARIFF·

. t 'l':adff: ln cm1siderm:ion for the Electricity suppli~ by the.Company to the Board a11d l .. kt'nk:d pursuant to Section 7.7. the Boatd 8Qttll pay me Ctmlpany the Tariff Paym~m. Tlm .tvkn:rthly Tariff Payment shall b~ eqi;i..'ll t~·;tb.e:~µ ~i,t'.t!le Monthly Fixed Charge f\1y1nent. l'vkmt'M.y Valiftbk: Crmrge Payment & payrnem;spuioo~1ntt{}Sttpplenmmary lnvuk£"S.

l i,m;;men~s by the Board i.vm be in Indian Rupees. .

ivlomhly Fixed Charge Pa,y:i,uent and K,lonthly V ar~1ble Chfirge. P~yment,d.urlhg the Opeti (' ydc n1odc of ()peration and the. Comb?too Cy.de. mt;;d~ o:faJ)Jeratfrm wm be cakuiated as per Section 7-2 and 73. i;rsing the indiv1.;!uhltariff c(}mpon~;;1t~J.t~givei1" in Table .A m Table D giv.:m in A.rmexu.re.

-- - .

:.1) From the. date <)fDate of C(lmn1~rcia1 Op-erati~ML~ the: First Ufiit till the Date of Comrncrcial ·Qperatian· of the Secun~ .Unit th¢" 1"$'1f(~l!etible~ sft:ill.~:aS':per t~1ble ;~,

Frn111 the date nf Date of Cwnm~~ial Operation pf the Sec.~~d \):nit till the Date cf Con1mc'.r(~fat1 Operation oft:he lbird tJn.ittheTariffappUt,ati:ltshaUbe a:> per·raole B.

c ) Frrnn th~ date of Date of Corm.ncrdal OperatiQ;tl ot"' $.e Third U!iit tilf the ·nate ·of CornmeJciaJ Opei·atiJ'.H"l of the Pro.ject, 'Ituiff apprt~~l~sMllbe.~perTabli:-C,

rhc ::.hail pay Tm1ff under dva: ope:n cyciel: niode:~ ~tfv<t~jn Ta:b:le ti) ~nabJe Jhm1 1bc \.hue of Co.mxn:erdai operarion of the First G¢ncmti~ ·t1rut upto tlm:;co~il'aiercilli: operrrtiou

ihv Pn.>j~ct The Board $htiU •tadff as slfovvn ill ~~~tlil~. I) frt)fi:\ ~he .daie Conr.mei:cial ope1~1tion of the Project

The loss uccurrirtg bct'Nee.n the mek:dng point ap,d th~ ]:itte~n~~c'tkn1 approximated b:i:ised on the :a:ver'ftgJ:~; iC1ad !:1ow· o.r1all th:e ·~~Je1t~er.sjfbta ;;;ornputntio.n ofthe mriJf for the Cmnhined Cyc:k: c1percitlo.t1~ ·

Unless. pu·srumt TO Section 7,6, th.:· Fuel is changect fo~.the p~rrpo~ this -"~1ttde7.,·Nlfl:phdil1 fa [!1¢ FueL lf the fuel .. as changed prtrattnn\ to S~ti~Il:}:.f,,~ Vitrmbie.Ch[rtge. and .·Fue% c onsumptmn f:a<...'t{'it wiU be cakulared. .ba<:>ed on m:e· 'l:at\itr He~t Rat~, m1d Otl the n1utuitlly decided calorific value and pri~ of ih.e \':hanged Fut~~ )1tie mutually decid'<Xi pri•;;e t:Yf tht::~

i.:har.·1ge.d .Ft·k·"· l 01.1ti·1.e date of deciding this pr:ice shall s~ve as·'tfu: ba~ price o·.·i.~ .. t.iriru.· · ... ·.·{od fot rnd0Xfffl on purpj:>Ses., . \)·· ... · ....._. . f

l~-

114


-"·-·---·····---··----------------------------------------------------·--·--------

7.2 Fixed Charge :

Fixed Charge for a Tariff Period is fixed price per kWh of Electricity subject to Deemed Generation and Reduced Generation, upto 80 % PLF for the applicable Tariff Period, as set forth in tariff tables of Section 7 .1.

The Fixed Charge shall comprise a Dollar denominated Foreign Debt Service Charge component expressed in USD per kWh and a Rupee denominated Other Fixed Charge component expressed in Rupee per kWh.

The Monthly Fixed Charge Payment in respect of a Billing Month shall be determined as follows:

Monthly Fixed Charge Payment

Monthly Fixed Charge Payment shall consist of following two components :

(i) Monthly Foreign Debt Service Payment

The Dollar denominated Monthly Foreign Debt Service entitlement would be:

MFDSC$n = Fd*C*Min [PLFn, 0.8]*Dn * 24 - SUPn*Fd

where,

C = Guaranteed. capacity in Kilo Watts.

PLFn = PLF for the time span commencing from the start of the tariff period in which the Billing month 'n' occurs through, including the Billing Month 'n' ·

Dn =No of days in the relevant Billing Month

Fd = Foreign Debt Service Charge in USD/kWh for the Tariff Period in .which the Billing Month 'n' occurs through.

SUPn = Start-up Power provided by the Board pursuant to Schedule 6 during the Billing Month 'n'

The Monthly Foreign Debt Service Payment in rupees, for Open cycle operation of the plant would be computed as follows :

MFDSCn = MFDSC$n.act * Exchange Rate prevailing on· the Billing Date + Max. (O,(MFDSC$n - Jv1FDSC$n.act)) * 34.50

---.. ---r-

\'~~,,~,#µ;#,,,.~,,, ... · ~~

PAGE - 21

'!'()}. n \ ·.·.·.· .· J. f

\

115


The Monthly Foreign Debt Service Payment in rupees, for Combined Cycle operation of the plant would be computed as follows :

l\1FDSCn = l\1FDSC$n.act * Exchange Rate prevailing on the Billing Date + Max. (O,(MFDSC$n - MFDSC$n.act)) * 36.00

Where,

MFDSC$n.act = Actual foreign debt service as estimated by the Company for the relevant Tariff Period /12. This ammmt will be limited by MFDSC$n and will have to be supported by documentary evidence.

(ii) Monthly Other Fixed Charge Payment

The Monthly Other Fixed Charge Payment in Rupees would be computed as follows:

MOFCn = Fo*C*Min [PLFn, 0.8)*Dn*24 - SUPn*Fo

where,

MOFCn = Monthly Other Fixed Charge Payment for the Billing Month 'n'

C= Guaranteed Capacity in kW

PLFn = PLF for the time span commencing from the start of the Tariff Period in which the Billing Month 'n' occurs through, including the Billing Month 'n'

Dn =Number of days in the relevan: Billing Month 'n'

Fo =Other Fixed Charge for the Tariff Period in which the Billing Month 'n' occurs through

SUPn = Start-up Power provided by the Board pursuant to Schedule 6 during the Billing Month 'n'

(iii) Adjustment in Fixed Charge

The adjustment in Fixed charge for a Tariff Period will be done only if the PLF for the respective Generating Unit(s) during the Tariff Period falls below 80%. The adjustment of Fixed charge shall be only upto the Date of the Commercial Operation of the Project.

Adjustment in Fixed Charge for a Tariff Period will be calculated as under and as on the business day immediately following the end of Tariff Period:

PAGE - 22

116


Fixed Charge for a Tariff Period= C* 8760* (PLFn)* (Fd90n*Avg.(Exchange Rate)n+ Fo90n)

\Vhere,

Avg.(Exchange Rate)n =Average of Exchange Rates at which the Monthly Tariff Payment were paid by the Board during the Tariff Period 'n' pursuant to this Section 7 .2(i)

C = Guaranteed Capacity in KW

Fd90n =Foreign Debt Service Charge, as given :U:t'Schedule 7, in USD/kWh for the Tariff Period 'n'

Fo90n =Other Fixed Charge, as given in Schedule 7, for the Tariff Period 'n'

PLFn = PLF for the Tariff Period 'n'.

Adjustment in Fixed Charge for a Tariff Period= Fixed Charge for a Tariff Period- sum of MFDSCn and MOFCn for the relevant Tariff Period

If the adjustment in Fixed Charge for a Tariff Period so calculated is positive, the Board shall reimburse that amount to the Company by way of a Supplementary Invoice to be raised by the Company and if this amount is negative, the Company shall pay this amount within 30 days of the date of computation o.f Adjustment in Fixed Charges.

7 .3 Variable Charge

The Variable Charge is variable price of Electricity per kWh supplied at the Inter Connection Point. ·

(i) For the proposed Generating Units/Project, Fuel Consumption Factor ( FCF) in kg/kWh is the amount of Fuel conswned for each unit of Electricity despatched at the Interconnection Point. The FCF agreed with the Company is as given in the tariff tables in Section 7 .1 of this Agreement.

(ii)The monthly Variable Charge per kWh is calculated as shown below:

Variable charge I kWh = FCF * Actual Lan*d Cost (inclusive of all taxes & duties and transportation) in Rs /kg supported by documen~ evidence.

The actual landed cost mentioned herein shal~ include all taxes, duties, transportation cost either actual or notional as charged by the Fuel Supplier. The reimbursement of Infrastructure cost collected by the Fuel Supplier as per Fuel Supply Contract, by way of reduction in the fuel supply bill shall be added back for the purposes of arriving at the Landed Cost.

PAGE - 23

117

KSEB - BSES KERALA POWER LIMITED POWER PURCHASE AGREEMENT May, 1999 ------------------... ---------------------------..... _ ... ___ ..., ____ .,. ___________________ .,. .... _____ ~_

tvt onthly Variable Charge =;' NME for the relevant month * Vari.able Chafg~fk Wh.

Where NME = Net Metered Energy supplied during such period I tariff period without deducting start up power, in kWh. -

(iii) Computation of"Ceiling Rate" for the relevant Tariff Period is showri below:

Ceiling Rate = X * AIB

where,

X = Variable Charge in Rs/k. Wh as given by the Company in tariff tables given in section 7 .1 pf this Agreement.

A = Average of prices (inclusive of taxes, duties and transportation) for domestic Fuel of

Gross Calorific Value Co, during previous 12 months obtained from Indian Oil Corporation

or any other public sector oil company

Or

Average of monthly quotes (delivered at the Project Site) for imported Fuel of Gross

Calorific Value Co during previous 12 months obtained from Indian Oil Corporation or any

other public sector oil company

The price relevant here will be domestic ifthe source of Fuel for the Company, pursuant to Section 7.4, is domestic and will be imported if the source of Fuel for the Company is imported.

B = Price quote for domestic :fuel of Gross Calonfic Value c0 (inclusive of all duties and

transportation) as on 1-12-95 obtained from Indian Oil Corporation or any other public sector oil company.

Or

Price quote ·for imported fuel of Gross Calorific Value Co (inclusive of all taxes and

transportation) as on 1-12-95 obtained from Indian Oil Corporation or any other public sector oil company. The quote obtained by the Company from BPCL is Rs. 6100 /ton for Fuel of

Gross Calorific Value Co inclusive of tax~s and transportation.

~'!-)) \ .·.

PAGE - 24

118

KSEB • BSES KERALA POWER LIMITED· POWER PURCHASE AGREEiMENT May, 1999 -·-.,·-·--·~''"'""'w'-"'"-·" "'~'""'"•·---------------.,..-....,;...-w,~------·------·•-·"''"' .. ' .. >"'~'"'*'""""'--------- ... ,., ..... ..,.,"""_. ________ ... ~.~.,,,.~mw""-·------------,.,·•n1w. ... ,., ___ _

The price relevant here will be domestic if the source of Fuel for the Company, pursuant to Section 7.4, is domestic and will be imported if the source of Fuel for the Company is imported.

where,

Co= Tariff Heat Rate (as given in Tariff Table of Section 7.1)/FCF

(as given in Tariff Table of Section 7.1)

If in any Tariff Period, the quotes required for calculating the Ceiling Rate are not available for

the particular Gross Calorific Value Co of the fuel, then the quotes available for some other

Gross Calorific Value (say, Cx) shall be obtained and that rate shall be proportionately

adjusted for Gross Calorific Value Co by multiplying that rate with CoJCx

A suitable procedure to ascertain the Gross Calorific Value (Cx) of the Fuel shall be evolved in consultation with the Fuel Supplier to th~ satisfaction of the Parties.

(iv) Variable Charge for the Tariff Period based on Ceiling Rate

= Ceiling Rate * NME for the relevant Tariff Period

• (v) "Fuel Adjustment,, : The Variable charges . would be paid monthly pursuant to Section 7.3, on the basis of actual landed cost of the Fuel procured, supported by the documentary evidence. At the end of the Tariff Period, the sum of Monthly Variable Charges actually paid during the Tariff Period would be compared with Variable Charge for the Tariff Period based on Ceiling Rate (Rs I kWh) for the same Tariff Period.

If Variable Charge paid.to the Company over the Tariff Period is lower than Variable Charge for the Tariff Period based on Ceiling Rate, no Fuel Adjustments shall have to be made.

In case, Variable Charge paid to the Company over the Tariff Period is higher than the Variable Charge for the Tariff Period based on Ceiling Rate, the Company shall pay the difference within 30 days of the date of computation of Adjustment in Variable Charges.

7.4 For the period beyond fifteenth Tariff Period the Board and the Company may negotiate a mutually agreeable Tariff based on the Fuel charges, 0 & M charges, and the asset value based on the amount the Company would have reasonably expected on dismantling and selling at its cost the generating set and other facilities built.

PAGE - 25

119

KSEB - BSES KERALA POWER LIMITFED - POWER PURCHASE AGREEMENT May, 1999 _________ ..,':"' __________ ,....,._,.. __________________ .., ____ . ____ .......... ___ "" __ , ___________ , _______ ................ --------------........... ----................ --------... ----

7.5 Fuel Supply Contract

The GOI vide letter No.P-21018/66/96-Dist/9-5-97 has already issued fuel linkage for 107 MW to Mis BSES and Mis BSES is solely responsible for fuel linkage of the additional capacity needed to make available the Nominal Capacity specified in the PP A.

The Price of fuel shall be calculated as per the Fuel Supply Contract. The Company shall provide the Board with a copy of the Fuel supply contract to be entered into by the Company with a Public Sector Undertaking or any other Company and the Board shall approve such contract, which approval, shall not be unreasonably withheld. The contract shall be for Fuel delivered at Site and all amendments to and replacements there of, shall be duly approved by the Board, irrespective of the materiality of such amendments or replacements.

In the event that no communication is received from the Board within 30 days of the d,ate of submission for approval of the Fuel Supply Contract or any amendment thereof by the Company, the Contract would deemed to have been approved by the Board.

A format will be prepared by the. Company and got approved by the Board 15 days prior to date of synchronisation of the mst G.T. Unit. The Company shall intimate the stock of fuel on 1st ·and 1 Sib of every month in the fonnat specified above, to the Board.

7.6 Change in Fuel

In the event of

(a) non-availability of the Fuel beyond the control of the company; or (b) steep increases in the prices of Fuel being used; or (c) availability of alternative cheaper fuel;

the Board retains the right to direct the company to use an alternative fuel provided that it does not involve additional capital expenditure on account of the Company and the equipment supplier certifies that such fuel is compatible with the equipment in use and does not lead to accelerated degradation of the eql).i.pment. In case the company desires to use an alternative fuel for the above reasons, it may do so with the permission of the Board. If LNG becomes available, 1hen it is mandatory on the part of the Company to use LNG as fuel for the project within six months of time. The Heat Rate and the increase in Capi1al Cost will be suitably adjusted in the tari~

PAGE - 26

120

KSEB - BSES K!ERALA POW/ER LIMITED - POWER PURCHASE AGREEMENT May, 1999

Dt'..r:::rne:d Gi.:n1t:ratk>n f;;)r .any period shat! i:nean with respect tu that . pei::krd. any reduction in sur~ply of Electricity vdlfoh the C01npany could .have ge11'Ct:tt7i:V4~l~9 s;;;>kt d!.t:di~g,suc'li perfod, wit'h te$fJi.X::t

to the /\vailahUity .becla:ratiort, but fbr the·fl:;!h::rwi.ng:

Syl}V::in probten::is o~het thm1 those .. w1th in tecJmic;,:i:l Ji.rrdts as per schedule 2 Ho;.1rd"s dcspaLchinl:jtrnctions except due to . lvhtr~~~f:O'_~.rvent. aE~;~".ri\u:tict'e l Delay

1nLo Con11Trer{:ial service due .. to the, Soard pnrs111;1tY~itl)Stc'0tlC1J13.4~.~oo.ct En:nts pursuant ro Section .14. l, (E) St~pping down dt1~ ~e/:~quensy v,~i~tj9u Lhc range between 475 Hz and 5 L5 l:Iz subjec:ttut~¢~Ji p~eters at• given in Schedule 2 (sue h fl"Uquency variation shall be ascertained based o:n.~~n.'.:li~'~j~em fr:eqn~; recordi¢r)

-!lie Deemed Generatio1i wiU be computed as follo\vs: ·

DC ""'Declured Capachy iu k\V for therelt:v~mtperic;d

Udipe ' No. ofhc1wxs during currency¢fDLrect.b:i.di~P()];j,:ti;c:i;i:1'£Nent

I: ti ipc '' N1J. of ht:i-iu:s during .curren{;}' ofJndind,fh(li~~~ 'P:clUt.i,6,al B\1¢nt """ of hours during >Nhich grid frequency varied beyond techn:ic~l 1:;iarru:neti;;\rS' las

:spi;;,_:ific:.d in .. Sc,hedule 2) ·

uetaru::.:r Gerv.::rntion dm·[n'\2 the ·radff P·t:::dt:idwill a!lo:\ved to G

tlt£tt period dues nN exce<.'d 80% of Guaranteed Ci:ii;nlt'..it~·,,

121


7.8 Reduction in Generation by the Company

If the Board has reasonable growids to believe that a notice of Declared Capacity does not accurately reflect the actual capacity of the Unit/ Project, the Board shall ~ve the right to monitor the Project in accordance with this section 7 .8.

Before monitoring, the Board shall issue a "Monitoring Notice" that it believes the Declared Capacity notice or revision thereto does not accurately reflect the actual capacity of the Project and the commencement of the proposed monitoring period. The actual :monitoring period shall (i) not commence earlier than the necessary ramp up time required by Prudent Utility Practices after the Company has received the Monitoring Notice and (ii) continue for a period of 2 hours from the time such Project should have .achieved the Declared capacity in accordance with Prudent Utility Practices

No more than 2 Monitoring Notices may be delivered by the Board during a Day.

If during the monitoring period, the actual monitored capacity of the Project is less than 98% of the Declared Capacity for that hour, then a "Monitored .Capacity Failure" shall have occurred. If a Monitored Capacity Failure· during a Day has occurred, the amowit of reduced generation during the · day in which the Monitored Capacity Failure occurred shall, for purposes of computing the Plant Load Factor, be an amount determined as follows-

RG :;:: L[ (DCi * ARPi) - MEi] * 2 + DGMi

Where

RG =Reduced generation during the day in which the Monitored Capacity Failure occurred (in kWh) DCi =Declared Capacity applicable to monitoring period i in kW MEi =Metered energy during applicable reduction period i in kWh. ARPi = Applicable reduction period with respect to the Monitoring Period i which shall be the number of hours in the period commencing at the later of

(i) 12 am on the Day a given Monitored Capacity Failure occurs and

(ii) the time prior to such Monitored Capacity Failure that the Project demonstrated its ability to achieve. D~clared Capacity by monitoting or operation and ending on the completion of Monitoring Period i; provide ARP may in no event be greater than 24 hours.

DGMi =Deemed Generation during the applicable reduction period i

i =Monitoring Period

PAGE - 28

122

KSEB • BSES KERALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999

ARTICLE-8

METERING

8.1 Main Energy Meters (export and import) of 0.5 class accuracy shall be installed at the Metering Point by the Company and check meters (export and import) at the same point and of the same accuracy shall be installed by or for the Board. The Company shall provide necessary equipment and dedicated circuits conforming to statutory requirement to connect up the check meters of the Board.

8.2 All the meters shall be jointly inspected and sealed on behalf of both Parties and shall not be interfered with except in the presence of the representatives of both Par.ties. For testing and calibration of meters, a notice of at least seven (7) days shall be given by the Party requesting the testing to enable the authorised representatives' of both the Parties to be present.

8.3 All meters shall be checked for accuracy every three (3) months by both Parties and shall be treated as working satisfactorily so long as the errors are within the limits prescribed for such meters.

Meter readings of the Main Energy Meters will form the basis of billing, so long as the quarterly checks thereof are within the prescribed limit. If the check meters or Main Energy Meters are found to be defective during the quarterly checks they will be immediately calibrated.

8.4 Where the quarterly check indicates errors in the Main Energy Meters beyond the prescribed limit but no such error is noticed in. the check meters, billing for the month up to the date and time of such test check will be done on the basis of check meters and the Main Energy Meters will be re-calibrated immediately. Billing for the period until the Main Energy Meters are calibrated, shall be as per the check meter.

8.5 If during the quarterly test checks, both the Main Energy Meters and the corresponding check meters are found to be beyond permissible limits of error, both the meters shall be immediately re-calibn).ted and the correction shall be applied to the consumption registered by the Main Energy Meters to arrive at the correct consumption of energy for billing purposes for the period of the month up to the :fune of such test check, billing for the period thereafter till the next monthly meter reading shall be measured by the Main Energy Meters.

8.6

8.7

All the Main Energy Meters and ch~ck meters shall be calibrated once in every six months jointly by both parties (i.e., January and July) irrespective of the calibrations that might have been done where necessary, during the quarterly checks. It shall be the endeavour of both the parties that recalibration is done as often as possible and the errors are adjusted as close to zero as possible.

If the errors found at the time of half yearly calibration are beyond permissible limits, the same procedures as applicable to the quarterly test-checks shall be followed.

-------···-·-----------------·-----PAGE - 29

123


8.8 Corrections in billing, whenever necessary, shall be applicable to the period between the previous monthly meter reading and the date and time of the test calibration in the current month when the error is observed and this correction shall be for the full value of the absolute error. F01: the purpose of the correction to be applied, the nieter shall be tested at 100, 50, 20 and 10 percent load at unity power factor and 0.8 power factor. Of these eight values, the error at the load and power factor nearest to the average monthly load served at the point during the period shall be taken as the error to be applied for correction.

8. 9 If both the Main Energy Meters and check meters fail to record the Electricity supplied then the Electricity supplied will be computed on a mutually agreeable basis for that period of defect.

8.10 For the purpose of test and calibration, the Rotating sub-standard (RSS) meter shall be calibrated and sealed by the Chief Electrical Inspector to the Government. This RSS meter shall be calibrated once in every six months at the Chief Electrical Inspector's Laboratory in Kerala.

8.11 All the tests on the Main Energy Meters and check meters shall be conducted by authorised staff of both Parties jointly and the results and corrections so arrived at mutually, will be applicable and binding on both the Parties. ·

8.12 Monthly meter reading shall be taken jointly (and confinnation in respect thereof signed) by the authorised representatives of both the Parties, on the Metering Date.

8.13 For the purpose of aforesaid provisions, if authorised representative of either Party fails to be present at the appropriate time, the authorised persons shall ~semble for the same purpose again on the next day (whether a working day or not) at the same time and place and if on such occasion such authorised representative is not present the other Party shall be entitled to do the needful and for the purpose such Party present, shall have full authority and power on behalf of the Company and the Board to do whatever is necessary or desirable to give effect to the provisions of this A.greement.

PAGE • 30

124

KSEB • BSES KERALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999 -------------------------------------------·--------------------... -----------------

ARTICLE-9

BILLING AND PAYMENT

9.1 Infinn Power : The Company shall submit to the Board a Supplementary Invoice each month for all Infmn Power supplied to the Board

9.2 Tariff Invoices :

The Company shall submit to the Board a Tariff Invoice for each Billing Month setting forth those amounts payable by the Board for· the Monthly Fixed Charge Payments and the Monthly Variable Charge Payments. The Company shall submit to the Board a Supplementary Invoice for any adjustment in Tariff pursuant to Sections 7.2 and 7.3. For all payment on or before due date of payment shall attract a rebate of 1 % of the bill amount.

9.3 Letter of Credit

(a) Not later than 30 (Thirty) days prior to the Date of Commercial Operation of the first Unit, and at all times during the term of this Agreement the Board shall cause to be in effect an irrevocable unconditional, transferable, confirmed, direct-pay, revolvillg Letter of Credit issued in favour of the Company by any nationalised bank.

(b) Each Letter of Credit shall (i) on the date it is issued, be valid for 2 (two) years (ii) be transferable by. the Company to any Lender and (iii) be payable upon the execution and presentation by a designated representative . of the Company of a Tariff Invoice or Supplementary Invoice and a copy of the meter reading statement for the Billing Month accepted and signed by both Parties. If the meter reading statement so presented could not be signed by one of the Parties due to. non-presence of that Party pursuant to Section 8.13, the Party claiming the payment under this Section 9 .3 (b) shall give a declaration to that effect along with the meter reading statement.

( c) The Board shall ensure that no later than 180 days prior to expiration I maturity of any Letter of Credit, a replacement or extension shall be operative in the favour of the Company. Any such extensions or replacement Letters of Credit shall be on identical terms as the initial Letter of Credit provi~d to the Company.

(d) The Letter of Credit shall be for an amount. equal to 1.25 (One and a quarter) month's Projected payments (which amount shall take into account the Monthly Tariff Payments and shall be adjusted periodically/annually to take account of changes in such Projected payments).

( e) Within 3 months of this Agreement, the Board shall obtain and provide to the Company a copy of a written commitment from a branch of the issuing bank, which shall contain a binding obligation by such bank to issue the first Letter of Credit, in favour of the Company, at least I (One) month prior to the date of Commercial Operation of the first unit. \2J

PAGE - 31

125

Notwithstan.ding the t:::>mhHshtnentdfthe·L~tit;r(lf~~the ~r~t~l ®entide·~lto u1a1re direct payments of a.11y Tariff Invoice ·or #ity,ejdl~iSttppi~mentarylrrvuice isru~e by °t.l:le Company to the Boan.t, by cheque imd wiH.~rr such.~iregpa]'n1e1!ft:is m~ prior!Q>ur(;nilli: Due Date {jf Payme:r:H, t11e Company shalt l':l:Ot pte.senttht:;. ~e. ttiU tG: the hank issuitig d1e Letter Q f Credit_ ·· · · · .· · ·

·:. b'l Any payment made beyond the Due Date (}(J>ay1~§Mti0at;9rfuter~at, the Contn1c.t Rat¥ of lnlei:est Not-.,,vithstanding the foreguing thi,~ · •. . .<loe;[email protected]~e ariy'right what~uever 1 o the Board to delay paytne.m a:nd µccordingly . . '. (tut1~rtjmiice to any 'Jtl1e:r remedy the C<'.impany rnay have for ta:te payment by the J.1toatd:

1.c> \Vher<< any dispute <'ts to aH or any portkm:of:anyantQU1lt:.ij~t().tije.Cer~xpaay:tm account m tm·if:flsuppI~mentnry inv1Jfoe:s ;irises, the Board sbaltJ'l~Ve<f'.~~'9S.pay ··ilie .. fuUamotn11 t>f ·!,he d.ispured charges 1,.vht·n dne.·and sl'la!l give vvrittenfi9~ of the disp:ute tcy the Crimpany.as soon as. reasonably possible afler the Board disc-Ov~s the sarw .. ~·. Such nci:tice '.Shall klenfrfy the disputed hiH,, stak th¢ amount in dispute and s~ forth a full ~teiT1e~r of tne grutmds oit

such dispute is bitsed. Up.011 final adJustrnent~ the l'.'?~d;if·aitY• tr.>~tl:1~· with imet>~l at the .Rate of Int.crust on any overpayn1entn.~{1y,;~h'.e·E~ardi shm! be adj;t:st&.:i.in the Ti;triffh<rvoice n.ext submitted mthc. Botut.i. . ·.. · ..

(a) Not later than 30 days prior t~·the dat.eof.ci?mn~~iffl:!::i~fioriofthefi.tst unit. fut:~ Buard shaH ~tablish u separate bank accoo.nt (the 1'1B~'Cro.# A~ouut"} at a b:ranch of a mxtiom1lised bank whtch is also thebarikcrtb th~Board.

\b) ·nu: arm:nmt crediteij·each momhto the EscrowA~ountshall not b~ less::t.ru;m. l .25(011C ~rtt;l ;;i quarter). months aggregate Proj~cted ;paym~ts {wlW:h atYR;~rit shail rake· inm .ac:co~Jnt Monthly Fixed Charge Payments,. ?i,1(1nth!y Vad::tlrl~ ~~ Paym~n~¥bas~tm a80011 pJ,m:i Lo~.td Fa<tor. Such recvt.~1ues shall ,c1Jnstltme sectidtj ·.fer-the llit)a~rd's ubligaiion:s umlcr tl:ns ,\gre4::~1nem and may be <li'Zcessed hy the Con1pm1y ~~tr.tote s1_:1e~tally set ffirth in ar1 Escrow Agreement to be etltered imo \Vith the B.oard, tl1e ~pany an~ktoo h~k.

-----·---·-------

126

KSEB - BSES KERALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1fl99

(c) The Escrow Agreement shall set forth the terms and conditions relating to the ·funding and access to the Escrow Account and shall provide that in the event of default as mentioned in the Escrow Agreement, the bank shall by way of first charge to the Company, upon written notice by the Company. cease honour of cheques, drafts, requisitions and similar instruments drawn on the Escrow Account, except in satisfaction of the Company's claim. Upon satisfaction of the Company's claim and written notice thereof by the Company, the bank may permit payment of funds from the Escrow Account to persons other than the Company. The Escrow Agreement shall provide that until notice is delivered by the Company to the trustee stating that the Board has failed to make any payments to the Company by th.e due date of payment, the. Board shall be entitled to draw on such account in normal course of its business.

( d) The Escrow· Agreement shall require the Board to identify designated areas, the monthly receipts from which, meet the above stipulation of 1.25 months aggre.gate Projected billing.

9.6 GoK Guarantee

The Board shall obtain the GoK Guarant~e on mutually agreed terms within three months of execution of this Agreement .. Pursuant to this .guarantee, the GoK would ensure the payment obligations of the Board under this Agreement.

9.7 Order of Security

The Company shall present all Tariff Invoices and any Supplementary Invoices for direct payment pursuant to Section 9.4. If the Board fails to make the payment on or before Due Date of payment, the Company may present the Tariff/Supplementary Invoice to the Bank for immediate payment under the Letter of Credit.· In the event there are insufficient funds in the Letter of Credit or if the Board has otherwise breached any ofits obligations under this Agreement, the Company may draw upon the Escrow Account, and in the event there are insufficient funds in the Escrow Account the company may invoke the Government Guarantee as more specifically set forth in Section 9.6 hereof. These rights are without prejudice to any other right or remedy that the Company may have under this Agreement.

PAGE - 33

127

KSEB • BSES KERALA POWER LIMITED· POWER PURCHASE AGREEMENT May, 1999

ARTICLE 10

INSURANCE

10.1 Insurance to be Maintained During Construction Period

The Company shall be liable to take lout and maintain or cause to be taken out and maintained during construction period such insurahce1s as may be required including: · .

(i) Builders all risk insurance (ii) Co~prehensive third party lia~lity insurance (iii) Workers compensation insuramce (iv) Marine cum storage cum erection insurance (v) Any other insurance that may be deemed necessary by the Company

10.2 Insurance to be Maintained During Operation

The Company shall be liable to take out and maintain or cause to be taken out and maintained from and after the Date of Commercial operation through out the term of PP A, such insurance's as may be required inter alia: I

(i) General li. ·ability insurance to lover all properties and all operations from. all risks as per normal commercial practices.

(ii) Comprehensive third party liab lity insurance · (iii) Any other insurance that may be deemed necessary by the Company

10.3 Evidence oflnsurance Cover

The Company shall furnish to the Board certificates of insurance in respect of insurance·s referred in S~ctions 10.1 and 10.2 at the request of the Board. ·

~

PAGE - 34

128

Insurances man be affe.ctecl with Indian· insurance C{,lJ'A~!~i~~. to 'ld.1~ ~e:rtt .'tJ~at ir~snn.mcl;' s be afiected vdth thtmJ·in acco-rdante v .. -iththis agreerr1errL ·

10.5 Applicatfon.ofla-.urance Pr<H:.t.-cds

~'>av<~ as 1.:xpressly provided in this Agreement, the p~ecls ofany insurance dain~ 111.ade due to loss or dru.nage to the Pmject or arty }Jati. thereof sIDt'l.U be ftrst applied ~ rei'!1Sillternent, rcph1cemen10r renewal of such fos'~ or damag~.

i iii Subjeci tO Section· l0.5 (i) a.bt..lv~, lhc Co:rnPatly shall use the ~~t! p~~tl.s tt:i

reimburse tht: mnm.mt if any ree~ived from the :ifoard by ·,.1,ra:y:A.tf dee1ned g4:11e11u.km {}:rl

~iccnunt of the evenr covered by !be1nsuranee.

1. iii) Suqjcct mSection f05(i) & (ii) abQVt\ the CiJ~l?~~ inay ~ihe fu~c¢· pro.ie~~ds deems ftL

r i.., ) Nnt;;,vithsmnding any Gability or ob'ligHtimi th!i:tf.~~~~ ,arise ·tn~l~ th];s :Al4:t'~en'lent, 1i111y lo:ilH,, J.hihrlhy, d:a.n:mge, paymcm, obHgation or exp,~n~)f<ir wl1iqlt ~.m~1)~115a£ia11 ls 1.h1e:. to Company under tUlY h1sm·ru1ce 'i.md~l'. Sec1i~1lS [:p;l_ a:t1d 10~2. :s~l n-0t l~ cllarged to '()-f

payab!e hythe Board orGoK. ~. It

·u"·· i ....• ·.' . .. :l L . \ :

129

KSEB • BSES KERALA POWER LIMITED - POWERPURCHASE AGREEMENT May, 1999

ARTICLE 11

REPRESENT~TIONS AND WARRANTIES

11.1 Representations and Warrantitis:

Both the Company and the Board represent and warrant as to itself that

(i) it is a duly organised and validly existing entity under the laws of India and has all requisite legal right, power and atjthority to execute and deliver this Agreement and all the contracts and documents referrec! to herein to which it is a Party and to carry out the terms, conditions and provisions hereof and thereof;

{ii) the execution, delivery and perfopnance by it of this Agreement and all of the contracts and documents referred to herein!~~- which it is a Party have been duly authorised by all requisite corporate action, and 'Will not contravene any provisions of, or constitute a default under, any other agreemdnt or instrument to which it is a Party or by which its

I property may be bound ; !

(iii) this Agreement constitutes its ivalid, legal and binding obligation, enforceable in accordance with the terms hereofiexcept thafthe enforceability thereof may be limited by applicable bankruptcy; insolvency, reorganisation, moratorium or other similar law affecting creditors' rights general]y and except to the extent that the remedies of specific performance, injunctive relief and other forms of equitable relief are subject to equitable defences, the discretion of the col;lrt before which any proceeding thereof may be brought and the principles of equity in gen,eral;

(iv) there are. no attachments or wmfants served on it in respect of sales tax, income tax, Government revenues, any other $xes and dues;

(v) there are no actions, suits or proc~edings pending or, to its knowledge, threatened against or affecting it before any court

1or administrative body or arbitral tribunal that might

materially adversely affect its a'ility to meet and carry out its obligations under this Agreement; and I .

(vi) it has obtained all consents, approivals and· authorisations necessary for the valid execution and delivery of this Agreement a.lict all of the contracts and documents referred to in this "

Agreement to wbich.jt is a Party. 1 · ~

PAGE - 36

130

!<$EB • BSES KERALA POVW!.H LiMJTED • POVVER PURCHASE AGREEMENT -------.-..--.... --.... -..... ---~---...... _________________ ...;. ____ . -----------------· -· ------------

ARTICLE12

CHANGE IN LAW

12. Definition of Law:

For the purposes of this Agreement, "Law" means any valid act, rule, regulation, norcation, directive, order policy, by-law, administrative guideline, ruling or instruction having e force of Law enacted or issued by an Indian Government Instrumentality, Court or Tribunal.

12.2 Definition of Change in Law :

For the purposes of this agreement, "Change in Law•• means (i) any Permit requir d to be obtained by the Company :from any Indian Governmental Instrumentality due to any e trnent ·or issue of any new Law, (ii) any amendment, alteration, modification or repeal of any existing Law by an Indian Governmental Instrumentality or through any interpretation thereo (iii) any change in any Permit requirement or amendment, alteration, modification or repe of any Permit in each case coming into effect after the date of this Agreement, provision ti r which has not been made elsewhere in this Agreement.

12.3 Tax on Despatch of Electricity :

Any statutory levy/tax/duty imposed by Gol Competent Authority/State Competent ,4..uthority on Electricity despatched to the Board by the Company shall be payable by the Board.

12.4 Change in taxes:

12.4 (a) Corporate Tax

12.4 (b)

An increase or reduction in tax liability of the Company in respect of~. income related to Open Cycle Project o.peration .on account of the changes in the .tax rate and the as;mmptions stated in this Section 12.4 hereunder, would be .passed n to the Board through Supplementary Bills within 3 months of the end of each fi cial year during the term of this Agreement.

* 100% tax holiday for initial 5 financial years of operations * 30% tax holiday for the next 5 financial years of operations * Indian Corporate tax= 43% (40% + 7.5% surcharge)

In case of change in tax.es and quties during implementation of the Combinetycle portion of the Project the tariff will be suitably amended to reflect the change· cost supported by documentary evidence.

. VJ ·------··--·• ....... --··-· ~----·

PAGE - 37

131

12.5 In case the Company has to incur any additional capital cost due to GoK/*I directive subsequent to any Change in Law, the Board will reimburse the same subject to e Company receiving prior approval of the Board. However, the Company will make all effo to see that the Change in Law does not result in additional costs.

12.6 Notice of Chang~ In Law

(i) Ifa Party who is affected. by a Chang~ in Law in accordance with Section 12.3,f 2.4 or 12.5 wishes to claim a Change in Law under this Article 12, it shall give notice in ace rdance with Section 12.6 (iii) to the other Party of such Change in Law as soon as reasonabl practicable after becoming aware of the same. .

(ii) Notwithstanding 12.6 (i), the company shall be obliged to serve a notice to th··. e ~card under this Section 12.6 ifit is beneficially affected by a Change in Law. :, I

(iii) Any notice served pursuant to this Article 12.6 shall provide. inter alia, precise dietails of the Change in Law and the effects on that Party of the same.

PAGE - 38

132

i<SEB ~ 8SES l<ERAL.4 POWER LIMITED " POWER PURCHAS.E AGREffMSNf' M~y, 1999

ARTICLE 13 ·

FORCE MAJEURE

13 Force Majeure

13.1 Available Relief for a Force Majeure Event.

Subject to this Section 13

(i) Neither party shall be in breach of its obligations pu.rsuant to this Agreement to thle extent that the performance of its obligations was prevented, hindered or delayed due to a F~rce Majeure Event and

(ii) the tights and liabilities of both the parties shall be suspended during the duratjon of Force Majeure Event subject to section 13.8 here of.

13.2 Duty to Report

13.2.1 Neither party may claim relief for a Force Ma.i.·eure Event unless it shall hav~noti:fied the other party in writing of the occurrence of the Force Majeure Event as soon reasonably practicable, and in any event within seven (7) days after the affected party kne , or ought reasonably to have known, of Its occurrence and that the Force Majeure Event woul be likely to have a material impact on its performance of its obligations under this Agreement.

13.2.2 Any notice pursuant to Section '13 .2.1 shall include full particulars of

(i) the nature of each Force Majd.rre Event which is the subject of any claim fo* relief under this Agreement;

(ii) the effect which such Force Majeure Event is having on the affected party's jperformance of its obligations under this Agreement; .

(iii) the measures which the affected party is taking, or proposes to take, to allev .. ·i.1e.··.·th. e impact of those Force Majeure Events; and t: .~. ·~

(iv) any other information relevan1i to the affected party's claim.

PAGE - 39

" .,,,,···; • ) I .

v.) ('v'

133

!<SEB - BSES KERAU1 POLl'v'ER UlvlfTE.D - POWER PURCHASE AGRE£lv1ElliT

-··--·------------------------------------------------·--·------·------

. 13.2.3 For so long as the affected party continues to claim to be affected by a Ftjrce Majeure Event, it shall provide the other party with regular (and not less than monthly) wijitten reports containing:

(i) the information called for by Section 13 .2.2; and

(ii) such other information as the otlier party may reasonably request about th~ a:f'ffcted party's. cl~. . 1.

13.2.4 Where the Co. mpany is the affected party. , it shall promptly notify the Bo. ~and GoK in · writing when any Force Majeure Event which is the subject of any claim under · Agreement ceases or when there is any material change in its impact on the Company's perfo ce of its obligations under this Agreement. . .

13.3 Force Majeure EventS Defined

A "Force Majeure Event" means any of the events or circumstances, or combinatijon of events and circumstances, referred to below occurring after the financial closing in Indiaftt only to the extent that such an event or circumstance materially and adversely affects the perfo . ce by the affected party of its obligations under or pursuant to this agreement and that the p affected by such event or circumstance ·could not have reasonably foreseen the event or circ stance and mitigated its effects,

; .... ;. ... , ..

(i)

(ii)

(iii)

to the extent that it could not reasonably have b. een expected to occur at thefplace, at the time of year, in question, exceptionally adverse weather conditions, lightning earthquake, volcanic eruption or (to the extent originating from a source external to the. Site) fire or landslide, ·

epidemic, famine or plague;

strikes or boycotts interrupting supplies and services to the Power Statt n (but not involving the Company, the Company's Contractors or their respective empl y.ees, agents or representatives or any strike or boycott to any unfair policy or pr tice of the aforementioned persons) not being an Indian Political Event; and ·

(iv) any event or circumstance of a nature analogous to any of the foregoing.

13.4 None .of the following conditions shall constitute a Force Majeure Event.

(i) late delivery of plan~, machinery, equipment, materials, spare parts., .. ·fuf· 1,. water or consumable for the Project; or ... :;:;)··. I . !

(ii) a delay in the performance of any of the Company's Contractors.

PAGE - 40

134

KSEB - BSES KERALA POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999 .. _______ .. _______ ,.. ________________________ . _________________________________________________________ _, _______________________ .,. __

13.5 Notwithstanding anything contained in this Section 13, insufficiency of ~s shall not constitute a Force Majeure Event. ..... I·

13.6 Duty to Mitigate

For ~o ~ong as a Force Majeure Event which is the subject of any claim un~er ~s 4greement is contmumg the Affected Party shall use all reasonable endeavours to alleviate its efjf ects on the Affected Party's performance of its obligations under this· Agreement.

13. 7 Breakdown of Communications

If a Force Maj eure Event causes a breakdown of communications so that a party is un~ble to serve any notice hereunder, the period for the serving of such notice (if any) shall be exten~d for every day whilst such Force Majeure Event prevents the service of such notice. ·

13.8 Consequences of Force Majeure Event

Except as provided in this . agreement, any time period specified for the perform ce of any obligation under this agreement by the affected party shall be extended by the period equal to the duration of the Force Majeure Event, provided that the affected party shalbnot bee ·tied to any such extension to the extent that such delay or failure to perform would have occurre irrespective of the Force Majeure Event, and provided further that if the Force Majeure Even occurs and continue for the period of 12 months, the party not claiming Force Majeure Event m y elect in a written notice to the other party to terminate this agreement, neither party shall have any liability to the other as a result of such terminati<)n ..

PAGE

135

KSEB • BSES KEF?ALA POWER LJMIT!!JD·~ POWER PURCHASE AGREEMENT

ARTICLE-14

INDIAN POLITICAL EVENTS

14 Indian Political Events

14.1 Available Relief for Indian Political Events

14.1.1 Subject to Sections 14.2 and 14.4, the Company,

(i)

(ii)

(a)

(b)

(c)

shall not be in breach of its obligations p~suant to this Agreement to the tent the performance of its obligations was prevented, hindered. or delayed due to Indian Political Event; and ·

shall be e:ntitled to the following relief in relation to Indian Political Events,

Increased Costs of Direct Indian Political events: the Company shall be e~titled to recover from the Board all costs which it reasonably incurs with the prior approtal of the Board, which approval shall not be unreasonably with held, in seeking to alleviate the effects of a Direct Indian Political Event in accordance with Section 14.4.

1

Reduction in available capacity due to Indirect Indian Political Events : Guaranteed Capacity of unit(s) in Open Cycle and the Project in Combined reduced by not less than 50% as' a result of an Indirect Indian Political- Event fo of one hundred and sixty eight (168) consecutive hours, then, with effect from that period and for so long as the Guaranteed Capacity shall continue to be re uced by not less than 25% as a result of any Indirect Indian Political Event or until the mpany shall elect in writing to discontip.ue the application of this provision,. the Com _ y may elect in a written notice to the Board to calculate the Monthly Tariff Paymen on the basis of 80% of the Guaranteed Capacity, regardless of its actual available capacity during the relevant period;

Reduction in ava.il.able ca. pacity. due_ to Direct Indian Political Events : ~-ere the Guaranteed Capacity of unit(s), in Open Cycle and the Project in Combined Cycle is reduced by not less than 25% as:a result of any Direct Indian Political Events, n for so long as the relevant Direct Indian Political Events shall continue or until the ompany shall elect to discontinue the application of this provision, the Company may cylect in a written notice to the Board to calculate the Monthly Tariff Payments on the basip ~f 80%. of the Guaranteed Capacity, regardless of its actual available capacity drug the

relevant period. . . : 'Q)

PAGE· 42

136

i\SEB - BSES KERALA POWER UM!TEO - POWER PURCffASE A.GREEMENT

14.2 Duty to Report

14.2.1 It shall be a condition of tlJ_e Company's entitlement to claim relief Uljlder this Agreement for an Indian Political Event that it shall notify the Board in writi~g of its occurrence as soon as reasonably practicable, and in any event within seyen(7) dayslafter the Company knew, or ought reasonably to have known, of its occurrence and that it youid be likely to have a material. impact on the Company's performance of its obligations up.der this Agreement or on the availability of the Project. · I

14.2.2 Any notice pursuantto Section 14.2.1 shall include full particulars of:

(i) the nature of each Indian Political Event which is the subject of any claim for relief under this Agreement; I

(ii) the effect whiC'h such Indian! Political Events are likely to have on the Cofpany's performance of its obligations under this Agreement or on ·the availabilit)t of the unit(s) in Open Cycle and the Project in Combined Cycle, and \

(iii) the measures which the Company is taking, or proposes to take, to alleviate ~e impact . of those Indian Political Events; and

(iv) any other information relevahi to the Company's claim.

14.2.3 For so long as the Company continues to claim to be affected by an IndianlPolitical Event, it shall keep the Board advised in writing of any significant developments r~lating to the Indian Political Event and such other .information as the Board may reasonabli request about the Company's claim. ·

1

·

14.2.4 It shall be a condition to any claim by the Company under Sections 14.1.1(ii)fd14.6 that the Company declare the extent to which the Guaranteed Capacity of the unit(s) in Open Cycle and the Project in Combined Cycle has been reduced as a result of an Indian Political Event.

14.2.5 For so long as the Company is claiming relief due to art Indian Political Ev~nt under this Agreement the Board may from time to time on one (1) day's notice inspect th~ Project and carry out any tests reasonably required by the Board to detemrine whether the $rit(s) in Open Cycle and the Project in Combined Cycle could have operated at its G1frranteed Capacity but for the applicable Indian Political Event. The Company shall provide th~ Board's _personnel with access to the .Power Station to carry out such inspections or tests, subj,ct to the Board personnel complying with all reasonable safety precautions and standards. . . I .. ,.,

14.2.6 The Company shall promptly .notify the Board and GoK in writing when ariY Indian Political Event which is the subject of1any claim under this Agreement ceases or wheµ there is any material change in its impact on th_· e Company's performance of its obligations $.·· der JPts Agreement .or on the availability of th<} Project. ·RY

PAGE - 43

137

KSEB - BSES KERALA POWER LIMITED POWER PURCHASE AGREEMENT May, 1999

----~-----·--

14.3 Indian Political Events Defined

An "Indian Political Event" means any of the events or circumstances, or combitjation of events and circumstances, referred below occurring in India or directly involving India which result directly or indirectly in the Company's performance of its obligations being p~evented, hindered or delayed or in the availability of any unit under commercial operatiqn being reduced but only to the extent that such events and circumstances are not a la'\ffilll and 1

reasonable response to the default, neglect or other wrongful act of the Com1pny, its employees or the Company's Contractors and their consequences are beyond the Company's reasonable control:

(i) an act of war (whether declared or undeclared), invasion, armed conflict or act cf foreign enemy, blockade, embargo, revolution, riot, insurrection, terrorist or military action, civil commotion or politically motivated sabotage;

(ii) radioactive contaminatj.on or ionising radiation;

(iii) politically motivated strikes or industrial action (other than those involving printarily the Company's own employees or those of any of the Company's Contractors);

(iv) Change in Law;

(v)

(vi)

(vii)

expropriation or compulsory acquisition by any Indian Governmental Instrumeptality of any material assets or rights of the Company or the Company's contractors; ·

the unlawful, unreasonable or discriminatory revocation of, or refusal to re:rp.ew, any Permits required by the Company or any of the Company's contractors to perf~rrn their obligations under the Project Documents or any unlawful, unreasoiF.ble or discriminatory refusal to grant any such Perinit (other than a Permit the ob~g of which is a-condition precedent to the parties' obligations under Section 3.1); or i

any other unlawful, unreasonable or discriminatory action on the part of atjy Indian Governmental Instrumentality occurring after Financial Closing which is = directed against the Project (other than action taken in connection . with or p~upmt to a commercial contract between the relevant Indian Government Instrumentalify and the Company or, as the case may be, one of the Company's contractors).

14.3.2 The events and circumstances described in Sections 14.J.l(i), 14.3.l(ii) and lti.3.1 (iii) are referred to in this Agreement as "Indirect Indian Political Events" and those de~cribed in Sections 14.3.l (v), 14.3.1 (vi) and 14.3.1 (vii) are referred to as "Direct- Indianl Political Events".

I

1Q)

PAGE· 44

138


14.4 Duty to Mitigate

For so long as an Indian Political Event which is the subject of any claim under thls ~greement is continuing the C. ompany shall use all reasonable endeavours to alleviate its effe~ts on the Company's performance of its obligations under this Agreement and on the availabil~ty of any Unit under commercial operation. I

14.5 Additional Compensation and the Board Subrogation

If the Company is entitled, whether actually or contingently, to be compensated by ~y person other than the Board as a result of the occurrence of an Indian Political Event for wh?.ch it has received compensation from the Board pursuant to this Section 14, the Board shal~ be fully subrogated to the Company's rights against that person to the extent of the compens*ion paid by the Board to the Company. I

14.6 Termination and Buy-Out for Direct Indian Political Events

14.6.1 If the Company's performance of its obligations is prevented, hindered or dflayed or the availability of the Generating Unit(s)/and or Project is reduced by more than 2$% of its Guaranteed Capacify for more than two hundred and seventy (270) consecutive days $ a result ofDirect Indian Political Events, subjectto fulfilment of its obligations pursuant to Sqction 3.1 for the Company and Section 3.3 for the Board, either party may elect in a written note to the other party to terminate this Agreement and require the Project to be sold to the Bo d, or its nominee, in accordance with Section 14.6.2.

14.6.2 Subject to Section 14.6.3, upon .receipt of a notice under Section 14.6.1, the Bqard shall purchase the Project from the Company pursuant to Article 14. Upon full and final prment by the Board and receipt by the Company .of the Buy Out Price in immediately availa le funds, this Agreement shall terminate.

PAGE - 45

139

KSEB · BSES i<ERALA POWER L!M!TED, POWC.A PURCHASEAGPU!U!MENT

14.6.3 Notwithstanding Article 14, during the time following the service of a noticelpursuant to Section 14.6.1 and prior to the Transfer Date the party which served the notice ptjrsuant to Section 14.6.1 may elect by written notice to the other party not to terminate this AFeement whereupon this Agreement shall continue in full force and effect and the costs of e other party and of the appraiser in connection with the valuation shall be paid within sixty 60) days by the party which served the Termination Notice.

14.6.4 Any Party serving a notice pursuant to Section 14.6.1 who subsequently ele1·ts not to terminate this Agreement pursuant to Section 14.6.3 shall not be entitled to serve a notice pursuant to Section 14.6.l for a period of six (6) months thereafter.

14.7 Breakdown of Communications

In. the event that an Indian Political Event causes a breakdown of communications ~o that a party is unable to serve any notice hereunder, the pei;iod for the serving of such notice (if any) sha~l be extended for every day whilst the Indian Political Event prevents the servicf of such notice.

IV

PAGE - 46

140

i<SEB · BSES' l<ER:AlA POWeR UM!TED" POWER PU.RCHASIE AGRE!ZME.NT ••'•0••>•''""'""" ___ .,,...,..,.,,_,,~._.,. ........ .,.,. ___ ,~--·-WMO> .. ~--•"""'""'"'-''""""'--""-----Nfo .. ~-m_.,.,.. __ .,.,,,...,,...,<V..,._ __ ,,._..,..,_.,,,,,.,.._._ __ ...... ____ «-<;-..,_,.w. . .,,-.,,.>;;_ ... ___ ... _""'_"° ___ .. _..,._ ... _.,,,_.,,

ARTICLE 15 TERM, TERMINATION AND BUYOUT

15.1 Term of the Agreement

This Agreement shall become e:ffectite upon its execution and delivery thereof by the Parties hereto and unless terminated pursuant to other provisions of the Agreement, shall cqntinue to be in force and effect for such time Until the completion· of a fifteen (15) Tariff Pedods from the Date of Commercial Operation of the 151 GT Unit

This Agreement can further be extended for a period of Ten Tariff Periods iond the fifteenth Tariff Period on mutually agreed tariff as per Clause 7.4 taking into accoun the Fuel charges, Operation & Maintenance charges and a nominal net residual value of . e Project which the Company would have normally expected on dismantling and selling the sre at its Cost. . ·

15.2 Termination Grounds for the Company On account of Board Breach

The Company shall have a right to serve a notice (Default Notice) on the Board if

(i)

(ii)

The Board continually fails to pay an amount in e~cess of 3% of the Mon{y Fixed Charge. Payment. within 45 D~s of notice of non-payment provided that the · ompany has complied with its obligations under this Agreement and has first mad demand without satisfaction under the Letter of Credit pursuant to Section 9 .3;

The Board repudiates the Agf eement or otherwise evidences an intention j\ ot to be bound by the Agreement. · I

(iii) The Board commits a material breach of provisions of the Agreement and ldoes not remedy them in 45 Days. , _ .

(iv) The Board delays the completion of construction of Inter Connection Facility for a period more than 6 months bexond the Scheduled Date of Completion.

(v)

(vi)

The dissolution of the Board or any structural changes within present consti)tution of the Board unless such dissolution or structural change is in connec on with privatisation or other restrucurng of all or any substantial part of the Boar and the Board's successor under this Agreement is, able to perform the Board's o ligations under the Agreement and has ¥sumed in writing, responsibility for perform ce of the Board's obligations hereunder., ,, ·

The Government o. f Kerala repudiates or is in default of its obligations unde·r~·the GoK Guarantee which severely prejudices the Company. · . . ·- 0

• I ' \) -4

'f..J/

PAGE - 47

141

KSEB - BSES· KERALA POWER LIM!TEQ - POWER PURCHASE AGREEMENT May, 1999 ________________ .., _______ ,.. ______________ ... _____________ .. ______ ................ _______________________ ... ,.. ___________ .. ____ ..,_.,. __

15.3 Termination Grounds for the Board On account of Company Breach

·i !10 Board

(i) The Entry into Commercial ~ervice for the Project gets delayed by a period/ of more than 6 months beyond the Sc~eduled Date of Completion. I

The Company fails to pay fill\ amount in excess of 3% of the Monthly Fixe4t Charge Payment within 45 days of nopce of non-payment I ·

(ii)

(iii) On occurrence of any of the fqllowing events

(a) the passing of a resolutjion by the shareholders of the Company for wifiding up of the Company , -i

(b) the appointment of the provisional liquidator in a proceeding for the wip.ding up of the· Company ~ notice to the Company and due hearin&. which appointment has not been set aside or stayed within sixty ( 60) days of such

- ! appointment; · i

( c) the making by the court of an order winding up the Company, exce~t for the purpose of the amalganjlation or reconstruction. · .. i

(iv) The Company abandons the c<jmstruction or operation of the Project for mor~ than 45 Days, except w_ here the reason ~or it, is-default by the Board, Force Majeure cojnditions, Indian Political events . I 1

(v) If the monthly Plant.Load Fac~or of the Project for a continuous period of 12 (Twelve) months is less than 60 %. ·

(vi) After the Entry into Commer¢ial Services; there is an unexcuse4, wilful or. I. reckless breach by the Company of any!of its obligations pursuant to Section 3 .1. . . -;

(vii) The Company repudiates the Agreement or evidences an intention not to be ijound by it.

(viii) The Company commits a matqial breach of provisions of this Agreement andldoes not remedy the breach within 45 Oays. ;.;[

PAGE - 48

142

K.SEB ·· EiSES KERALA POWER UMITf:;'O POWER PURCHASE AGREEMEl\iT May, 1'$199

15.4 The Board's Right to Operate

If the Board gives Default Notice to '11e Company pursuant to Section 15.3 and sucJ notice is not disputed by.the Company and if, f~r reasons of the security or integrity of the. Gtjd System or security of supply, the Board reqfres the Company to operate the Project and where the Company is unable or unwilling to operate the Project as per the Board's requirem¢nt which are within Technical Limits and as p~r the Prudent Utility Practices, the Board shal~ have the right (but not the obligation), to orerate the Project in accordance with Prude~ Utility Practices. The Board shall incur all thf expenses to operate the plant in respect of the eriod of such operation. The payment of Fixfd Charges will be made to the Company p suant to Article 7, subject to a ceiling of the ~e. bt service obligation apportioned to such pe~od. The. Board's right under this Section 15.4 shall terminate when any novation of this A eement under Section 15.6 talces effect.

15.5 Termination Procedure

(i)

(ii)

(iii)

A notice given pursuant to ~ction 15.2 and 15.3 (Defaµlt Notice) shall !ecify in reasonable detail the circums ances giving rise to the Default Notice. Nei er Party shall be relieved ofits obliga · ons under this Agreement by the issue of su notice. However, the non defaulting arty shall not be in breach of this Agreeme t if it is unable to perform its obligatio:p.s under this Agreement due to the circumstan~s giving rise to the Default Notice.

Following the serving of a Di.fault Notice, the Parties shall consult for a petiod upto three (3) months. (or such lon er period as they may· agree) (the "Suspension.\1 P. eriod") as to what steps shall be take with a view to mitigating all the circumstanc~s due to which the Default Notice has isen. Either Party may waive the Suspension :Period in respect of a Default Notice se , ed by the other Party. . · . . . I

Upon the expiry of the Suspe~sion Period and unless the Parties shall have tjtherwise agreed or the circumstances gi ing rise to the Default Notice shall have cease~ to exist or shall have been remedied, e Party having given the Default Notice may tFrminate

· this Agreement, su~ject to ful~lment of its obli.g~tions pu:suant to. Section 3.ll ~or ~e Company and Section 3.3 forlthe Board, by glVlng a wntten notice (a "Tetj:nination Notice") to the other Party, sutiject to Section 15.6 and Section 15.7. ,

PAGE - 49

143

KSEB - BSES KERALA POWER Lt1WiTED - POV'.IER P't!RGHASE AGREEMENT

(iv) Once a Termination Notice has been delivered by either Party, the Buy Out rice for the buy-out event, if any, would be determined as per the section 15.7. Until s ch time as the sale of the Project by the Company to the Board is consummated, · eluding receipt by the Company of the Buy Out Price in full in accordance with thi Section 15.5 and 15.7, the Company shall use all reasonable efforts to keep th Project operating and the Board shall be obliged to pay Monthly Tariff Payment. In ~e event the Buy Out Price is not received by the Company in full in immediately fVailable funds by the date that is thirty (30) Days after the date the Buy Out Price is determined for the Project, the Board. shall pay to the Company on a monthly basis a Contj'act Rate oflnterest on the unpaid portion of the Buy Out Price for each Day beyond sucp date.

15.6 Rights of Substitution

a) Upon serving of a Default Notibe by the Board pursuant to Section _15.3, thejLenders shall be entitled to substitute a lcompany (the Nominated Company) for the qompany under this Agreement in accordance with the provisions of the following paragra\Phs.

b) At any time during the period commencing from the date on which the Boarq gives a Default Notice and ending thirty days after the date of sµch Default Notice, a ' otice (a Substitution Notice) may be given to the Board by or on behalf of Lenders to horn in excess of 50% of the then outstanding amount under the Financing Documen is owed by the Company. The Substitution Notice shall indicate the name/s of the mpany proposed to continue this Agreement in place of the Company.

c) Upon receipt by the Board of a Substitution Notice, the Board and the relevanti Lenders shall consult for a period of thirty days as to the company which is to be the N<l>iniiiated company. On or before the expiry of that consultation period, the Board· shall !have the right to reject the company I companies proposed in the Substitution Notice provided substitution of such company would prejudice the national security interests o~ India or such companies do not possess the requisite technical expertise I financial capabflity.

d) At the end of the period (s) specified in paragraph (c) above (unless, in accord.$ce with that paragraph, the. Board shall ha.· ~e rejected all companies proposed by th,. relevant Lenders) the Board, the Company and the Nominated Company shall forthwi. execute novations of this Agreement in agreed terms. . .

e) the· Board .shall not be entitled to terminate this Agreement, as novated unde1· .aragraph ( d), by virtue only of events or circumstances described in Section 15 .3 occ · g prior to the relevant s.ubstitution notice unless the same event continues for a perio of more than thirty (30) Days after the execution of the novation of this Agreement r if such

event or circumstances recur and are not cured during that period. Q_,,J

PAGE· 50

144


15.7 Remedies for Default:

(A) Board event of Default during Operation Phase:

On the expiry of the applicable Suspension Period, pursuant to Default Notice giv¢n by the Company under Section 15.2, the Company may serve the Termination Notice, reql)riring the Board to buy the Project.

If the Company chooses to sell the Project to the Board,the Buy Out Price would ble Market Value of the Plant

(B) Company event of Default : On the expiry of the applicable Suspension Perio~pursuant to Default Notice given by the Board under Section 15.3 and if no Substitution Notic is. given to the Board pursuant to Section 15.6, the Board may terminate the Agreement by giving a Termination Notice to the Company. On serving the Termination Notice the follo "ng shall occur,

The Board may choose to buy the Project for which the applicable Buy Out Price wo~d be

(a) For termination prior to Date of~ommercial Operation-

Lower of

i) Debt utilised towards the Project + Amount owed to EPC contractµrs • the insurance proceeds and the liquidated damages received by the Company

1 ..

ii) Market Value of the Project.

(b) For termination during Operation phase -

Lower of

i) Depreciated Historical C~st

ii) Market Value of the Project

If the Board is not willing to buy the Project as above, the Company shall be allow~d to sell and/or assign the Project to the Lenders or third party purchaser duly approved by ·re Board which approval shall not be unreasonably withheld provided that such third party r lenders shall undertake to abide by the terms and conditions of this Agreement. v

PAGE - 51

145

i<SEB • BSES i<.Ef~AL4 PO\NER L!MffEO • POWER PURCHASE AGREEMENT

(C) Termination for Indian Political Events

Pursuant to Section 14.6, if either Party serves a notice to terminate this Agree1ent, the Company ~hall sell the Project to the Board or its nominee and the applicable Buy ut Price for the Project would be : · . ·

Average of

i) Depreciated Historical Cost &

ii) Market Value of the Project

15 .8 The buyout prices pursuant to section 15. 7 shall include an additional amount to j:neet the applicable tax obligatio~ and wherev~r Market Price is mentioned~ an adjustment 'f ould be made for the assets provided to· the Pro3ect by GoKJKSEB at concessional rates. ./

15.9 Upon full and final payment by the Board and receipt by the company of th~Buy out price, the company shall transfer all its assets, rights, title and interest in the Project free and clear of all liens, charges and encumbrances to the Board and thereafter this agree nt shall stand terminated. I ·

!~~~s :e~:!~on of this article 15 ,'hall survive the cancellation, expiration o:,:r7on

'i/

PAGE - 52

146


ARTICLE 16

NOTICES

16.1 Delivery :

Except as otherwise expressly provided in this Agreement, all notices or other comin~cations which are required or pennitted hereunder shall be. in writing and shall be sufficiently given if delivered personally or sent by registered or certified mail, telefax, telex or telegram a dressed as follows:

If to the Company : BSES KERALA POWER LTD. 165 MW COMBINED CYCLE POWER PROJECT PUTHIYA ROAD, UDYOOMANDAL P.O. KOCH! - 683 501

Attention : CIDEF EXECUTIVE OFFICER Telefax No: 0484- 541614 Telephone : 0484-559849, 558759, 543751, 557576

If to the Board:

KERALA STATE ELECTRICITY BOARD V AIDYUTHI BHA V ANAM PA TTOM, THIRUV ANANTHAPURAM-- 695 004

Attention: CHAIRMAN

Telefax No: - 0471 -441 328 Telephone : 0471- 4421251448128 Telex No.: 0435-6225/6361 KSEB IN

All notices or communications given by telefax, telex or telegram shall be confltmed by depositing a copy of -the same in the post office in an envelope properly addressejd to the appropriate Party for delivery by registered or certified mail. All notices shall be I deemed delivered upon actual receipt thereof. - , C

tlJ - ~

PAGE - 53

147

KSEB, BSES f<Et«l'ALA POWER UM/TED - POWER PUi'<CHASEAGRIESMEN'T

ARTICLE17 ·

ARBITRATION

17. All disputes or differences between the Parties arising out of or in connection lwith this Agreement shall be first tried to be settled through mutual negotiation.

1.7.2 In the event ofsuch differences or disputes between the Parties not being settle4 throu~ mutual negotiations within 90 (ninety) days of such dispute, any Party mat issue a written notice of 30 (thirty) days to the other Party requesting for appointmetj.t of sole arbitrator ~o be decided mu~ly by the Parties and in the case of disagreemfnt to be decided by the Chairman of the Central Electricity Authority. The arbitration! shall be conducted in accordance with the provisions of Arbitration. and Conciliation 4.. ct, 1996 (Central Act 26 of 1996) and any statutory modification thereto. , !

17.3 The decision of the arbitrator shall be final and binding on the Parties. The ¢ourts of Kerala shall have the first jurisdiction in all matters arising under this Agreement.

17.4 The arbitrator shall reasonably decide the proportion in which arbitration fees clmd costs are to be shared by the Parties. The arbitrator may, with the consent of the Partitjs, extend the time taken to make and publish the award. - . . I ·

17.5 Any ~etenninati?n of Buy Out Price shall. be made exclusively by the_ indFpendent apprmser and neither Party shall have any nght to cause any such determmatjon to be resolved by arbitration or otherwise.

17.6 Notwithstanding .. the existence of any disputes referred to arbitration, the Patjies shall continue to perform their respective obligations under this Agreement and tJte Board shall not withhold, ·for any reason whatsoever including the pendency of a;fbitration proceedings, payment of any bill presented. l

~l

\0J

PAGE - 54

148

?<SEB ·· BSES KERALA POWcR UMl/e:D - POWER PURCHASE AGREEMSNT

ARTICLE18

LIABILITY OF PARTffiS

18.l Liability of Parties:

The Company and the Board each assume full responsibility and liability for the mahitenance and operation of their respective properties involved in the performance of this Agree$ent.

18.2 Indemnification.

(a) The Company agrees to indemnify and hold harmless the Board and the Board'~ officers, elected officials, agents, emplo.yees and representatives against . and from an~· and all loss, cost, damages, expense and liability by reason of physical daIDag. e to the property of or personal injury (including death) to third parties of whatever nature or kin , arising out of or as a result of any negligent act or negligent failures to act, wilful misc~nduct or breach of this Agreement by the Company, its officers, partners, shareholders, ptincipals, directors, employees, agents, lassignees, pledges, contractors or subc~ntnl.ctors in connection with the Company's performance under this Agreement. Such lljldemnity shall not apply to the extent that any liability, loss, cost, damage or expense w"-8 caused by or arose out of any negligent act or negligent failure to act, bad faith, ~r wilful misconduct by the Board, its officers, elected officials, employees, agents, ~signees, representatives, contractors or subcontractors in connection with the ,. Board's performance under this Agreement.

(b) The Board agrees to indemnify and hold harmless the Company and the Cqmpany's partners and the shareholders, principals, officers, directors, agents, emplo~ees . and representatives of each of them against and from any and all loss, cost, damages~ expense and liability by reason of physical damage to the property of or person¥ injury (including death) to third parties of whatever nature or. kind, arising out of or ~ a result of any negligent act or negligent failure to act, wilful misconduct or breaclji of this . Agreement . by the Board, its officers, elected officials, employees, · agents, representatives, assignees, pledges contractors or subcontractors in connection !with the Board's performance under this Agreement. Such indemnity shall not apply to ~e extent that any liability, loss, cost, damage or expense was caused by or arose OU;t of any negligent act or negligent failure to act, bad faith, or wilful misconduct by the Cbmpany, its officers, partners, employees, agents, representatives, assignees, pledges, co~tractors or subcontractors in connection with the Company's perfunnance under this Agtj:~

PAGE 55

149

KSEB - BSES K!ERALA POV!/£.R LIMITED - POW/ER PUF~.CHASE AGRlEIEMlENT -~·--·-»-----~ .. --.... ,_ .. _____________ .., __________ ,.. __________ _. .... -~-----... _ .. ___ _..,... ....... ,..._ ___ ".""_""".,;,._,..,,_ ... __ .. --__ '"'_...,.,,. _________ _

18.3 Limitecl-Recourse Nature of Liability.

Anything herein to the contrary notwithstanding, the obligations of the Companyter this Agreement do not constitute a debt or obligation of and no recourse shall be had wi respect to such obligations to any shareholder, partner, officer, agent, employee, director or liate of the Company. No judgement for any personal liability or deficiency in connection iwith the obligations of the Company under this Agreement shall be obtainable by anyone ag~ any shareholder, partner, officer, agent, employee, director or Affiliate of the Company. I

PAGE - 56

150

KSEB • BS/ES KEf-?AJ..A POWER UMJTED - POIAE'R PURCHASE AGREEMENT

.ARTICLE 19

MISCE~LANEQUS PROVISIONS

19.1 Variations, Waivers and Modifications:

19.1, 1 Survival of obligations

a)

b)

C. ancellation, expiratfon or tennination of this agreement shall not reliev~e . e parties of their obligations under this agreement. The Parties obligations shall survive such cancellation, expiration or te · ation of

this agreement.

19.1.2 No variation, waiver or modi:fJication of any of the terms o. f this Agreemen~ shall be valid unless reduced in an agreement in writing signed by the Parties. I ·

19 .2 Severability .:

The invalidity or unenforceability, for any reason, of any part of this Agreement bhall not prejudice or affect the validity or enforceability of the remainder. I

19.3 Assignment

Neither Party shall assign any· of its rights or obligations under this Agreement to <jm.y third party without the prior written consent of the other Party; provided however that $bject to Section 15.2(v) and 15.3(iii) hereof no such written consent will be required in the c~~m of an assignment by a Party to an Affiliate of the Party for the purposes of an amalganjiation or reconstruction of such Party. Notwithstanding the foregoing, for the purpose of ~btaining financing. for the Project, the .Company may a.Ssign or create security over its ri~ts and interests under or pursuant to this Agreement. The Board shall execute all such co~sents to assignment and/or acknowledgements of any security created in accordance with thi* Se~tion and shall deliver such opinions of counsel regarding the same as may be reasonably ¢quested by the Company.

19.4 No Waiver

The failure of any Party to insist in one or more instances upon the strict performanc~ ~f any of the provisions of this Agreement or to take advantage of any of its rights hereunder sbfl not be construed as a waiver of any such provisions or relinquishment of any such rights but pie same shall continue in full force and effect. i

v PAGE - 57

151

KSEB • BSES KERAL..4 POWER LIMITED POWER PURCHASE AGREEMENT May, 1999

19.5 Mutual Agreement:

Unless the context otherwise requires, every arrangement, procedure or any other matjer which is, under any of the provisions of this Agreement, required to be mutually agreed upon\ between the Parties, shall be concluded by a written agreement between the Parties not later. than the date specified in such provisions of this Agreement and where no such date has been ~pecified, not later than the date of Financial Closing.

19.6 Governing Law:

This Agreement shall be governed by, and construed in accordance with, the Laws ofllndia.

19.7 Waiver oflmmunity:

The Board and .the Company are subject to civil and commercial Law with resp~ct to its obligations under this Agreement, and the execution, delivery and performance hereof1 by them constitutes private and commercial acts rather than governmental and public acts. To 4ie extent that the Board or the Company may in any jurisdiction claim for itself or any of its assets or revenues immunity from suit, execution, .attachment (whether in aid of executiotj., before judgement or otherwise) or other legal process, or to the extent that in any jurisdictj.on there may be attributed to the Board or its assets or revenues any such immunity (wheth~r or not claimed), the Board and the Company her~by agree not to claim and irrevocably WjClive any such immunity. '

19.8 Entire Agreement:

This Agreement, including the Exhibits I Schedules appended hereto, contains all of the understandings and agreements of wl!l.atsoever kind· and nature existing between th¢ Parties with respect to the subject matter of this Agreement and the rights, interests, understandings, agreements and obligations of the Parties hereto relating thereto. All prior writtetj. or oral understandings, offers or other <'.Ommunications of every kind pertaining to the sale or purchase of electric energy to the Board by the Company are hereby abrogated and withdrawn. Ji1eadings herein are for convenience only and shall not influence the construction hereof. !

. 19~ 9 Further Acts and Assurances

If a Party reasonably determines or is reasonably advised that any further instru¢ents or actions are necessary or desirable to carry out the terms of this Agreement, the other P¢y shall execute and deliver all such instruments and perform all su(!h actions.

19 .10 Confidentiality:

(a) During the term of this Agreement, or in the event this Agreement is termin;ated (for whatever reason), from the 4ate of this Agreement until 2 (Two) years after ~e date of such termination, neither Party shall, except with the prior written consent of fbe other Party, disclose any Information stated in Section 19. lO(b) to .any third Party t? use the

{LP PAGE 58

152

KSEB. BSES KERALA POWER LIMITED • POWER PURCHASE AGREEMENT May, 1999 _.,... __ .,. "'""'~·.....,_ ___________ ._,,,,,~.~~----------- .... ~·· -·--· -··· -··-···~----... -«-~---·---------'""'-·~------,.------------

(b)

Information for any purpose not related to the Project, provided however,! that the foregoing shall not apply to the disclosure of Information required by la\\1, a legal process or court order (provided that the disclosing Party shall give prior writt~n notice thereof to the other Party). ·

For the purposes of this Section 19.10 (a), "Information" means the follo~ing: any information or materials obtained by either Party as a result of this Agreement ( ncluding any data, studies, reports, Permits, agreements or Financing Documents relat d to the Project), any information or materials disclosed by one Party to the other :arty, the disclosure of which is stated to be confidential or which the receiving Party shoµld know is confidential. ·

In witness whereof the Parties executed these presents through their authorised repre~tatives at Thiruvanathapuram on the date above mentioned.

WITNESSES {'\. W·· 'n'l'&l.·"<"-•1i'~ '\...__......,.....,..

2.

WITNESS

2.

FOR AND ON ·aEJj!ALF OF BSES K.E~ALA·PO\/ER 1JM1T:ED

I

CHAIRMAN

PAGE· 59

153


Sl.l

SCHEDULE 1 PERFORMANCE TEST PROCEDURE

Before initi~l synchronisation, not later than ninety (90! days before the SchedµIed Date of Completion. the Company shall supply the followmg documents to the $oard for approval: ·

a) Final single line electric diagram of the Project b) Electrical protection study report c) Start-up procedure and on-grid testing program d) Operating procedure and other agreements as described in Section 6.2

S 1.2 Before performance tes~ the Company shall supply the following docume~ts to the Board for approval:

a) Report of completion of on-grid testing program b) Copies of insurance policies covering the Project pursuant to Article 10

S 1.3 The Company shall give seven (7} days notice to the Board before starting the Perfonnance Test. The Board may elect to witness the Performance Test.

Sl.4 Scope of Performance Test.

(i)

(ii)

Separate Performance Tests shall be made for open cycle operation and qombined cycle operation.

During each Performance Test, the Project shall be operated in a manner ~imilar to normal commercial operation with all auxiliary loads and losses associate~

(iii) Each Performance Test will be considered successful if the Project I operates continuously for Seventy Two (72) hours at or above 97% of its Nominal ~apacity for open cycle operation within the Technical Limits specified in Schedule 12.

(iv) During the Performance Tests, environmental standards as containe4 in the environmental clearance slaall be met and proper corrective actions to bejtaken, if necessary, before the test is conducted again on this account.. . 1

PA.GE· 60

154


·--~----'-------

SI .5 Test Report

The Test Report shall include the following:

(i) kilo Watt-hour and kilo-Watt meter readiiigs at Inter-Connection Point to yeri:fy the · net output. Reproduced. copies of actual log sheets are preferred where po~sibk

(ii) For gas turbine unit(s), a curve of net capability Vs ambient temperature,lwith test result noted on the graph. ·

(iii) Calculation of Tested Capacity

(iv) Notes explaini.ng reason fur any failure to achieve Nominal Capacity, andJ intended date and means of correcting the deficiency or re-rating the unit capabili~-

(v) Written report of the emission level, according to site conditions and fuel )lSed.

(vi) Written report of the noise level measurements (open cycle and later dombined cycle). . · I

(vii) Written report of the physical-chemical analysis of the water returned 1o source waters (if applicable). I c'·

~

PAGE - 61

155

r<SEn • f~SES KkRALA POWER UMITED - POWER PUR.CffASE AGREEMENT May, 1999 -""~"'~m~~•<'__,,..,,_~,.,._,.,,,.,,,.,,,.,.,. __ .,.._,,,. ____ .,. __ ._...,..,. __ ,,_.,..,....,. __ ,., ..... __ _._, __ ........... ,~----"""'---""------.....--............ - .... __ .,.,._,,,,_.., ... .,.<llo ___ ,.._ ... ____ ..,_..,,,.,....., __ _

SCHEl)ULE 2

TECHNICAL LIMITS

'While the normal regime of operation shall be 75 - 100% the Company shall ope¥t~ the· Project at a lower load when so required by the Board. . .

PAGE - 62

156

KSEB - BSES KERALA POWER LIMITED POWER PURCHASE AGREEMENT May, 1999 _____________ .,.. _______ ... __ ,..._.,_ ... ____________ .... _____ .., _______ .,._ .. ______ ..,, ____________ _

SCHEDULE3

PROCEDURE FOR DEEMED GENERATION

Deemed Generation for any period shall mean with respect to any period, any r~ducti~n in supply of Electricity which the Company could have generated and sold during such period, but for the following - ·

(A) Grid System problems other than those vftthin the technical limits as per sch~dule 2 or Board's despatch instructions except due to Force Majeure event as per Article 13.3,[(B) Delay in Entry into Commercial service due to the Board pursuant to Section 3.4, and (C) Indian Political Events pursuant to Section 14.l, and (D) Stepping down due to frequency ¥ation in the Grid beyond the range between 47.5 Hz and 51.5 Hz subject to technical parFeters as given in Schedule 2 (such frequency variation shall be ascertained based on an on-l~ne system frequency recorder)

The Deemed Generation will be computed as follows:

DC*Hops+DC*Hobd+DC*(Hdipe+Hiipe+Hfv)+NC*Hecs - MEi where,

DC= Declared Capacity in kW for the relevant period . : ·1 NC =Nominal Capacity in kW Hops= No. of hours during grid problems/back-down instructions by the B ard Hobd =No.of hours back down due to Board's despatch instruction. Hdipe =No. of hours during currency of Direct Indian Political Event ~~;'"' ;: :':~

Hiipe =No. of hours during currency oflndirect Indian Political Event

Hecs =No. of hours by which Entry in.to Commercial Service is delayed on!account of Bomd. Hfv =No. of hours during wln.ich grid frequency varied beyond technical pa:fameters (as specified in Schedule 2) '

NMEi =Net Metered Energy supplied during the currency of such period.

However, Deemed Generation during the Tariff Period will be allowed to the extent that PLF for that period does not exceed 80% of Guaranteed. Capacity. . · j;

PAGE· 63

157

KSFB BSES KERAlA POWER LIMITED - POWER PURCHASE A(/.f&.fEMl?NT May, 1999 -... -.... .,,.,,,,_,,, ___ ...... _ ... _.,, ______ ,,, .... _ ... __________________ .., _____ . _________ ..;,,:;:,~.._ ... _;,.. ______ ._ .. _______ _....., ..... _,.,, __ ,.. ___ . .,.._.~ ... --...... _

2.

3

4.

5

6.

7.

8.

SCHEDULE4

ELECTRICAL SYSTEM CHARACTERISTICS AND FUNCTIONALr SPECIFICATIONS

Generator Terminal Voltage

Frequency

Speed

Power Factor

Generator Capability Curve

Generator Efficiency Curve

Turbine Heat rate deterioration

Rated output

11.00 KV

SOHz

3000 RPM

0.800 lag

Refer Annexure

: Refer Annexure 2

: Refer Aimexure 3

: 45.320 MW, 56.65 MW A

9. Single line diagram : Refer Annexure S ·· i.-· 10. Predicted Performance C~es (Deterioration of Heat Rate and Capacity

Indicating Capacity, Heat Rate V /s. Running Hours - Refer Annexure -

PAGE - 64

158


-----------------'."----------------------------------------------------------------------------------------

1 SCHEDULE 5

Despatch Procedures an<l A vai labiUty Declarations

Despatch of the Project i.vill be controlled by the appmpriate Load Despatch Centre' of the Board. Hh.: Board 1.viil iden.ti~.: .an<l ooti f:y the company re~ing; th~ @;ppt6pria:tel~ody ;;utd the rum.:~, of the designan.:d officers for the deSJV.:ttch of the ·Project at feastooe-month pdo.r t:O the \cheduk:d D<lt:c of ('.,,n:np!etiun to the Hrsi Unit W11;mn Onie. ~~ .9f.rt."4"tji.p.t of sm;h i Kill i1..:k1tinn the C011tpany shall notify the names {>f its ®signated >officers to receive t.be despatch

T'hc executive:> wm despatch. the Onit{ci;} in accprdance wittffbis.:schalu~ and. the n10ri1 <JJ'dcr iliperati011 of the A di\'.l,s:pat<>h ii::istrm:~~h:ntcitn ch~~be tx;J:Wt.~yecd \1nilly o:r in

(by or othenvise) provided that e.ach oral despatch. instro.crion \Vill have HJ be confin:ned in \Vri.ting \Nithin 8 hot:rrs, receipt. Qf ~y d£lsp.atch instru{;tion wm he acknowledged. by i:t:ie desigmited ofl.foern of the C'ot:npany \:yitbin one bout (}freceipt of the s:une

r; d In d(;·spm.ch:i:ng the Prqject, the :Comp..9.ny .shall follf;)cwthedfu!ctives,of the BOru.'d. 10 hack d(m·n gene.ration and to resume genc.~mrion of "Net Electrical Energy in each case c.misls:ti;:m vvith the Project's 'leclmic:al L~1;S., J>~~t Utmty · PracJites,. the rccnmmendmfons of the manufacturers of maJovi!q~t. .ibis A.gret.."Ulent and oth>.::r <UT•1.ngem¢nts bet;..vcen r..hc Compm1y and the: ~.(*~g ~p11nunicaticm artd e<i~ ordination of opt~rnrion (cad1 such dircctive-heing~i~i~tch l~i:rw.-."tion;')

l ll i U nkss in an Emergency., no de.o--pat.ch in~l!i.tctio&~lrequiri;, the Company tu operate the Unit(s) at a gross genera.ling capacity bi::low ·7~,_,a ~£:th~ P:roj$:f s iri~taUed capacity i.ot any period of ti.n1e. in the event of operath>-g.ihe:1Tqje~f · ~~kvw 75 ;;:. (>f load~ for periods rnore th.an half hour, adequate heatorate. ~ctiqtt$ as pt~,r ;A.r.mexurc -ik tl:te Heat Rme Vis Part ioad curve, i.ihaU he app_lie,~~lti .. F'CU:'.•b pjjieilinon_•the: ftml consnmpti:on fa~tor (FCF) shall be revised corresponding: to the corrected Ht-at Rate, sut:iect to the <'".lPpmval of me Annexure- 4 by ·tllt'.B'9mfl

.j

~· .

159

Availability Deefaratfous

L Generally as soon as practicable before the C:ommerx:'.w::0periitkln oftbe.Unh{or .;>f rht hist Unit. if there is 111ore than tlne UnitJand~oJxHmJ.e tt, time th~r. biAt not Inter than the Pn.::scdbcd Time each day, d1e Cciffip~ Sfutll. &eliver to the BbEt1fd an. A va1bbility DeclL~ratlcm containing the follo\Vtn;:t;r~r1J1atkn~:;

c) T11e Decfared Capacity of the Project: antl>expected t:empemt:ur~ f:1nd htm1UI ity fbr each {)f the Settlement PerliJds mrri_u:gAt)Ut~ 1\'ClCYW!tperiod (<;tlld '\Vbere $Uch Declared Capacity changes, the finl~:at·whi.eh~~.c:Jiange·~·A},'{p(ctoo.tn take effect)~ ··· . . . . .

ir Ch~mges: The Cmnpany :;hall take re~~oie ®re iJ'l preparing AvaUahilhy De:cmrations with . ;;). vie'\v to\va:rds declaring a¢c'tlniteey •ihe·. company's expt!Ctatio:tis regarding the perfbt'l!'.tance of the Unit(s.J m:l~ '~f:tCh Unit i:n acc.(mlauce with. mis A grcr::~ment. If the Company·b~{mte~ a\vm'f~>6~~y, qii~tlltk~me (othe:r .thml .a.change in ambi:enl conditions) tb.m would be dre D«:ta~C~pacity fbrany Settl~~n1 Period, the Cm:i::ip::tny shaJl promptly .issue a. revised AvwlabiJjty O~lMaticrt TI1e Ctrmpany shaH ha·ve i:hi: tighi 10 chm1ge Availability f:)ecliu1'.ltfen i'i!,J,:least eight (8) h:q.ttt's pri(>r to the. time .such cl1ang;es is tri be9'.ltil~ effectv;\7e. . . . . . .· ..

iii, Dt:clared Capacity of Zer.o: A'd¢q!arati()nin ~~avallribllJty,D~laratian h1creasing the declared Ca:pudty from ze.ro sha!hnean that Pr~J~ct iac,z~?:ble ()f heh:tg sync.hnmise<l tc> th~: Board'~~ tntnsmis.sfon system at the lin.11e t:l:~at i:~i~~¢/fs s.tated. tc~ i::ff:ective (or is m:J such ti.me ls stated, then immedia.rtely)"

160


SCHEDULE 6

START-UP POWER MEASURING PROCEDURE

Energy required for starting the generation from the Proj~t shall be drawn iflrrough Board's transmission system and shall be measured by energy meter provided at !Project. The units of such energy drawn from Board's transmission system during an .. 1. billing period shall be deducted from the energy delivered by Company to the Boar in the same billing period. The bills shall be prepared on net energy basis. . :

PAGE-.,· 67

,.

161

FORA.NNUAL

(NOT

162

KSEB - BSES KERA~ POWER LIMITED - POWER PURCHASE AGREEMENT May, 1999

SCHEDULE 8

CALCULATION OFINET PRESENT VALUE OF TARIFF

The Net Present Value (NPV) ~fTariff shall be calculated as follows:

1. The Foreign Debt Service Charge/kWh shall be multiplied by 36.00.

2. Foreign Debt Service Charge/kWh, Other Fixed Charge/kWh, and Variable ChaJrge/kWh shall be added to get the total Tari:ffi'k:Wh.for a particular year. · ·

3. The Tariffs/kWh for all the years shall be multiplied by their respective discou4t factors assuming a discount rate of 12% (Twelve percent) p.a. to find out NPVof Tariffs/kWh.

4. All the discounted Tariffs/kWh in 3. above shall be added together to find out ~V of the Tariffi'k.Wh for comparison purpose!). . . I

5. No escalation on any of the variables shall be considered for the purpose of c~culating NPV.

PAGE - 69

163

TABLE· A

~ojori ~~~,-~l...-Y-L ..... ,""" ...... ·-·~ ...... __ 1_01 ...... ··~::_,.,,,_,~··:~C.~.-.--.-.. 1~·-~'#~:&1·~·"·:: ... "·"~~--N,,,,,l __ ~.-_ .. ~.·1:51

1;:;t:it::: (:r)\\( 1--·----------·~-·'" """""' ', ,, ···•,•.·•.n•"·'•'"'''''w@e<·•·"'"'·'"'·"'"··'n"'· '''·""''"·"f{@

~ ~-\'.4· ·,i~Jn-:

j FCF lot Opm Gyd1J,, ~1 lnlt.liOtlf!MrGtim1 Point i:: O 218 K.gNNJh ·--~-'/lt:@.\·,'!~'/1<)~Vh'l.'li.\"1\1'/,,,(,,-..W,,.,,,,,.,...,.,,,., .. .,., .. ,..,..-,,.,,.,,m~~:~:.'m:1-:-::.%».-.:~---'!"""""'-~rl.':;l:-!-ll\:10:v..~;;~...., ... ~ ~.,.~\'*;1 ~°'·M:(~Wl/l~<)(',\~

1, ,...,.~~~~ ~/,~'111. );lm..»1.r-:.:-:«V:«v»>.'l:Y.~WM~'iM .. ~-.;w»:W»M"''<rili.~"'.:V:.:~Wl/iW."..w.;,v;..\,\\,\l'.;«W:..W:

i I . Tariff 11BalRijjz foi Qpi3ii Cyds opi~ra'!km "'2338 Y.calMNh. In remGln P't1.!.lo oV$1' 111e 1f!fl}f of !his Arinwn#rlt l I

O'.bar@e

Rwriro:~:Wh,

.J._ .. _._ ... · .. ····j

. d ' ' l

' .

\ '

"

164

TAE1LE • B

_,,,,_,~,VM''.~"'_'''·>_W--__,,_--,---,,__~,,__ .. ,,,_ .. ,,, .. ,, .-... i··.-. ,.-., ... -... ·-. -.. !'.· .. · ..... Tariff Pmlot f . ...... .. .. . . .. . zj . . ,, "' . -~w.\\l.{-.!:0:1\','\•'.;'>;'"4:"·' ..

( '

l.\'. 1 ·,·.''.., f',·.·.,' .. ·"'.·'."' .'°'.1·)~' 1,· ,t;' :c.· .• • • ....••••.. , .. , .,.,. ·.".·•.··.· .. ·.····.···'"····-.. ·.·-· '·""·'· •.• ........................... , ..... , •• .,. ·•·.·. ·-•.••. 1·.•.·1••.--··.··· -.. ··-.. • .. -... ··.•.•.f;J, <. ' .. · , ;1 f ~.,Ii•, .. ~ ... '1.,· ...... .. ~'I(.~ ·~tL' ~ v. ;;;; "';;"'H-,,-- •. ,, , ,. , -· ,_ , , , _, ~.. ,. _, ·'\\.ii' ~ :;..,. ,. J•r~·n ,, :· i ~"'" "~~·~·.·.~·:,~::~:~ , .. ~~~"r"· )1c'. ·:~:1·::v, ... .,,: '\''\'*'->="~,,...,,.,,,,,;.in·~· .... ·:-i:·:~.,"*-"\~"'A-'.""",:...,.:.,.;;,;.v~~'~,.;....--.,,N-. -~·~-r"!."l-x\-\:.l(Jr,,a:~<.;:·i·i.~'i''M:.i.•"~·"•·M

i)~•1J\:Wr1 I t-:;,.:,.~~---~ ............ :.i; ;..-..::;. ... ,wm,~ .. M'W:::{.~~l·HW~~Yl.:''(.i'<'~'!(.i'zy,.~~~.-. -. "".--.. -""'."~~.-. : ·-·; :·~·'!'~~)'.)~f'W-~~~~~~~·~~'W"'''('-0:0:(.:.:.'«W~~«~l-';~"W/.1,:1,'ll'l:~w~~':":¥.~~(m,~'!?:~.''·0.\M\%'««~~.{~'~~·,,w,,;,.;,~,.v..i;.. ·1' 1 f'.Gf ft.rt QpM C1~:!i:, at lrMm1t1Mcii1m Pein! m Om K!)JWih i I Tariff H1~1tl faiH) fo1. Ofx~;1 cydr1 i,1p1:t4lfo11 '" ?~,~$ k~li~fih, tt1 illflWlP Flxi!d 0111~1 ti10 1 nrm cf !\~is Ag;tw1F!mt

7

·~~---~,...,.,.,.,..,,.,....._,..~...,_,...,.,...,..,,,.-..,,,___..,,,..,,..,,.,.,...,.-..,.,..,....,,~ ....... '"''"'""""""""-·~···· ---------1·~. · ........ ,;,.., ... ..__ ..... ;---. . .. ~ ... ·.,j w==--=~ ~=-=.,.,...,..,,,.,,...-""~~~~~,_.,.,,,~...,_~~,,,.,.,,.~,,,.,-,~~..,.+.,.,.,,...,.,...,..,,.,..,,...~,~"""""""""""""'"""'"'~~~~~~~~·'""""'i...-...,..,..~~--.- ' ··-- . ...,,. ~~ . .........,,, -·· -. ~w.,

¢,trQ39 · JJ,Q~ H O 0 . 0 0 G \.,,. '

. ' ' :,, .... ', :· ' ' .~

-f--""""-"--+-~••~_,,,,4_w.-""""""""',,,,__.'ll.'. :'. '=««M~\~\\~4'"""" .. ~.,.-=j~"""'"'"""""'*,._="'"'~~"-'-'"'-...,.P~-,,;,,.-,-f-..-,,,,,,;,,.~~&11-:i<1""-~'\l1"1' ~"'"---..,+---=~·

.• ~;:;;:rriw,\t -OJ1 lrn n,n . . . . o jf' o :11

. ~~Wh d ,,

• »».w.ii)')'.w;l'J«<'W<. ~,,,,.,.,.,_,_ __ ....._.._.~~v.6"""""'"''""=!"""*·''·"'i""""*"""'1'i11U;~""!«\\,\W,W.\W.~ ~'*"""";...w,.:."m,w...~~"-·""~"'-m~•~----·,,_..,.i;,,__...._~'"'-'-""'--..J....-""""'",,__.,,.,i_. mw111m#tt,11;.:.:;.w,w.w1;;, • ..,· • ......,,.,,,,_,

-OJ1 011 on

~]~··· ..._____,..

i}.71

·y;··:,··.:··.··.····.· ... · .... · .... · ........ .

' . ;' i .· . (

t

165

I

\1\' \

TABLE ·C

Tariff Table C ·!or Open Cycla Ope1alion for Untt 3

Tariff Period 1 2 3 4 5 6 7 .a 9 10 11 12 13

:Variable Cost --~---- --Rs 1.33 /kWh.---···~--·-···---·-~ .. ~--------r·~~~-··.,..--M~·-·-·-·-R&!kWb.

FCF·fo10penCycle, at !nterconnection·J>oint •·D.2iS kgl'r:W~; . '"''"''"· ...... .. ..

Tariff He:oit Rate for Open Cyela operati~n " 239S kWWVh. lo remain. F(.(ed. O:'leHhe lerm cf thidgrooenl '

IF~ad Cha1ge Al~% Plant LQad Factor ;I. Foreign Debi :serviee Ch:lt9e o.0054 0,0048 0,004'3 0.0038 0.0033 0.0027 0.0022 0.0016 0.0011 0.0005 lusc1kWh. 2. 0th¥ Fi:w:I Ctiaig~ o.~ 0,68S3 0.6U3 0.61!83 0.£883 0.6883 0.6&1l 0.6883 u.~ O.e&.3 Rs/kWh

The above Other Fixed Charges were arri11ed al after reducing Re 0.0317 per kWh. on account of estimated savings of combining the third unit along with the eXisung units.

In case of change ln outies/ taxes during implementaion of the third Un rt ttie tariff will ue suitably amended to reflect the change in the Project cost duly supported by d!lcumentary evidence.

V. 1

:

1

......

0 0 0

0.6&&3 0.dm o.&83

14. 15

.................. , ........... ,, '"'

0 0

0.6833 0.6Ml

166

ii * .. ~~"-"'.. s.~··· -~aj.._:~~·~-7 ~..,~,-~L~ __ s __ 1...._91~·=:~,1.~.': --*~~l~· ::~ .... ~1 ___ 3 ... ".~4r 151

~~fl~~~:·;;..···(,-'.9-st_· --I'-: "'_ .. -_ ... _ ... -_ ..... _ .. _··'7:;'.""~'.::'.~'."";'.""i;'."";'."".~-~:'.:'·~"'.'"';""';-.~~-:~'."";,,..,;,-=~"":;"'f•~-~""::·~~;::;;;;;-;;;e;~':'.'·~-::;:-:-;~;;;:'~-:-:-.-:=:~:=::·-:-· ,-/ ~~~-:-~-:· ..... ~-~-,~-,,-,:-:·::~:.:·:~~=·-~-"~~~~~ ...... -.-~,-~"":,~.=~~:-~.-':-~"""~-···--,0~~-~~,-~-~-~-<1~::-',~-1;-1~,-,n-g _-_..,w_..,. ___ •• ~- - l hlr M@dlit\•> bi#:i'ins# b~}!Wwn.$0% m.fld ?S.% Taril1 Heal Rm!<fr t!hmii i?O· lls tub:ctanti:ifrHl by n;rr.;dion cuf'Je .. 1Jcm !he ManufQi{ifftd ~u.bjed ta ~ l11·1¥K11ttum bf '-··•XtllJiltWn

farlfff!tt.~t f:atiiN f lh@Jstm 1lHb1;; Agrcen111nt k~~~-="-=m~I=-=-=~~~~~;;..~~~ ~~""""'"""'"""""""""~~~~~~~_.._~~~~~~~·"""""'~.....-~~~-'-'-'-.-... -... ~~J:::::~-T'--~~

Ttt.e::t~rlff·me11t\0ne<l•··1~\JPvtrttlq not inrjlqcle theeomporteot.of ·1119o~~Tax· .. Pitjyable by the Cwmpany, Tl\$ ~rtti;\tmt t)f lrmpmElwx shalf~e r~irnb~Jl'!~ed l?ytile Bpardfo thn Ct1rtiflBTl'f . . · .......... · ... · !h ..at±cNti~ti.oe with thw Ga\ternment of .·India· Policy'/ t;u[1.fo!!ntj$, ff a rl)i a.&; app.Hr.:\flhltt ·~~

LfMS~T~ntels for lar1d beym1d Rs 35/· !a¢spef armuft1 pa ya bl® by r.nc1 -r·•1'·'~·1 r'· 1"nu $hall bil i,ldjuwte:d in t.1'1e tariff@O:m11 paJsBpr,~r mil1ii:m Rs incn~sse ovf:1rri:s\i1::i·

b .•••.. \, .. J ... ) ·~/ '

0

//TRUE COPY //

167

.·.;-~.; Q~.~

a:rketing Division · $5QOJ ·~·~~ tafiits ~i ~ : ift'?C~ ath:~ :.~il-i'

ofi-9, ~ tmr.:: ~ 111:11 .,~ (~), ~~-400 051.

Indian·: Oil Corporation-limit.ed · "•Qo. Offtu : lnd••n OU Bhav01n·.

G·P. Ali Yav11 Juno M110. SlllCS•I {b'1.) MUll\b•i·.1100 05'1. T•••·: 1421::172 l11!u: : 011-1t65!. oii.7H02 G,.m I 'INOIANOIL"

I

Date :;11 ·1' l 1J1111 _,,,.,.

-~ .\1.s. B~E~ Kcraln Powc:r J muird

'2-- ~

F-7. \t(DC /\le.":!, M:iml. t\ndhtn 1 I J'>I).

\fo:ttbli 400 093

Suh: Suppl} ;11 '\1tphth11 lor your lS'J :\1W t.•omhinl'd c~clc (lfmi:r - !ll:iut 111 \ud1i11. Kcrulu.

Ref: _f id ~uppl~ .\grccmenc dated l i.3. J'NS aud sub\ct1uc11t ri:fatt•d Aw .. u''.;:u-ntli tht:rt~I.

\\'c thou~ }'<)U for th:: coun"") 1.:.\k1;Jl·,~ ltJ nut Cl:ief~bn3£~r • IPF), lh.'1 I<..Mcnun :l111n1t: In~~ 1,,, '" )i!UI orr;~t· till 2£di.'JQ .illd bl.! c1~,·u~~ion,. w1:l1 your Cha:rm:m Shn R. \'.~nha1 :ind Dm:..:!•>I 1n "-'111 K.l 1.Mimbd nn

1

tltt· ~l\uvc 1rn1<·

Durm1! the di)(tl:'i~hl:H. It h..t:lh:<ri ..:.11fveyc.11;111l 2 w1its \\"ifh ;i .:omhm1.~l pth\t'I !'.~'iJ1.·1.1tH•11 , ... 1.,,. d1 11f 107 \1W an· alr~·:iJv rcu,l;...fl•i r11\'~~r grn·~ra1ion with naphth:i by !~.9.99

ludtau Otl ( ·vlfh)J ;mon LtJ. Ila• l' .ilrr:i.t!y hnc<l up N~phtiu suppl.\ ar:atli;t:lll~nts t<ir ""''UI ."l ;1111. "11!. .1 •

1.1t1.rntt1y of 133.75 T\fl·p,\ th~t.•lgh prpdine. ·

\\'~· huvc r1otcd from 11!(' c<1::~1:1~1111i..:;ll~t)lt i.)f G~v~mmcnt of K~·:ii;J, th:~t Bsi:s ,,,., .1: ...... h~~ .. 1 1 ..

.;oinplctc cornnu~.S10llHl(; of \1<..:};:l pu"' c:;r plam JnJh.c s~m~ ;i::ca ,,·hcrl·,2 p.l•nl!> 011~ aln!';t,f~ , ·•11''"" f.rd

11!> )rd unit, enham.:in~ 1he pv\\·c.•1 gcnctat!ui,1 front J07 ~1\\' t<1 l 57 N1\\' to rm-ct 1ht- :l::i:·.- pm\1.•r sho11::.gt> :11 the St.tie of Kcr:il:i -~·0r ~hic11 P?Ahas ti;:lso been ngm:d;hr KSl:U ;ind H~I· . ., Kt"1;1!.1 1111'.' ~ynd:rnni1c<l comhint,1 c:sk ttpcrJt:on of ;t!'l the ... ~ plnn:s- wdl 11.C:Suh 111 au Z.ujci:nonJ! tl:i.p1w;11. in t1f 7{) T:\111> A vf ~"11pht\:1-J. hy l1~1:\\. ~cral~ · .: •

. . : ~ ~

- ~ ~-

Ta).m~ inro the t1cnnmt !ht" !!ltfk•llMll.'.1.' o( <1.U lhc- ~ u1tiu of }'ll1'!t rtl\~er~ J>l:int o.pc1;11i.1u t•1 me~·• 1h,· powt'r rcqum:mct)!:i of.StiHC of };~·r:ii.: and 11lso 1he $pr:1:iA! effom ot' ~cr.1b ::>t.i!tt• Elccmcuy Hn.11,f .11 .. I 1'er~ill (ion:rrurn:m in 1,1Ig.11ii; U'.H:S t.:~r::1!~ P<>v.,t>r Ltd .. to consm1(:t.ln,:i ~onm1:ir.:.ii.m 1h• J'J 1:tl1t ah.,,

l'k:l\(' .:;H!\ t.:) the_ ~~:i;:l'. . .-h~·.o1.'·· •:· "'.'l KcT1la .;l.l!C 0!:1.c. t ·.1.:hw :n ''~1'.•Ll>c" _.,)11\llh'I'.»"'•.' .•• ,.,

-~11 ?''-fh!l:.J tc) yt.,~a i 1 . .-:::1·, -~ .. -.: ,,.u~r~\.

s B-SO, Defence

NeW Oetru -110

ANNEXURE-P/6

// TRUE COPY //

168

SSES KERALA POWER LIMITED KBR A.LA

R~gd .. Offiee· l Works : UOVOGAMANOAL.P.O., KOCH! s·s3 501

Ph: (91 ~84) 3085050, Fax: {91484) 30!·2007

'BKPUKSEB/GAS/2011·..:12ro7

The Chairman, Ker13la State Electricity Board. \!ydyuthi a·havan Thirwananth~puram.

RespQded Sir,

11tii Juiy ·2013.

Project

S!Jb.j~~

165.MW CCPP of BSES Kera.la POW'er Limited at Kochi

Pr~pp~a,IJor pc;>nyel'Slqri ()f.16~ M.W CCPP o(BKPL at :.}{oc.J:ii from Naphtha tO. LNG/Natural'c:Sas~ ·

References 1. Our letter BKPVKSEBIGA$1201 F12/00 dst$(! 21"' De<: 2012 2 .. Presentation inaq~. by st{PL on 1$111 Feb201'3 ·· 3"' Technical presentation tzy Mis G?neral Electric Inc, us on

25mMay2013

We invite· your ki_nd attention to thr; r~f~r.red letter and the subse~.ent twQ presei')tations ·on o.uq:~ro-posal .forQC!S conver$.!on.

Vide the referred letter we h~ve sought ihe approval of KSEB to convert the operafiori of our 1':65 MW N.aph1ha .based Gombin-~p Cyde.Power Plant afKoohi ft.om liquid tu.el tQ Gas

· a~:mandated \Jy the. PPA.executed"~tw.eenthe corryp~ny and K~tB. - . -. .

It has beer.i relial;>ly learnt thatthe P:etrone.t's LNG· terminal at Kochi will be 00.mmf~si.oned. · hy .Aug· 2013 ·wtien commissioriing.-cargo is expected. M's. ·Gas Authority of India. Umited (GAIL'S}' Kochi - Kanjik.ot.ie- Mangalore.:. :sa~gatore tru.DK pipeline will be completed by· e.hd of .2.0t4. GAIL has -alreaoy· i.n~lled the ·ga.s corrdi;ioning Q.Um metering. skiti at our

... plant. pr.e.mise~ (lnd laid the pipe.Hoe ·~onneqtjng tq . the abo~ ~riuoned. Wrik pip13Hne to > ·:"t6ceNe. tNs·::by the tlme F>~ti()n¢'~ LN~· ·~ermlrial ·1s. :~mrrifssicin~d 'and domestic Natur$1.

Ga$·when the Mangalore-:Ba~gafor~:.PlpeJine is operatJona~. . ., ... , '. .

As a~vised ·by. K:S.Ea,· w,e.h4d air~ad.Y.. apptq,a.c~eQ ~n,ral Electricity AuthotifY:'.(CEA) for reo:omrnendlng allo<:ation -of d,om~~~ic:.~tural Ga$. for BKPL.under 12111 plan ·perj:0d: CEA has noted: our ,r:.equirement arid has·.friforme1;f th.at the. same would ·be co:nSide.red by Ministry of Power, Ministry of Peiro·leum & Natu~I G:as ancr E,mpowered Group Of · MiniSt$iS. A posffi~. recomm~ndati"on ·fr9m Government of .Ke.tala hence· Will:. p,e of itn~nse help to see:ur&the·~llo~foii ofdome~ic N.aturat 'G~s for"the·plant,· .

In .vitaw of· Ute. expected avallabiliy:. of iNGi Natural Gas/we in~.nd to ;proceed with: the ~nve~r<?n: ·ct the pl .. art1 .. fro,m, :'Napbtl'l~ .. :.to .. LN~Jtfab,i.ral· .g_a~; ~h. art, o.ye,tlll. View .. : .. of .. · ·behefltting· KSE$''.ana· the:$.tatEf ~t K.~3.'8$ t~.plantts .. tot~llY'd~~ftijted'tQ' .. KSP.B.: lrt ·ord¢.i:: to ~ve time. · Wf: ·n~ve initt~led -~isoussiqns with .gas. tui'bitie m~nutac;tUrer/ EPC' Contractors· for.executing the fu~ cor:w$FSic.n wor,k.s which ·S.hall .be comp~teo .\N1.thin 12 months from the start date. °The :~tart date can·:.be-.'ct:onimunicated to .the ~P:C: Contract¢r

I , ' . ' ' , ' •

1 f·P·agAt ·.

coRP.oRA-fe CFF.tce:>: ·t· aiociC, 11t i:.u'i6R, :p-~i1fit)6fiA1 .AM~1~0WlEOGE .cnYi NAV.1 MUMBAI - .~oo ·i10 " . .- - . . ; \ "~· · ..

ANNEXURE-P/7(Colly.)169

//True Copy//

only upon getting the approval from Government of Ker~fa for the proposal. submitted to KSEB~ .

ln line with the di~®.s:sions ah.q presentation. by Mis . .G.enera.( Electri~ lnq, US Mkl on 251b May, we- would lik~ tp submi~ the foll9wing updated pro.po_sal for Boc:irc''s kind co.nsideratit)n. ·

Pr:opasal f9rConversion of16:5 MW·CCPP at Kochi and Extension of P·PA

A. Capital ·Cost

Ttie_pr.oposed eonversior.r Qf··planr ·from. Naf),htha to LNSf Natural G.$~MA~Ot,Jld. ~u.ire an addrtl.onaLcapita:I e>;penditure ·of-about·RS. 124·erore.s·~s pedhe·"SCope. m·Workand .al'an exchange rate of Rs 60 to a Dollar. T~ levetrsed fixed tariff fo( 12 years. assuming ·1 o years eXtension of the cllrrent PPA term Whict.i expire~ on 31st· O'C.t 20t5 wm be Rs i.09/KWH~ .

Clause 7:6 of the PPA stip.ul~te.s that after gas ·conversion·. heat rate :and tbe increase in capital cost will be suitably ·adjusted in tariff. Accordin91¥-~ the actual capital cost incurred on the conversron $hat! be appfopri.~y·pa$seq::-through '" the fixed charges.

B. Changes in the Ope~ting P.arameters:ofthe PP.A:

The proposee epnv~rSi.~n of .:P.la.ntfr,orn Napnttla tp ~Nqt.Nati,iral G~~ will <;:ti~nse '~~. operating parameters· of the ·piant.. Th~ maehin'e. p·entiririance po$t ·f\i$I ·sWit¢h O"'.ef w.~$ di.~cus$ed with M/s. <3:ener.al Efe.ctri.c ~ sug·ge.sted by KSEa tf.urin9 9.ur pr~~tatiqn.qn 191.h Feb ,20) 3, Accord1ngly expected petfcmna~s of the machines ·w~fe · .. evaluated. by . gas turbi.ne' s OEM. Geheral E leeti·c lnc .and SP~INT {SP Ray INT e.rcool&lg) te¢hnolo:9)' ·:1s ·

. -proposed t<> be introduced in gasturt>ines along with·corwerslontp .optimlze'the::plaht heat rate. · · · · · · ·

tt1~· ~~~~~at~d h~t· ·~:~rii \ti~~J+~te' :~~>·~hv~6~: ~iU o~-:~~7tfKeaVKwfl ~ the .-·$talion·~ ~ .:· export of t9't MW and oo HHV ba~is. The. same has fo ·be :incnr.por8fed ih the PP.A .by .a . · suitable amendment-and has to be :sui1ably adjust-e<J.' when .plant is:.di~patched for part · {<l~d o:pera.tlon.. · · ·

. c. PaS$~through· of 'Take:. or P.•1 .under Gas· .Svpp!Y, :Cbntract ·and· Ship·· ·or Pay u nd:er the Gas T.ransportati'on Gon(ract. .. ·

As. part of cpnv~on of the plarii •. $)<PL. woµid -~,.req.;il~-..to ·execute th~ G.as Supply .· A'greernent :(QSA) with· ·9as. m.e1~eti119 tQ.mpa.nie.s- ·a.n.d ·Gas Tr.ar!$p0rtatt.or1 Agreen.ient :J~J~lW.itti.·_GAIL GSA ¢n1a.i.~ t~ .. t~a-0r:p~y·tl1a£Qe&i:~rid::<;JT~,t~in.s.::ttia:6Qi.P :O.r:.P.~Y· tnatg~ W'hiCJi'beQorrie appu·table.$Md P'1Y~bJe tt.s'as liitnat~dr~tf~nd P._ipetin.eJs:not ·~d · · a$ commi~~d in. f!i" ey.erit- .bff'\<?.n~sehe4.ulet. 9.1· pow.er by tl\e- l:Jtility: Ht!rnie; ·suit~f;lf# provis!On~ for b.?tck.;t:Q-back arra:ng~e.ri\ n:®~ to ·_pe ·i\CQrpor.~led fqr SU(ltt 11~.bi!~~Jn the. eX.i sting PPA.. . . . .

170

"-"

- B$ES KERA LA POWER UMlTEP

D. Exteo$ion olPPA Tenure by to yea.rs

Cla.u$~ 1"5.1 of t!Jt? PPApr9vides th~ 1h:e tenn i;>.fthe ~xisti'ng ·ppA can b~ extended b,, 10. years .after the e1<piry of initial term-:of 15 years.

tt wm b.e beneficial to KS.E:B.to ~x.te:nd the term of the PPA ·by 1 Q more years together wrth conversion of:the plan1 from Naphtha to Ga.s s.in~ cost Qfpower on Gas will be Che.aper as·c·('.m1pared to. Naphtha (presently by 30?/d). TnA5: approa.ch wfll al.so m~ke·the lncrea$·e tn .fixed charges negllgible:. as th.e recovery of addJtional. capital cost on conversion wUI be spread over a longer periOd. · ·

.E. Land, lease reneV'ill

The plant is locatecf in 20 acre$ of land leased oUt by Travancore Cochin Che.mic.at-s Limited (TCCL) as per Govt.Order 165198110 dtd 24tti Nov 1998 .rtie lease h:as -e.xpited on 31 ~t March ·2oi 2. As per the term_s .. of the tease Agreement between BKPL arid TCCL1· the · period ofthe le.~$e .sh.all b.e ·extended :by .rn~.tqal.~.agreement :betWeen .lessor ~nd.-1.e.ssee on the order oHh.e· ·G·pvemment ofK.e.rala an expiry Qf\he period $tipulated ·\herein. We have·

. already made a. request to TCCL to renew· the f~.hd 1.e.ase· for 15 more years with .effect from 1st April 20i2 at the e:Xlsting terms.and t:oni:itfons.

We have als0 made a re.presentation fo <S~c.re~r'j (Po;wer), .GoK f.ot makir;ig a recomnwndation tQ lndu~tries.: D~pa~~nt for r~:iewal of land l~-~$e for··a fl.lrther peri9d of 15 years with ~ffect from 1 "~April. 2012. This, is ir; li.ne With the PPA provision ·for extending the. term of PPA fqt rn mor¢..y~ars f;lfter·theJn!µal. term of.15 years wmch expires on :ar~ oct 2ff1 s.w~ s~tl(GoKs kind.··approvantdhis ·regarcf a$ wei1. · · · ·· · ·· · · ·

· F. .Over~U Adv~rytagetc KSEB

ThELroain advantage of :gas conversion will -be.<;onside.rable reduction ·Jn. Vana:ble ·cna.rge fuel. Though th.ere wm be a marginal incre·ase in· ~e fixetl charges art ~carunt of:addltio.n~l

· .~m·,:·~:i1·~~1l~l~~r:g~~1.#:f '~~T~1~iy~~~i!a·J~:J>l~~~·a'11t1~~~~tti~~st~ ·unlike· today wh~.reln ~$EB· Js provtding. the s~hed~J& on.ly du~i.ng the peak $easori .. Th~· following tabfe . $hows. thef indicativ:e. .~st dt. J)9Yw!'.ef.' frDin· our plant after conversi·Qn . (botb with -domestic Natural .Gas as .we~ LN~): is· :g~v.en below·. · · ·

OeSQ.r)ption ·

r ctarrartff

..... ···,

·.o:~:m~'Stic · · N·aturarGas · .. 1..®.,·

.:5..0.5

171

"'··Cost otdomfJ:sficNaturarGa:s consk:JertKJat US0:8r41 tnmbtv ~nd t.N.G·eonsk:Je.redat µso .. t8 lrnmbtv dong t~)) . .E'Xcharyge rate 1 USO ~Rs 66,

G:. Waive.rof KVAT on gas pur:chase-.an.d Sales Tax. on L.NG::t~nsport.

lt may please be noted that.Got has wat\ted off the. 5% Customs Duty :on i..r.-.iG. impo.rted by Petronet for :SuppJy to a a~~rat~ng c~n)pany. KV.AT and·service Tax together .cost about 1.Z% :qt the tan¢ed cost Qf L,NG·~Hen:ee waiver of these two· levte$: can t.educe the price of gas and. G9ns~quenW the cost of power substantiaHy · ·

in view Gf t_he abov.e fac·ts ~nd long t~d time inVO,Ved in c9n\iersion of. the p~arit,. we· ·earnesUy request KSEB to: ·

1.. Gr-ant us the approval fot. c..onver$iofl' ·of· plant: fl'-om Naphtha to Ga$ with· ti)e. additionat capital expe.ndit\lre ·o1 abo.ut R.s. 1:24. :Crore& with the .consen1 for· :m~~ng. ne~~-t>'~iy clia.ngei>J ameidment tn· the PPA in¢tudJng fu.e extensron of PPA terrn b.y 10 more:· ye~s. The ~bov~ ·am.o;,J~ i$ ~t an exchang~ rate.· of Rs.SOJUS-$ and an,~. chan\1es in tf;tE.$art.te will affE¥~ the cost of-conversion.

2. Make·s·uitable recommendation· to the-CE.Al Government.of h"ldia for aHocatioin of dom·esti.e N.atu.ral·:Gas· fo·r our plant.

~. Ma~e recommendation to ·qp.K. for r~n~al :of land· lea$e for • fu.rther peri~ of. 15 ·yean with effect from- 1·~ April :2tl1··:z· ·

4-. ·Make ·teeommendati<>.n' to·:.GoK/G61' ··for ·waiver Of KVAT and. Ser~1oe ·rax .r-esp:ectlvely.forthe· LNG to be: used by u.s for,p.Owe·r-gene.rati~n;.

Should ,any crari1ication or additional· information 'be reqwe-d on this proposat fiin.dly fet us. know~ We wtll be lni!PPY to furnh~h the $.am:e-at:the:earHe$1.

·. ··.Thanking· yqu .· ·· .. ·

Yol.i.r.$ falthfully,

.For. BSE'S:.·K~rata Pqw~r .L.im.lt.ed

;'h(P~~-~--. . .· ... I~~. Y~-·~·-· .. ~-Robin.S'e.hasti.an .

. oirect9r

~-TRUE COPY

S OFFICE B-50, Defence Colony

New De!hi-110 024

172

KER.ALA STATE ELECTRICITY BOARD Office of the Chief Engineer (Corporate Planning) Vydyuthl Bhavan, 9tn Floor Pattom, Thiruvananthapuram Kerala, Pin· - 695 004

Phone : 0471 2.447404 Fax : 0471 2.558340

E111ail 1 : [email protected] Email 2 : [email protected]

FCT: 9446008607;'9496011752.

---•--w••----------------·~-------•-••••---•••--------------------~--------------------•·

No: 380/PAEE1 /2013/CE(CORP.PLG}/ ~if·~ Dt: 30.1.13

To

Sir,

M/s. BSES Kerala Power Limited, Udyogamandal,_ Kochi.

Sub: .Proposal for conversion of BKPL plant at Koc:;hi from naphtha to

natural gas - reg. Ref:· Letter No.BKPL/KSEB/GAS/2011-12/04 dtd 12.11.12 of the

Director, BKPL.

In your letter addressed to the Hon'ble Chief Minister vide reference

above, it was requested to grant approval for conversion of the subject

plant from naphtha to natural gas with additional capital expenditwe of

about Rs. 99 Cr. KSEB desires ta· have a discussion on the .. points raised by

BKPL regardin~ their additional expenditure.

You are requested to intimate your earliest convenient date,. for a

meeting with the under-signed to discuss the matter .

. ~ · r-·f2 FEr zorl

Y9urs f.aithfully

,

··:

~~~ ~Chie.f Engiyr (Corporate Planning) . ' • .. v,.':I.;.-:~.,., ...... :.,. .... ~·----I

(.-~....- ......... _. .. ": ..... -····

t -(~ :: r'·- .· ~.. :::~·.\.'/:· ....

' .. ··-~-'; ,,.·· .. ·:

.•• - ... • • ..- ..... --... i ..• -.-..... - •••• _ ...... _ ...

173

BSES KERALA POWER LIMITED Integrated Management II· ~. Sy$terns Certified / 1_,

, ,. ·--- ·- - . . ~ ..... _,,_ -~ -_ - -

KER ALA · Regd. Office & Works : · ·

UDYOGAMANOAL P.O., KOCHl 683 501 Ph: (91·484) 3085050, Fax: (91-4S4) 3052007

lSO 9001 : 2008 '1

ISO 14001 : 2C0-4 till OHSAS ·18001 ; 2007 -..~ "''!ll ISO 50001 : 2011

BKPL/PS-GOK//GAS/2013-14/01 1st Aug 2013

The Secretary, Department of Power, Govt.of Kerala. · North Block, Secretariat Thiruvananthapuram.

Respected Madame,

Project

Subject

References

1.65 MW CCPP of BSES Kerala Power Limited at Kochi

Proposal for conversion of 165 MW CCPP of BKPL at Kochi from Naphtha to LNG/Natural Gas.

1. Our letter BKPUFIN/KSEB/RLNG/2010-11 dated 5t11 Aug 2010 addressed to CE (Commercial and Tariff),KSEB

2. Letter no.CP/IPC/148-BSES/252 .dated 20/10/2010 from CE(Corporate Planning}.KSEB

3. Our letter BKPUKSEB/GAS/2011-12/07 dated 11th July 2013 and addressed to Chairman, KSEB

4. Our letter BKPL/FIN/KSEB/Land Lease/2011"'.12/01 dated 01/02/2012 addresse.d to The Secretary (Power),GoK

5. LetterNo.1962/81/11/PD dated 18/08/2012 from Addi.Chief Secretary to GoK.

BSES Kerala Power Limited (BKPL) has set up a 165 MW Naphtha based Combined · Cycle Power Plant at Kochi as per the decision of Government of Kerala. The plant is fully dedicated to KSEB and the Cornbined Cycle Power Purchase Agreement (PPA) was signed on 3rd May, 1999. Clause 7.6 of the PPA mandates the company to use LNG/ Natural Gas as fuel for the plant within six months o.f its availability in the State.

In connection with th~· approval for fuel conversion of the plant, we ·invite your kind attention to the referred letters submitted to KSEB whereby we have sought the approval of the Board to .convert the operation~ of our 165 MW Naphtha based Combined Cycle Power Plant at Kochi from liquid fuel to Gas and to sign the Gas Supply and Transportation Agreements. ·

It is learnt that the Petronet1s LNG terminal at Kechi will be commissioned during Aug 2013. Gas Authority of India Limited (GAi L) has indicated that their Kochi - Kanjikode -Mangalore- Bangalor~ trunk pipeline will be completed by end of 2014.They have already installed the gas conditioning~cum-metering skid at our plant premises. The pipeline

llPtige

CORPORATE OFFICE; 'l' BLOCK. Isl Fl.OOR, DHIRUBHAI AMBANI KNOWLEDGE CITY, NAVI MUMBAI. 400 710

174

If&'- BSES KERALA POWER LIMITED

connecting to the above mentioned trunk pipeline has also been laid to receive LNG from Petronet's LNG terminal and also to lin!< the domestic Natural Gas supplies when the Mangalore-Bangalore pipe line is getting operational.

As advised by KSEB, we have already approached Central Electricity Authority (CEA) requesting recommendation of domestic Natural Gas for BKPL under 12th plan period. CEA has noted our requirement and has informed us that the same would be considered by Ministry of Power, Ministry of Petroleum & Natural Gas and Empowered Group of Ministers, Gol in due course. A positive recommendation from Government of Kerala hence will be of immense help to secure the allocation of domestic Natural Gas for the plant as noted b'y CEA

In view of the expected availability of LNG/ Natural Gas, we intend to proceed with the conversion of the plant from liquid fuel {Naphtha) to LNG/Natural gas with an overall view of benefitting KSEB and the State of Kerala as the plant is fully dedicated to KSEB. In order to save time, we have initiated discussions with gas turbine manufacturer/ EPC Contractors for executing the fuel conversion works which shall be completed within 12 months from the start date. The start date can be communicated to the EPC Contractor

·only upon getting the approval from Government of Kerala for the proposal submitted to KSEB.

Subsequent to the latest discussion we had with KSEB on 25th May 2013, the following proposal has been submitted for the ktnd consideration of the Board vide our letter dated 11th July 2013

Proposal for Conversion of 165 MW CCPP at ·Kochi and Extension of PPA

A. Capital Cost

The proposed conversion of plant from Naphtha to LNG/ Natural Gas would require an additional capital expenditure of about Rs. 124 Crores ~s per the scope of work and at an exchange rate of Rs 60 to a Dollar. The levelised fixed tariff for 12 years, assuming 10 years extension of the .current PPA term Which expires on 31 6

t Oct .2015 will be Rs 1.0~/KWH.

Clause 7.6 of the PPA stipulates that after gas conversion; heat rate and the increase in capital cost will be suitably adjusted ·in tariff. Accordi.ngly, .the actual capital cost incurred on the conversion shall be appropriat.ely passed~thrnugh in the fixed charges.

8. Changes in the Operating Parameters of the PPA

The proposed conversion of plant from Naphtha to LNG/. Natural Gas will change the operating parameters of the plant. The machine performance past fuel swi.tch over·was discussed with Mis. General Electric(GE), the Original Equipment Manufacturer of our gas turbines as suggested by KSEB during our· presentation to the Board on 19'd1 Feb 2013.We had arranged a presentation to this effect by GE,USA to the senior official.s of KSEB on 25th May 2013. . . ·

.. -......... ,. -· .... .

2 IP··· o ·'·· \.,.::,. \,.

175

bQ BSES KERALA POWER LIMlTEO ·:fl!:~RALA .

Expected performances of the machines were evaluated .by General Electric Inc, USA and SPRINT (SPRay INTercooling) technology is proposed to be introduced in gas turbines along with conversion to optimize the plant heat rate.

The estimated net plant heat rate after conversion will be 1978 Kcal/KWH at the station export of 157 MW and on High Heating Value {HHV) pf the fuel. The same has to be incorporated in the PPA by a suitable ·amendment and has to be suitably adjusted when plant is dispatched for operation at part load.

c. Pass-through of Take or Pay under Gas Supply Contract and Ship or Pay under the Gas Transportation Contract ·

As part of conversion of the plant, BKPL would be required to execute the Gas Supply Agreement (GSA) with gas marketing companies and Gas Transportation Agreement (GTA) with GAIL. GSA contains the take or pay charges and GTA contains the ship or pay charges which become applicable and payable if gas is not drawn and pipeline is not used as committed in the event of non-!;i<;;hedvle of power by the utility. Hence, suitable provisions for back-to-back arrangement need to be incorporated for such liabilities in the existing PPA.

D. Extension of PPA Tenure by 10 years

Clause 15.1 of the PPA provides that the term of the existing PPA can be extended by 10 years after the expiry of Initial term of 15 years.

lt will be beneficial for KSE13 to extend the term of the PPA by 10 more years together witr conversion of the plant from Naphtha to Gas since cost of power on Gas will be cheaper as compared to Naphtha (presently by 30%). This approach will also make the increase in fixed charges negligible, as the recovery of additional .capital cost on conversion will be spread over a· longer period.

E. Land lease renewal

The plarit is located in 20 acres of land leased out by Travancore Cochin Chemicals Limited (TCCL) as per Govt.Order 165/9B/ID dtd 24111 Nov1998 .The lease has expired on 31st March 2012. h. per the terms of the Lease Agreement -between BKPL and TCCL, the period of the lease shall be extended by mutual agreement between lessor and lessee on the order of the Government of Kerala on exptry of the peri9d stipulated therein. We have already made a request to TCCL to .renew the land lease for 15 more years with effect from 1st April 2012 at the existing terms and conditicns.

We have also made a representation to your esteemed .office for making a recommendation to the Industries Department for renewal of land lease for a further period of 15 years with effect from 1st April, 2012. This is in line with the PPA provision for ext-ending the term of PPA for 10 more years after the initial term of 15 years which expires on 31 it Oct 20.15. We seek Go K's kind approval in this regard as well. . .

F. Overall Advantage to KSEB

The main advantage of gas conversion will be ·considerable reduction in Variable Charge fuel. Though there will be a marginal increase in the fixed charges on account of additional ......... ················-··-···

31Pa~c

176

Bli!fl BSES KERALA POWER LI Ml TEO K:ER A

capital expenditure for fUel conversion , such conversion of the plant will enable KSEB to use this plant to supply reliable ard economical base load power on continuous basis unl.ike today wherein KSEB is prov ding the schedule only during the peak season. The following table shows the indicative cost of power from our plant after conversion (both with domestic Natural Gas as well LNG) is given below.

Estimated Tariff (Rs/kWh) Description · Before After conversion"

conversion Domes~e LNG Natural Gas

Fixed Charaes (FC) 0.69 1.09 1.09 Variable Charoes NC) 11.811 1 3.96 8.48 Total Tariff 12.5 5.05. 9.57

1 At the current Naphtha price of Rs e7COO !MT * Cost of domestic Natural Gas consfdr;rea' at USD 8. 4 I mmbtu and LNG considered at .USD 18 I mmbtu (long term)) .Exchange rate 1 USO =Rs 6C.

G. Waiver of KVAT on gas purchase ·and Sales Tax on LNG transport

Jt may please be noted that Gol has waived off the 5% Customs Duty on LNG imported by Petronet for supply to a generating comp<;my. KVAT and Service Tax together cost about · 12% of the landed cost of. LNG. Hence waiver of these two levies can reduce the price of gas and consequently the cost of power substantially ,

It is learnt from the letter cited as reference no.5 that a recommendation for allocation of domestic natural gas is pending a decision on the extension of land lease and PPA

In view of the above facts and tong lead time. involved in conversion of the plant, we earnestly reques:t your good office to kin~ly:

1. Issue needful directives to KSEB to grant us the approval for conversion of plant from Naphtha to Gas with the additional capital expenditure of about Rs 124 Crores with the consent for making necessary changes/ amendment in the PPA including the extension of.PPA term by 10. more years. The above amount is at an exchange rate of Rs.60/US $ and any changes in the same will affect the cost of conversion. ·

2. Make suitable recommendations to the CEA/. Government of India for getting allocation of domestic Natural Gas for our plant.

3. Make recommendation to GoK for renewal of land lease for a further period of 15 years with effe<:t from 1$t April 2012 ·

4. Make recommendation to GoK/Gol for waiver of KVAT and Import duty/Service Tax respectively for the LNG to be used by us for power generation.

4 I ·r~ .. , .., ,,, 1..(,. .~? \.•

177

(, g. BSES KERALA POWER LIMITED KE-:R'..ALA

S1ould any clarification or additional information be required on this proposal, kindly let us know. We \Nill be happy to furnish the same at the earliest.

Thainking you.

Yours faithfully,

For BSES Kera!a Power limited

4f\ ~. )L~ ' Robin Sebastian

Director

Enclosure: Copies of the referred letters

5 I Page

178

KERALA STATE ELECTRICITY BOARD tlffir~:.o!,t:1~ 1 Clij~f Eng1neer ,C::>. i . .1vr,o.c ,"tanr,r.g) 9u· Floor. Vydyut:ii Bhavanam Pa:tcm. Thiruvananthapurarn ~«:-nib, Pin· 695 004

. CP/Plg.1 /BSES/ 2 2'3

To

Sir,

The Director BSES Kerala Power Limited Udyogamandal P.O. K.ochi ·· 683501

Phone

F<>< En ail

0471 2447 404 9446008607; 9496011752 0471 2558340 ceolg@ksebnet. corn dceplgCi\lksebnet. com

Date: 24.08.2013

Sub: Proposa. for fuel conversion of· ·157 M'N CCPP of BKPL at Koc.hi from Naphtha to RLNG/Natural Gas

Re-': Your tetter No. BKPL/.\SEB/GAS/2011-12.'07 dated 11.07.2013 addressed to Ch?1.irman, KSEB

Referring to your letter cited on the subject T1atter- seeking approval of KSEB for the

fuel conversion, I am directed to inforrr as follows. 'i..

It is noted that BKPL is intending tJ proceed with the conversion of the plant from

Naphtha to LNG/~IG, on the assumption of getting domestic gas aHocation from Govt. of India and/or tying u;i with RLNG frorr the Petronet LHG terminal. As per

your lc::tter ~ the addittonal capital investment required for the conversion o, ~1»e

existing 157 MW plant from Naphtha to Gas i~ Rs. 124 Cmre at an exchange rate of

Rs.60 per USO. The leveUsed fixed charge for a period of 12 years (subject to a PPA

extension hr lO years) is shown to increase from the current level of Rs.0.69 to

Hs.1.09 p:er unit of electricity. The variable charg~ per unit is indicated as Rs3,96

in case of 100% domestic gas and Rs.8.48 in case of 100% RLNG as fuel, assuming the

cost of domestic gas as $8A/mrnbtu and that cf RU~G as $18/mmbtu. "'

Ho'Never·) it ls to be noted that as per the domestic gas allocation criteri.a .of MoP 1

natural gas would be allocate<i to power plan~5 in a State1 for onty up to 60% cf r'l"!'ir capacity. Thus1 even if maximum domestic gas allocation ls received for the prdject, gas would have to be sourced from the costly RLNG also. The expected tariff in such

a scenario is to be worked out.

Another po~nt '.loted in your let~r is the r1eat rate, which is mentioned as ·1978

kCal/k\iVh at tl·e capacity of 157 NW and on HHV basis. It may be noted that the

179

;wove heat rate is much inferior to the heat rate offered by most manufacturers for

their gas turbines that are based on modern sta>:e·of-the·art technology. Considering

tj,'\e high cost of the prnposed fuel, a poor heat 1·ate wilt result in higher variable ,,,,. r

charges and will badly affect the economics, especially in the long run. Stated othet"\Vlsc, a new turbine unit employing better heat rate would be much beneficial

in tile long run t!:an retrofitting an old unit yielding a poor heat rate, even if the

capital investment required is more., considering the fact that the fixed cost is only a

very cninor part of the total power tariff.

Thus, lt is suggested that installing a new combined cyde gas turbine generating unit

of around 400 MW etriploytng mod~rn state-of·the,art technology would be a more

appropriate solution for the BKPL plant than retrofitting the existing 157 MW

naphtha based units with gas turbirn±>s. As discussed, you are requested to evaluate

the possibility of shifting a unit of s'.mflar capacity from the capacity creatE.'d

eisev,ihere, keeping the fixed costs to around U1e levels suggested, as the present

PPr\ is to the order of 157 MW and KSEB may extend the PPA to around this figure or

at the maximum 200 MW and for the balance KSEB shall exercise the first right of

refusal for purchase of power and BKPL shalt have the privilege of export if such

right is not exercised, so as to maintain a high ~lant load factor.

.1\nothe1' step that could be explored to reduce the cost of generation is tc :-:-:~kc

avc,ilab!e the RLNG by pooling with shale gas. In the ccise of conversion of RGCCPP

Kayamkularr\ NTPC has already requested Petronet and GAIL to supply the gas by

pooling with cheap shale gas; lNhich has been contracted by these two entities. BKPL may also explore this possibility, where 60%. of the gas requirement could be. i~;t

from domestic gas allocation and for the balance 40%, which is to be met from RLNG, 75% of the requirement may be made available on the Henry Hub Index

pricing (shale gas contracts) and 253 only on. the expensive JCC Ind.ex plicing

(already contracted by Petronet for Kechi terminal).

Urgt:'nt action in tllis regard is to be initiated) as the land lease agreement executed

by you has already expired} the PPA executed by KSEB is due to expire in March 2015, ar.d tilt~ fixed charges rolled out monthly tiy KSE8 is reflecting badly on the accounts due to very low production levels.

Your remarks on the above suggestions may please be furnished at the earliest.

Yo~irs faithfully 1

\ ~ \ \\ r""-h / \)""' ,

Chief ~ngineer (Corporate Planning} L i/

180

~W4· •. ;··' ---. - . . ·-" -

KE-RALA

BSES KERALA POWER LIMITED Regd. Office & Works :

UDYOGAMANDAL P.O., KOCHI 683 501 Ph: (91·484) 3085050, Fax: (91-484) 3052001

Integrated Managem. 1e:ntm_· . --~ Systems Certified • • /\:

ISO 9001 : 2000 · '1

ISO 14001 · 2004 ~ OHSAS 18001 : 2007 ~ lSO 50001 : 2011

BKPL/KSEB/GAS/2011-12/10 17th Sep 2013

The Chief Engineer (Corporate Planning), KSEB, Vydyuthi Bhavan Thiruvanantnapuram

Sir,

Project

Subject

165 MW CCPP (Gross Capacity) of BSES Kerala Power Limited (BKPL) at Kochi Proposal for conversion of 165 MW CCPP of BKPL at Koehl from -Naphtha to LNG/Natural Gas.

References 1. Letter from KSEB No. CP/Plg.1/BSES/233 dated 24th Aug 2013 2. Our letter BKPL/KSEB/Gas/2011-12/07 dated 111

h July 2013 to Chairman, KSEB .

3. Our letter BKPL/KSEB/Gas/2011-12!01 dated 4ttt April 2012 to Chairman,KSEB

4. Our letter BKPL/FIN/KSEB/RLNG/2010~11/01 dated 5th Aug 2010 to Chairman,KSEB

We are in receipt of the referred letter. Our views on the various suggestions mentioned in the letter are consolidated arid submitted for your kind consideration.

1. Gas options for the- project

A. Domestic Gas We understand that the Ministry of Power is currently considering a gas pooling policy under whieh a blend of domestic gas as welfas LNG will be allocated to all the gas b~sed power plants which are c;onnected to the grid, Kerala is not yet connected to the national gas grid and may not pe considered for allocation of domestic gas under the pooling policy. However, we will again take up the issue with Ministry of Power and Ministry of Petroleum and Natural Gas to include our plant in the proposed gas pool to enable lowering the effective gas price for the .. project by swapping of gas. We wm write separate letters in this regard to Ministry of Power and Ministry of Petroleum and Natural Gas.

It is requested that G~K may please support our request for inclU$ion in the gas pool by recommending our case to Ministry of Power /Ministry of Petroleum and Natural Gas.

8. R-LNG Kechi LNG terminal has now been commissioned and has started supplying gas to the customers who have executed_ agreements. Also gas pipeline and gas skid has already been installed at our plant premises. It is quite a waste of resources to have these enabling things in place and still not having the capabilityto generate power. It is in everyone's best interest to get the plant converted at the earliest, so that the project can produce cheaper, clea~ and green power using R~LNG.

CORPORATE OFFICE: 'I" BLOCK, lat FLOOR, DhlRUSHAi AMBANi KNOWLEDGE CITY. NAVI MUMBAI - 400 710

181

BSES KERALA POWER LIMffED

C. Shale Gas

We have also explored the availability of shale gas but to the best of our information it is still in the development stage .We are ready to go for the same as and when Shale Gas is available in the commercial market.

2. Proposal for conversion of the existing 165 MW CCPP and signing of GSA & GTA

It may please be noted that we have submitted our letter BKPUFIN/KSEB /RLNG/2010-11 /01, to KSEB seeking permission to sign the Gas Sale Agreement (GSA) and Gas Transmission Agreement(GTA) in August 2010.

A. KSEB's letter to BKPL

In turn, KSEB, vide fetter No. GP/IPG/148-BSES/252 dated 20.10.201.0 suggested us to consider linkage of RLNG for 40% requirement a.s there is chance of getting domestic gas up to 60% of the requirement as per the existing ga\5 aU9cation policy. Accordingly, we have applied to CEA/Gol for getting allocation of' NG under the 1210

plan and CEA vide its letter No.CEA/PLG/IRP/501/39/2012/213 dated 1st February, 2012 informed us that the matter is under its consideration. We have also received a communication from GoK under cover of· its letter No.1962161111/PD dated 18,h August, 2012 stating that a positive recommendation 'for allocating domestic gas to our existing project at Kochi can be considered only after tak1ng a decision on the extension of land lease agreement and PPA.

ln line with article 7.6·of thePPA we have also submitted a .. detailed proposal vide our letter BKPL/KSEB/Gas/.2011-12./01 dated 4th April 2012 seekfng.~SE6's approval for converting the planHrom Naphtha to Gas. Further. through our letters dated 21 'SI. Dec 2012 and 111

h July 2013 we have reiterated our intention to immediately pr:>ceed with conversion of the project to enable operation on R.e,-gasified- LNG/ N~tural Gas.

B. BKPL Heat rate after co.nversion

Plant Net Heat Rate on HHV basis after conversion from liquid fuel to gas.Juel works out to 1994 KCal/kWh as against 1940 kcallkWh in liquid fuel firing" KSEB has suggested BKPL to explore the pQssibility of reducing the Heat Roate. Accordingly SPR1NT (SPRay lNTer Coolin§ Technology) will be introduced during gas conversion and the Heat Rate will be reduced to 1978 KCal/KWh at 157 MW station export.

The part toad Heat Rate of the plant will be higher and has to be d~.scussed and Included in the PPA separately.

lt may kindly be noted that Heat rate of the plant on Low Heating Val.ue (LHV) basis will improve after gas conversion. But on High Heating Value (HHV) which ls the ba~is for the contracted plant heat rate, the heat rate will increase since HHV When compared to LHV is higher in case of Natural .gas than that of Naphtha.

The contracted Heat Rate of BKPL even after gas conversion is comparable or even better than that .of similar plants of the same vintage. The he:at rate of pl\ants with similar capacity is shown as follows:

182

A BSES KERALA POWER LIMITED

Plant NetHeat rate (Kcal/KWH)

:· ' . 157 MW , BSES Kera la Power Limited 1978

165 MW Combined Cycle Power Station -II, G!PCL,Baroda I

20991'

213 MW ,GVK Industries, Andhra Pradesh 2060*

330 MW, PPN, Nagapattinam (Single shaft) 1957 ~ i 3.68 MW, Lance Kondappil\y ,Phase-1 1957 * I

*Gross heat rate plus 3% auxiliary.

C. Variable charge working

The variable charges have been worked out as sh.own in the following table considering the options of 100°/o domestic gas , 100% RLNG and taking the Domestrc gas allocation of 60% and balance 40% RLNG.

Fixed cost i---·-Heat rate

Variable cost (Rs/KWH) Total CO$t Plant (Kcal/KW (R$lKWH) I

(Rs/KWH) H) (at80% I

I PLF) '

' 100 60% I 100 I 60% I I 100% 100%

{ % LNG NG.+40% % l LNG NG+40% NG LNG NG LNG

BKPL l

(165 1978 5.10 ! 9.69 I 6.94 1.09 6.19 10.78 8.03

I ' MWJ I l

' Assumptions:

1. Dellvered RLNG cost of USO 1Q/MMBTU (Includes delivered ex ship price ofUSD 15.72~ VAT of USD 2 .2.8 and transportation cost of USD1 /MMBTU)

2.. Delivered Natural gas USO 10 IMMBTU (lnciudes delivered ex&hip price of USO 7.86, VAT of VSD 1 .14 and transportation cost of USD1 /MMBTU)

3. Exchange rate: tUSD = Rs 65

4. HR of1978 Kcal/ KWH at Base load

5. One year of operation or gas during the cµrrent PPA period and extension for 1 O more years

l

The total cost of generation after conversion of the 157 MW project comes to Rs 10.78/KWH using 100% LNG and is even much lower than the currentvariable cost of power 4sing Naphtha (Naphtha price-Rs 78,000/MT), which is Rs 13.8/Kwh.

3. 400 MW CCPP and part load heat rate

KSEB has suggested BKPL to consider setting up a 400 MW plant in place of the existing 157 MW by limiting the PPA to 200 MW maXimum. We could consider setting up the plant based on 1 GE 9 FA gas turbine, 1 HRSG and 1 Steam Turbine, which would give 366 MW net capacity with a heat rate of 1830 Kcal/KWH on HHV basis at 1001% load and a heat rate of 1965 KcalJKWH at 55% load. KSEB has suggested that it will sign PPA for 200 MW which would imply that the plant has to be operated at 55% load to meet the requirement of 200 MW. This Will result in high Heat R.ate deterioration and increase in the fuel cost. An illustration of the design performance at part lo.ad of a 400 MW CCPP is given in the table below:

183

~ BSES KERALA POWER LIMITED KER.ALA.' ..

.----~-------.,---------,----=-:----...... ·-·--""''-·---·-----~ ' H t Fixed i I' Pia· nt % r:t! Variable cost cost I Total cost

(Rs /KWH) ! (Kcalf · (Rs/Kwh ! • Load (Rs /KWH) at SO% i

~-~--l--K_w_·_H_)-+---10_0_0_~--...--12-o--rl-~~~~~~o+---P-L_F_)-+\-1_0_0_~-.--.-1-0-00-~,--6-0-0-~---j NG io : '001 N. G· • LNG NG+40%

LNG I .. '0 LNG 1 LNG \

BKPL (165 ' 1978

I i 10 . .78 8.03 I' MW) 5.1 9.69 6.94 I 1.09 I 6.. 19

f-----_.._----1----+---+--+---+----+---··T-----r---~·~ New 369 ' i

MW- 1.

Multiple 1830 4. 72 B.97 6A2 1.54 shaft (GE 1 oo \

9FA)

--·saVi ri9-5-·--w. r .t BKPL

New 369 MW-

Muitiple

148

1965

0.38 0.52 i_:

' -0.45

5.07 S.63 6.89 t.64

I l 6~·.26 t

i0.51 7.96

l i

! I -0.07 0.27 0.07

6.61 11. 17

~I shaft (G. E • 55

9.FA) ! •.: ·-~~~-~ I--·,~~--+--~-+~-+----+----+----+----+----'

Savings i 13 l j'

w.r.t_a_K __ P_L_._ __ ..1-.~~ ........ _o_.,0_3~i..-·o._0_6~J~O._os--''-·-O_A_5__,J_-o_.4_2_·--'-'-.--o_.3_9_.__-o_.4_o__,

From the above it can be seen that the Heat Rate advantage of s.etting up a 400 MW CCPP based on advance class machine is nullified by the part load operation. Moreover setting up of a new plant will take considerable time and all the clearances have to be obtained as in the case of a Greenfield project.

Assuming a period of 1 year for obtaining clearance etc and another 2 years for setting up the plr;lnt, the minimum time required forsetting up the project will be 3 years. Therefore, KSEB's proposal to install 400 MW plant compris.ing of advanced series engines with reduce.ct heat rate can be considered onty if KSEB is willing to sign PPA for the fuH capacity.

4. Options for reducing the gas price w Waiver of KVAT on gas purchase and Service Tax on LNG transport

BKPL vide its letter addressed to Secretary,. Power dated 1st August 2013 has sought a recommendation to GoKlGol to waive off the VAT on gas sales and Service Tax on Gas transportation. Board's kind intervention in this regard is requested so that landed cost of gas can be reduced by about 12%.This works out to a saving of about USO 2.25/MMB:TlJ at th~ current LNG price of USD 19/MMBTU. In variable cost terms· this translates to a s:aving of Rs 1.15/KWH

5. Conclusion

The existing plant has Gas connectivity readily available and can be converted to gas · in a short period of about 8 months. In case Kerala gets domestic gas allocation, BKPL would be the only power plant in the state ready to U$.e the· same.at this point of time.

41 p ,_[ f: {.:'

184

A BSES KERALA POWER LIMITED

Conversion will offer power at a differential fixed cost of less than 50 palse/KWH during the pendency of the existing PPA, which works out to a saving of Rs. 68 Crores during the 1 year when current PPA would still have been effective.

On R-LNG the annual saving in fuel cost will be about Rs. 500 Cr per annum as compared to power produced using Naphtha (Variable cost is Rs13.75 I KWH ~t current Naphtha price of Rs 78000/MT (USO 26.76/MMBTU}) assuming the plant is dispatched fully. Time is hence the essence of saving.

Considering the above mentioned points, conversion and utilization of the existing facility will be beneficial to KSEB rather than setting up a new plant and operating at part load. We would accordingly request KSEB to approve our proposal for conversion of the plant and extension of the lease at the earliest.

We are available to discuss this proposal and reques1ed to let us know of a date as per your earllest convenience ..

Thanking you.

Yours faithfully,

For BSES Kerala Power Limited

Director

Cc: The Chairman, KSEB for kind information

Enclosures:

1. Our letter BKPL/FIN/KSEB/RLNG/2010.11/01dated5th Aug 2010to Chafrman,KSEB 2. Letter from CE (Corporate Planning), CP/IPC1148~BSES/2S2 dated 20th Oct 2010 3. Letter from CEA ,CEA/PLG/IRP/501/39120121213 dated 1st February, 2012 4. Our letter BKPUKSEB/Gas/2011-12/01 dated 4tti April 2012 to Chairman;KSEB 5. Letter from Secretary (Power) No.1962/81/11/PO dated 1atti August, 2012 · 6. Our letter BKPUKSEB/Gas/2011-12/07 dated 11th July 2013 tP Chairman, KSEB 7. Our letter BKPUPS-GOK//GAS/2013-14/01dated1st Aug 2013 to Secretary (Power)

5 11' :~. ·~· t

185

~~:-:~· "~'--- . . ::. --... _, -

BSES KERALA POWER LIMITED Regd. Office & Works :

Integrated Management.. · . Systems Certified · •·

ISO 9001 · 2008 · .•

KER.ALA UDYOGAMANOAL P.O., KOCHI 683 501 Ph: (91484) 3085050, Fax: (91-484) 3052007

!SO 14001 ~004 ~ OHSAS 18001 2007 ~ ISO 50001 20'11

BKPL!KSEB/GAS/2]11-12/11

The Chairman,

27th Nov 2013

KSEB, Vydyuthi Bhavan

Thiruvananthapuram

Sir,

Project

Subject

References

165 MW CCPP {Gross Capacity) of BSES Kerala Power Umited (BKPL) at Kochi Proposal for conversion of 165 MW CCPP of BKPL at Kochi from Naphtha to LNG/Natural Gas.

1. Our letter BKPL/KSEB/GAS/2011-12/10 dated 17th Sep 2013 to CE(Corporate Planning)

2. Letter from KSEB No. CP/Plg.1/BSES/233 dated 24th Aug 2013 3. Our letter BKPL/KSEB/Gas/2011-12/07 dated 11 1

th July 2013 to Chairman; KSEB

4. Our letter BKPL/KSEB/Gas/2011-12/01 dated 4th April 2012 to Chairman,KSEB

5.. Our letter BKPL/FIN/KSEB/RLNG/2010-11/01 dated 5th Aug 2010 to Chairman,KSEB

Please refer to the Jetter referenced as item 1 where in we have responded to the various points mentioned in the letter dated 1st July from CE (Corporat~ Planning) and the subsequent meeting we ha<:! at iour office on 25th Sep 2013.We loo.k forward to hear from KSEB on our proposal dated 11 July 2013 for converting the existing plant from Naphtha to gas together with extension of PPA period for 1 O more years after the expiry of the current term.

We have written to Central Electricity Authority requ.esting recommendation of Domestic gas for BKPL to the Ministries of Power and Petroleum & Natural Gas. Request for inclusion in the g,as pool being planned by the Ministry of Power has already been made with copies to this office. BKPL w1th connectivity to GAIL's first phase of pipeHne network covering Kechi is ready to receive gas and is the only power station in Kerala having gas pipeline connectivity .We believe that a favorable recommendation from KSEB/GoK to CEA/MoP, Gol will go a long way in getting the much needed allocation of domestic natural gas for the plant which will substantially reduce the cost of generation.

With a view to reduce the landeq cost of R-LNG being supplied by GAIL, a request was also made for making rec.ommendation to the ·concerned ministrles for waiving off VAT on gas sales and Service Tax on gas transportation whereby the cost of gas can be brought down by about 12%.

As part of conversion of the plant, BKPL would be required to execute the Gas Supply Agreement (GSA) with gas marketing companies and Ga.s Transportation Agreement (GTA) with GAIL GSA co1lains the take or pay charges and GTA contains the ship or pay charges which become, applicable and payable if gas is not drawn and pipeline is not used as committed in the event of non-schedule of power by the utility. Hence, suitabl,e provisions for back-to-back arrangement need to be incorporated for such liabilities in the existing PPA.

CORPORATEO,FFlCE ·'I' BLOCK, 1st FLOOR, DHIRU6HAI AMSANI KNOWLEDGE CllY, NAVl MUMSAJ. 400 710

186

BSES KERALA POWER LlMtiED

The materials required for converting the plant for gas operation and the services for design ,engineering and execution of the project has to be sourced from GE, USA.The lead time as indicated by the vendor is approximately 8 months. We will be able to negotiate and finalize the contract with GE only after getting KSEB's consent for our proposal.

BKPL is located in the 20 acres of land which is on lease from Travancore Cochin Chemicals Limited. We have already requested TCCL to renew the lease which has expired on 31st March for 15 more years with effect from 151 April 2012 at the existing terms and conditions. It is learnt that the matter is being processed in the Industries department. .. In view of the above facts and long lead time involved in conversion ::>f the plant, we earnestly request KSEB to:

1. Grant us the approval for converting the plant from Naphtha to Gas incurring an additional capital expenditure of about Rs 124 Cror'es (a$suming an exchange rate of Rs.60/US $ )with the consent for making necessary changes/ amendment in the PPA including the extension of PPA term by 10. more years.

2. Make suitable recommend·ation to CEA/ MoP, Government o,f India for ailocation of domestic Natural Gas for our planL

3. Make recpmmendation to GoK for renewal of land lease for a further period of 15 years with effect from 1 $\April 2012

4. Make recomme.ndation to GoKfGol for waiver of .KVA.T and Service Tax respectively for the LNG to be U$ed by us for power generation.

Shoufd any clarification or additional information be required on this proposal, kindly let us know. We will be happy to furnish the same at the_ earU.est.

Thanking you.

Yours faithfully,


Director

Cc:

1. The Additional Chief Secretary (Power) 2. Chief Engineer (Corporate Planning),KSEB,TVM

// TRUE COPY//

187

KERALA STATE ELECTRICITY BOARD Office of the Chief Engineer (Trans.System Operation)

Load Dispatch Centre, H.Jti. T Colony (PO}, Kalamassery 683503 Tel: 0484-2555965(CE), 2555950; Fax: 0484-2543850

E-mail: [email protected] _____ .............. -........................................... ,, .. _______ , ___ _ No. CESO/EELD I /BSES/2014-15/ O(S,:13

"fo

Sir..

lllc Plant in-clmrn.c. 13SES Kenda Power I .tel.. UdyogarnandaL Kocbi.

Sub: Scheduling of BKJ)L reg.

Date: r.1 l .2014

Kind attention is invited to the subject matter.

Now BKPL is scheduled from 5.10.2014 onwards. It is expected that all

the nrnchines will be required in the forthcoming period. 1-Iowcvcr. the daily

sd1odule will be based on the real time system condition subject to technical

limitations and demand.

You are therefore requested ro ensure sufficient fuel stock at your station

considering the above and according to PPA.

Copy submitted to the l)irector (Trans & SO)

Yours fi1ithfully,

! ' ! f

Chief Eng·i'iYe~r (Trmis.S.0.) ;') ,./

Copy to the Chief Engineer (Commercial &Tari ft) for information

ANNEXURE-P/8

// TRUE COPY //

188

- . . - . - .

History:

DearMaam,

Information regarding Naphtha George P Mathew to: dcecomml Cc: Padmanabhan Sasidharan, Robin Sebastian

This message has been forwarded.

Capacity of Naphtha tanks

Stock of fuel - (Usable) (approximate)

Weighted average cost of Present stock of naphtha with BKPL

15/01/201512:40 PM

-16250 Kls

- 6670.45 MTs

- Rs.69,888.12/MT

[Last purchase from IOCL was brought by them CPCL Chennai and balance product available with them from that supply is a~proximately 3800MTs which costs Rs.58662. 71 /MT]

Quote by IOCL for supply from KRL with effect from 01.01.2015

Thanks & Regards, GEORGE P. MATHEW J 3SES Kerala Power Limited I Koehl Phone 0484-3085119 J RIM 09388605970

- Rs.40,364.81/-

ANNEXURE-P/9

// TRUE COPY //

189

BSES RALAPO ER Regd. Office & Works:

KERA.LA UDYOGAMANDAL P.O., KOCHl-683 501 Ph: (91-434) 3035050, Fax : (91-484) 3052007

BKPL/KSEB/GAS/2011-12!13

The Chairman & Managing Director, KSEB Limited, Vydyuthi Bhavan

Thiruvananthapuram

Sir,

ITED CIN:U40105KL1996PLC010257 lntegrate.d Management(I.

Systems Certified ,~\, !SO 9001 : 2008 n~ ISO 14001 : 2004 OHSAS 18001 : 2007 J@iffeij ISO 50001 : 2011

29th January, 2015

Subject 1. Proposal for extension of PPA term by 10 more years and

Conversion of the plant from Naphtha to gas

References 1. Our letter BKPL/KSEB/GAS/2011-12/11 dated 27th Nov 2013

2. Our presentation to KSEBL on 22"d Dec 2014 and 12th January

2015

We invite your kind attention to the referred letter whereby we have submitted for KSEBL's

approval, our proposal for conversion of the plant from Naphtha to gas as per clause 7.6 of ·

the PPA and extension of the PPA term for ten more tariff years beyond the fifteenth tariff

year as per clause 15.1 of the PPA.

Subsequently during the presentation made on 22nd Dec 2014 and 12th January, 2015 the

details of the proposal for conversion and PPA extension were discussed. In continuation of

the discussions held on 12th Jan , we would like to submit the enclosed formal proposal_ for

your kind consideration. We earnestly request KSEBL to grant us approval for:

a. Extending the term of PPA by 10 more years

b. Conversion of plant from Naphtha to Gas incorporating SPRINT technology and with

dual fuel option incurring a capital expenditure of about Rs 175 Crores.

c. Making necessary changes/ amendment in the PPA

d. Operating the Plant with Naphtha as fuel in the interim, to ensure continuous availability

of power to KSEBL without any interruption till completion of conversion of plant.

We will be happy . to provide any additional information required in connection with the

proposal.

p ~. n .).

CORPORATE OFFICE: RELIANCE ENERGY B~FlOOR PE~A'l_l::P.NE, BORIVAU WEST, MUMBAI - 400 103

ANNEXURE-P/10190

//True Copy//

Thanking you.

Yours faithfully,


Director

Enclosures:

1. Proposal for conversion of the plant from Naphtha to gas and extension of PPA

2. Our letter BKPUKSEB/GAS/2011-12/11 dated 2th Nov 2013

// TRUE COPY //

191

/"

3ITT(1 ~

Government of India.

~3tl"t~~ Ministry of Commerce & Industry ~am~ m~ Wro.:r <tlm>

Petroleum & Explosives Saf:~~rganisation (PESO) ~ 31<10l, ~ <fi-2, ~ , CSEZ qr.3IT.~ .

~ -682037 . Kendriya Bhavan, Block C-2, 3rd Floor, CGO Comple Kakkanad,

Ernakulam - 682037

E-mail : dyccee'[email protected]

Phone/Fax No : 0484 - 2427286, 2427296

mT /No. : P/HQ/KIJ.$/337 (P14575) ~/Dated: 1110612015

~ ~ rro, I M/$1BSES KERALA POWER LTD.,

"-. C..f5MBINED CYCLE POWER PLANT, 'fccLCOLONY,UDYOGAMANDALAM,

DIST • ERNAKULAM, District: ERNAKULAM, State: Kerala PIN: 683501

~/Sub: Plot No, NA, DIST· ERNAKULAM, UDYOGAMANDAL, District: ERNAKULAM, State: Kera la, PJN: 999999 ;A° ~ fclc;_~J1ia:J

~ CTir A,B~ ~ ~ ~ P/HQ/KU15/337 (P14575)<fi ~ ~ ~ ~ 1

Existing Petroleum Class A,B Installation at Plot No, NA, DIST. ERNAKULAM, UDYOGAMANDAL, District: ERNAKU.LAM, State: Kerala, PIN: 999999 - Licence No. P/HQ/KU15/337 (P14575) - Renewal regarding.

~/Sir

(5).

~ JTrC!C); '1'f ~ BKPUO&M/02/2014 ~ 29110/2014 C!ir ~ CfR" I

Please refer to your letter No.: BKPUO&M/02/2014, dated 29/10/2014

~ff~ P/HQ/KU15/337 (P14575) ~ 25/01/1999 Cfil" ~ 31/12/2017 C1'0fi ;;:{ej"(,,·i)ti(1 CR"~ tt:r cf;" mt:r ~ ~ ·~intf ~I Licence No P/HQ/KU15/337 (P14575) dated 25101/1999 is forwarded herewith duly renewed upto 31/12/2017.

~~~ 2002ofi m.f'r.1iilu1N mr~ 148~ ~ ~~ q:;r ~ :B° ~~I~ <fi° ~'ITT};

W!ra~cffi"~cfi'r ~ ~ ~ cf:i'r~ ~ <fiJ1"B'CFJ1"30~ ~ ~ cp1-~ Eflt] Please follow the procedure strictly as laid down in rule 148 of the Petroleum Rules, 2002 and submit complete documents for the Renewal of the licence so as to reach this office on or before the date on which Licence expires.

~~I Ce acknowledge the receipt.

~~ours faithfu. lly •.

. ~''\ J --("!" •. : .. ' . ,

(A.6. Tam dge) ~·

Controller of xplosives ~.3tl~~~ .

For Dy. Chief controller of Explosives ~

\~ ·~~ ~~ ~~ l"l<l~f.fi (3JiUq:; ~ ~ ~ ifir ~. ~J."<Kti ~ ~ fuq(OT cfi' ~ ~~ui;t~~IOl~f E~p¥O~lvtf

{For more information regarding status, fees and other details please visit ~,.~~f14 11ttE~tt-~~~

ANNEXURE-P/11192

//True Copy//

'SR'itf xv (1ilmf~q>T~6~)

FORM XV {see Article 6 of the First Schedule)

~#~*~•~t-~~ LICENCE TO IMPORT AND STORE PETROLEUM IN AN INSTALLATION

31'1!iTCci ti". (Licence No.) : P/HQ/KL/15/337(P14575) 'tlirn rn (Fee Rs.) 30000/- per year

M/S BSES KERALA POWER LTD., COMBINED CYCLE POWER PLANT, TCCL COLONY, UDYOGAMANDALAM, DIST - ERNAKULAM,

District: ERNAKULAM, State: Kerala, PIN: 683501 q:;'\ m ~<:rm ~ cnT MR m:mft * ~ 17450.00 KL 3'JfllTO ~ <ii'

~ 3ffi 3tfcflI. a:!\<t mot; 3fir ~ 01"if~IT mr P/HQ/KL/15/337(P14575) mfRi 28/05/2015 ~ fcl;-~ ~ ~.;if ~ "flI ~

qr ~ <fl ~ ~ ~. 1934 <fl N<M m m :mfui orarf"Q' dRf f.1<m't m ~11 31~ *i' ~ ~rill * mfI;r ~~,<ff;~~*i"~g I "

Licence is hereby granted to MiS BSES KERALA POWER LTD., COMBINED CYCLE POWER PLANT, TCCL COLONY, UDYOGAMANDALAM, DIST • ERNAKULAM, District: ERNAKULAM, State: Kerala, PIN: 683501 valid only for the importation and storage of 17450.00 KL Petroleum of the class and quantities as herein specified and storage thereof in the place described below and shown on the approved plan No P/HQ/KL/15/337(P14575) dated 28/0512015 attached hereto SL1bject to the provisions. of the Petroleum Act. 1934 and the rule made thereunder and to the further conditions of this Licence.

<:ft. 1™ 31st day of December2017 'RCfi ~ ~ I Th·. ·~nee shall remain in force till the 31st day of December 2017

~ '2flT ~ /Description of Petroleum

q1f 'fi' * ~ /Petroleum Class A in bulk

cm q:; ~ ~ :R° ~ JPetroleum Class A, otherwis~ than in bulk .:>

craT 'l]' $ ~ iPetroieum Class B in bu:k

cra1 ~ ~ ~ ~ ~ /Petroleum Class B, otherwise than in bulk .:>

ci<T <T * ~ /Petroleum Class C in bulk

cra1 7f 1f? ~ ~ ~ /Petroleum Class C,otherwise than in bulk

1uary 25, 1999

~ JID:T (f4'i«liiflc<'i ~') IQuantity licenced in KL

16250.00 KL

NIL

1200.00 KL

NIL

NIL

NIL

17450.00 KL

Chief Controller of Explosives

~ qfurU CfiT ~ 3itt ~ DESCRIPTION AND LOCATION OF THE LICENSED PREMISES

~ ~ ~ ~ ~ ~ raff~ :J~ • .,. Ji~ ~Yr ~ ~ ~ ~ Plot No: NA, DIST - ERNAKULAM, .:> • ~

UDYOGAMANDAL, District: ERNAKULAM, State: Kerala, PIN: 999999 ~ ~ ~ t rrm ~ ·r.;;;:;;:ift:lR!in FOUR

ABOVEGROUND STORAGE TANKS OF PETROLEUM CLASS A & TWO ABOVEGROUND STORAGE TANK OF PETROLEUM CLASS B TOGETHER WITH CONNECTED FACILITIES.~ t l The iicensed premises, the layout , boundaries and other particulars of which are shown in the attached approved plan are situated at Plot No: NA, DIST - ERNAKULAM, UDYOGAMANDAL, District: ERNAKULAM, State: Kerala, PIN: 999999 and consists of FOUR ABOVEGROUND STORAGE TANKS OF PETROLEUM CLASS A & TWO ABOVEGROUND STORAGE TANK OF PETROLEUM CLASS B TOGETHER WITH CONNECTED FACILITIES. together with connected facilities.

193

~ ~-{Licence No.} P/HQ/KL/15/337 (P14575}

g;qJ01~if>'{OJ *' ~ tfl ~ ~ SPACE FOR ENDORSEMENT OF RENEWALS

L!s;,1S't:im ~. m~ ct;-~ ;:rr ~ <li'r" arfmr ~~cmm~~~mim~ ~ 3ltfr.:!" ~ dfQ" ~ m ~ Date of

Renewal ~ <fi1" ~Till .<ITT ~ o:!' ~ <li't" ~TI *~~~.r~fctim¥<t> zy~~~*1°J.T~j This licence shafi be renewable without any concession in fee for ten years in the absence of contravention of any provisions of the Petroleum Act. 1934 or of the rules framed thereunder or of any of the

1nditions of this licence.

1).

2).

3).

4):

30/11/2005

04/11/2008

16111/2011

17/06/2015

_, Date of ~

Expiry of license Signature and office stamp of the licencing authority.

31/12/2008

31/12/2011

Sd/-

Sc!/R.Venugopa\

31/12/2014 Sdf-

K ~u~;~e~an 31112/2017 A.~l4arn dgef

Controller f Explosives For Dy. C ief Controller of Explosives

_ Ernak(Jlam •. , . f.pxa-~; ~'1 '7:4 i1~ ~ill~ . . {or freput'J-Cn\ef Conuoner ot b.?\OSi~~ C!H\\'bi"R ! Emaku1arn · ~' r .!;

~ ~ qftm" ~ ~ ~ 3fh" ~rnf ~ ~ o;ti' GN ~ ~ 3fiz ~ faim:IT ~ uc=IT cf; 3ftft;:r ~ _,

~ ~ cf;'i-~~Wt~ CfiT ~ ~ cf;'i- ~IT *'l!r; ~~ ~ ~ ~ ~ 3'tlz ~ ~ _, " _, _, 3N{!tr t ~ ~ ~ t. ~ -c.rcn -.i:rrn- ('fcfi ~ ~ ~. m ~ *· ~ vco ~ ~ Cicfi ~ ~ ~. <ir ~ *· 3'tlz ~ ~~ 3mitr *' ~ mtm'UT q;mqm * ~ ~ 'Jira ~ ~ ~ t. <IT ~ ~. ~ ~ ~ ~ ~ ~ ~ t. m ~r;ihr. ~ ITTm I

This licence is liable to be cancelled if the licensed premises are not found conforming to the description given on the approved plan attached hereto and contravention of any of the rules and conditions under which this licence is granted and the holder of this licence is also punishable for the first offence with simple imprisonment which may be extend to one month, or with fine wnich may extend to one thousand rupees, or with both and for every subsequent offence with simple imprisonment which may extend to three months, or with fine which may extend to five thousand rupees or with both.

)\

// TRUE COPY //

194

I KERAtA STATE EtECTRICITY BOARD LIMITED I l j Office of the Difector (Corporate Planning & SCM) f Vy-dyuthi B-havanan1,. Part-o-m_, 'f'hiruvananthapu.rt.Hn ·- 69S 00- 1r1 Ke-~vala l Phone: +91 ,.,712446BS3, 2.SHS20 Fax· tH71 244T246 i t:-nrnil: [email protected], dccplg@ksebnctn,rn

No. CP/BSES/2015c16/ ftJr

To

The Director . .

BSES Kerala Power limited Udyogamandal P.O. Kochi - 683501

Sub: Proposal for extension of PPA term and conversion of plant from Naphtha t0 Natural gas - reque$! for update .

Ref: Your letter No.BKPL!K5EB/GAS//2011-12/14 dated 11.06.15.

Vide ref (1), you have. requested to give the update on the subject proposal

submitted by you.

Please be infurmed that Direcnot boar¢ of KSEBL has accorded in princ1pl.e

sanctimrtto. aUowlS//MW BSESplatitt-0.rt:n ktNaphthg fuel for a period of 2 mere

years from the date crf exp fry \Jf e-xisttng ;PPA subject to the f oUowing -

'i. terms of the existing PPA has to be suit'ably modifie0.

2. re-a·scertain the fixed charges applicable for the extended perfod, as the existtn:g

ptant is a fully depreciated one.

3. obtaining approval from KSERC for the above.

Proposal to convert the fuel of plant from Naphtha to natural gas be

considered in due course, after detailed assessment of the issues involved.

Yours failhfuUy,

ANNEXURE-P/12

// TRUE COPY//

195

KERALA STATE ELECTRICITY BOARD LIMITED Office of the Chief Engineer (Commercial & Tariff) 8th Floor, Vydyuthi Bhavanam, Pattom, Thiruvananthapuram - 695 004·, Kerala Phone: +914712514554 Fax: 04712442106 E-mail: [email protected]. [email protected]

No. CML-EEI-AEE3/BK.PL/PPA Extension/2014-15/3 '10 Date:~f. 09.2015

! 'To

The General Manager (F &A) & Secretary

Mis BSES Kerala Power Limited

Udyogamandal.P.O

KOCH! - 683501

Sir,

Sub:- BSES Kerala Power Limited - Proposal for extension of PPA with Naphtha as fuel-reg

Ref:-1) B.O. (FTD) No.l l 79/2015(D(R&P)/BSES/2015-16) dated 11.05.2015

2) B.O. (DB) No. 1420/2015 (CP/Plg.4/BSES) dated 09-.06.2015

3) Your proposal dated 1/2015 and 12.08.2015

KSEiI3L resolved to accord in principle sanction to allow the BSES Power Plant to run in

Naphtha fuel for a peribd of two more years from the. date of expiry. of the existing PP A.

Approval of Hon 'ble KSERC is to be obtained before a revised PP A is proceeded with.

· · I am directed to .request. you to .file petition before the Hon'ble KSERC, for the approval of ' I ' ' ' ' ' ' '

tariff and PPA for the proposed extended period of two years subject to the following conditions.

1. The components in the Annual Fixed Charges shall be

a. Operation & Maintenance expenses

b. Interest on Working Capital

c. Return on Equity

· 2. Since KSERC has not specified any norms to calculate the 0 & M expenses for Small gas

turb~ne power generating stations, average of the previous five year .Q&M e,;xp~gses (from l '·:._ ••• •• j ' •• , •••

2009-10 to 2013-14) is to be tak:enfor calculation of AFC. O&M expenses for 2014-15

,shall not beconsidered .as it is found exorbitant compared to previous years' and realistic I I

· average could not be worked out.

ANNEXURE-P/13196

//True Copy//

3. While arriving at the Interest on Working Capital, cost of fuel is to be taken as the average

of last 3 months just prior to the date of PP A renewal. The same may be reviewed and

modified after one year from the date of renewal of PP A, if necessary. It may be noted that

actual PLF ·of the plant for the last three years is less than 30% and the tank capacity is

l 1375MT only. As storage of 11375 MT fuel is only possible and actual PLF is less than

30%, cost of fuel shall be calculated based on the above.

4. Also while calculating Interest on Working Capital, receivables for 15 days shall ,be taken,

since KSEBL is making weekly payment and considering the processing time for

settlement of bills ..

5. Regarding RoE, as detailed in Clause 7.4 of the PP A, a nominal net residual value of the

Project which the Company would have normally expected on dismantling and selling the

same at its cost shall be taken. As per Companies Act, depreciation is 95% of the original

cost and hence nomina.l net residual value is only 5% of the original cost.

6. Mis BKPL's claim on correction in heat rate can not be agreed.

7. Major overhauling of the machines after 4000hr running, may be considered when such a

situation arises, with the concurrence of the Commission.

8. Non tariff income, if any, shall be deducted from the Fixed Cost. I

9. For calculation of monthly fixed c~arges~ ·plant availability of the particular month limited

to 80% maximum shall only be consiclered. In other wo~ds the payment .of fixed charge

based on PLF would be strictly restrict<ed to the PLF pf each, :rnont]l.

10. The proposal of the company that in case of the two years cumulative PLF exceeds 40%,

then the tariff applicable for the entire tariff period will be the tariff for PLF. qfmore than .

40% cannot be agreed to.

The tariff petition may please be filed before 5th October 2.015.

mmercial & Tariff)

~\~

// TRUE COPY //

197

GOVERNMENT OF KERALA

Abstract

Power Department- Extension of PPA between KSEBL and M/s BSES Kerala Power Limited (BKPL) for the combined cycle power plant at Kochi in- principle sanction accorded - orders issued. ------------------------------------------~-----~-----------------------------------------------------------------

POWER (B) DEPARTMENT

G.O.(MS)No. 03/2016/PD . Dated, Thiruvananthapuram, 24.02.2016. -------------------------------·------·----------------------------------------------------------·---------------400---· .. Read:- 1) G.O(MS) No. 16/95/PD dated 30/08/1995.

2) G.O (MS) No. 7/96/PD dated 7/06/1996. 3) G.O (MS) No. 30/96/PD dated 16/12/1996. 4) B.O ((DB)No.1420/2015 (CP/Plg.4/BSES). dated 9/6/15 5) Daily order· dated 28/10/2015 of the KSERC in OP No. 34;'2015. 6) Letter No.CML-EEl/ AEE3/BKPL/PPA Extension/2015-16

dated, 07.01.2016 from the Director ( Fihance), KSEBL.

ORDER

.As per Government. Order read as 1st paper above Government decided

to launch an Emergency Action Plan to ensure additional power generation 'to the extent. of 400MW with ill' 8-9 months through Small Power Plants in the

private sector by establishing power projects in the locations allotted to Kerala

State Electricity Board and location ·linked to Industrial Clusters which were

a Hotted to KSIDC. Consequently two locations, one at Techno Park,

Thiruvananthapuram and another at Kakkanad were allotted to Mis BKPL as

per G.O read above as 2nd paper above. Later the project proposed at Techno.

Park, Thiruvananthapuram was allowed to be shifted to Kochi along with the 40

MW project proposed in the Travancore Cochin Chemicals Limited site. On the

basis of the discussion held among KSEB- , KSIDC and Mis BSES Limited '(.;

Mrnnbai, who have quoted for setting KSIDC sponsored power projects, PPAs

signed between KSEB and Mis BSES Limited. The same was approved by

Government and Government .guarantee . was extended for all paym~t

ANNEXURE-P/14 198

//True Copy//

obligations of KSEB regarding the PPA as per G. 0 read as.3rd paper above. Th . .

term of the PPA was for a period of .l5·years from the commercial operation o

the 1st GT Unit of the combined cycle power plant, i.e. 31/10/2000. The term o

PPA expired on 31/10/2015. Mis BKPL has requested KSEB to extent the PP

for a further period of 15 years with a proposal to convert the fuel to LNG.

2) The KSEB in its B.O read .as 4t11 paper above has a.ccorded 41

principle. sanction to extend the PPA for 2 more years subject to existin$

CERC norms and allow the BSES Kerala Power Ltd to run the Plant in - .

Naphtha fuel for the 2 year period and in the meantime take an appropriate

decision to convert the plant from Naphtha· to natural gas using SPRINT

Technology and with dual fuel option after assessing the uncertainties in the g$

. market, cost of fuel conversion and various other parameters. The Board har>

also ordered that the conditions in the existing PP A shall be modified suitably

as the existing plant is a fully depreciated one andthe revised fixed costs are tp

be reworked taking in to account the current CERC norms.

3) The KSEBL can renew the PPA only with the approval of the

KSERC. Accordingly Mis BK.PL file.d. a petition before KSERC on 3/1012015

for the approval of Tariff and PP A for the proposed extended period of two

y~ars. KSERC after heard both sides on 27/10/2015 and issued the following

directions to the Petitioner BK.PL and the respondent KSEB Limited as per dailb'

order read as 5th paper above.

i) KSEB Limited shall submit a detailed appraisal on the demand and suppl~

position of power during 2016 and 2017 duly considering the availability of

power from its hydel stations, Central Generating Stations, power purchasie

199

agreements with traders/ generators, KSEB's own diesel stations, other liquiq

fuel stations including RGCCPP- Kayamkulam ·and from short - term marke~,

the average cost of power purchase for a period of two years from November

2015 , availability of corridor and such other details to substantiate the necessitjr

for extending ·the PP A with BKPL for a further period of two years from

November, 2015 for which in-principle sanction has been accorded by thp

Board of Directors of KSEB Limited.

ii) KSEB Limited may, if found necessary, file petition under clause (b) of su~

section (1) of Section 86 of the Electricity Act, 2003, for the extension of tl¢

original PPA dated 3/05/1999 as per the Article 15. l and Article 7.4 thereitj.,

with mutually agreed . tariff and terms and conditions incorporated in the dra~

PPA initialled by both the parties to the agreement.

iii) Time up . to 27 /11/2015 is granted to the · petitioner BKPL and ~e .

respondent KSEB Ltd for complying with the directives . (i) & (ii) above.

iv) KSEB Limited and BKPL may,. till 30/11/2015, extend the PP A dat9d

3/05/1999 as per the Article 15.1 and Article 7.4 therein subject to the conditior

that the payment for the period of one month from 1/11/2015 to 30/l l/20lj5

shall be as decided. by the Commission in the final order.

4) Based on the daily order of KSERC~ discussions were held to arrive ft a mutually agreed tariff Then M/s BKPL submitted their proposal dattjd

14/12/2015 with an annual fixed cost of Rs. 43.06 crore and Rs. 44.77 crote

respectively for the 1st and 2nd tariff period. Land· 1ease charges and income t~x

are demanded in addition to the above .

5) The Director ( Finance), KSEBL iii his letter read as 6th paper above hhs

requested Government to take an appropriate decision on the extension of PP}\

with Mis BKPL for. a further period of two years as the matter involves poliqy

decision from Government. ·

200

6) Government have examined the matter in detail in the light of the ·

Board Order read as 4th paper.and the order ofKSERC.read as 5th paper above,

are pleased to accord in -principle sanction for extending PP A between Kerala

State Electricity Board Limited and Mis BSES Kerala Power Limited (lvl/s

BKPL) for the combined cycle power plant· at Kochi for two more years fron;i

, i

the date of expiry of the existing PP A subject to condition that no Governme~t i

guarantee will be allowed for any payment obligations. of K.SEBL and the findl . I

. '

tariff shall be decided by KSERC shall be brought back to Government anµ

approval of Government obtained. The K.SEBL is also· permitted to study "°itl f

firm up its decision on the option of fuel conversion of the plant from Napht~a

to LNG in consultation with KSERC and obtain Government approval at t~e . • . !

.appropriate stage.

To

(By Order of the Govemod,

M. SIV ASANKAR IAS, I Secretary to Government;,

The Chairman & Managing Director, KSEB, Pattom, Thiruvananthapura¢. The Director, M/S BSES Ltd ( BKPL Kerala Power Limited), '

Udyogamandal P.0, Kochi-683501. The Director (Finance ), KSEBL, Pattom, Thiruvananthapuram. Finance Department. · GA (SC) Department. The Principal Accountant General (Audit), Kerala, 'fliinivananthapuram, The Accountant General (A&E), Kerala, Thiruvananthapuram S/F I O/C.

Forwarded/By Order, .~·

Section rOfficer.

// TRUE COPY //

201


COMMISSION


O.P. NO. __________ OF 2022

IN THE MATTER OF:







Versus


INDEX

(VOLLUME- II)


18. ANNEXURE P/15

A True Copy of communications dated 07.07.2016 and

18.06.2016 issued by the Petitioner

202-218

19. ANNEXURE P/16

A True Copy of the Order dated 26.10.2016 passed in

219-234

Petition No. 34 of 2015

20. ANNEXURE P/17


235-238

21. ANNEXURE P/18


239-240

22. ANNEXURE P/19


241-242

23. ANNEXURE P/20

A True Copy of the IOCL Report dated 07.02.2017

243-246

24. ANNEXURE P/21


247-248

25. ANNEXURE P/22

A True Copy of the Order dated 04.04.2017 passed by the

Hon’ble High Court of Kerala

249-260

26. ANNEXURE P/23


261-275

27. ANNEXURE P/24

A True Copy of the judgment dated 31.10.2017 passed by

Hon’ble High Court in W.P. (C) No. 540 of 2017

276-295

28. ANNEXURE P/25


296-297

29. ANNEXURE P/26

A True Copy of the Judgment dated 29.01.2018, passed by

298-303

Hon’ble High Court in W.A. No. 237 of 2018

30. ANNEXURE P/27


304-357

31. ANNEXURE P/28

A True Copy of the letter dated 22.10.2018

358-374

32. ANNEXURE P/29

A True Copy of the Order dated 13.05.2022 passed by

Hon’ble APTEL in Appeal No. 352 of 2018

375-376

33. Vakalatnama along with Board Resolution. 377-384

34. Court fee 385

FILED BY





B!i)i'i BSES KERALA POWER LIMITED

KE.RA~LA CIN:U40105KL 1996PLC010257

Regd. Office & Works: UDYOGAMANDAL P.O., KOCHl-683 501

Ph: (91-484) 3085050, Fax: (91-484) 3052007

BKPUKSEB/PPA extension/2015-16/09

The Honourable Chief Minister of Kerala,

Olo The Chief Minister,

Government Secretariat,

Thiruvananthapuram-695 001

Respected Sir,

Sub: Appraisal of the issues with respect to BSES Kerala Power Limited

July 7, 2016

Ref: Power Purchase Agreement between KSEB and BSES Kerala Power Limited dated May 3,1999.

BSES Kerala Power Limited (BKPL) has set up a 165 MW Naphtha based Combined Cycle

Power Plant at Udyogamandal ,Kechi as per the decision of Government of Kerala to implement

short gestation thermal power projects in the state. The plant is fully dedicated to KSEB Limited

(KSEBL) and the Combined Cycle Power Purchase Agreement (PPA) was signed on May 3,

1999.

BKPL supplied electricity to KSEBL under the said PPA and the initial fifteen years term of the

PPA has expired on October 31,2015.The PPA dated May 3,1999 contained provisions for

extending the term of the agreement for ten more years on mutually agreed tariff and conversion

of the plant to gas when LNG is available at Kochi. Considering the enabling clauses in the PPA

BKPL has submitted its proposal to KSEBL for extension of the PPA term and conversion of the

plant from Naphtha to gas.

KSEBL's Board has accorded in principle sanction to extend the term of the PPA for two more

years from the date of expiry of the original agreement subject to approval by Hon'ble Kerala

State Electricity Regulatory Commission (KSERC).Government of Kerala has also accorded its

in principle approval for extending the term of the PPA for two more years subject to approval of

tariff by Hon'ble KSERC. Government has also permitted KSEBL to .firm up its decision on the

proposal to convert the plant from Naphtha to gas in consultation with Hon'ble KSERC and seek

its approval at appropriate stage. Pursuant to various discussions and actions taken by both

· BKPL and KSEBL ,the draft agreement for extension of PPA for two more years is before the

Hon'ble KSERC for its approval. Hon'ble KSERC has posted the petition for approval of the

agreement for the two years extend~iod on Jul 19,2016 for final hearing.

CORPORATE OFFICE: RELIANCE ENERGf3aORlli>IN~ff:Sf!JtjIDG)R:;hlavjDAS LANE, BORIVALI WEST, MUMBAI - 400 103 New o,.:iihi - HO 024

1

ANNEXURE-P/15202

//True Copy//

While the regulatory process for approval of the PPA for the extended period is under way, there

are certjain areas where we would like to seek your kind intervention These issues, which are

further elaborated for your kind perusal in the form of separate notes are as listed below:

Note 1: Expediting the process of extension of PPA

Note 2: Conversion of BKPL plant operations from Naphtha to Gas

Note 3: Suitable amendment in the Land Lease Agreement between TCCL and BKPL

We hurqibly request you to consider our requests favourably and seek the kind intervention of this

office for speedy resolution of all the issues.

Thanki~g You,

Yours ff!ithfully,

For BS~S Kera1a Power Limited,

ebastian

Dire etc:

203

Note 1: Extension of the Powe·r Purchase Agreement between BKPL and KSEBL

Background:

1. BKPL has set up the 165 MW Naphtha based Combined Cycle Power Plant at

Udyogamandal, Kochi as per the decision of Government of Kerala. The plant is fully

dedicated to KSEBL and the PPA for the Combined Cycle Power Plant was executed on May

3, 1999 ancj the initial fifteen years term of the agreement has expired on Oct 31, 2015.

2. Clause 15. ·1 of the PPA provides for extension of the term for ten more years from the date of

expiry of the initia·I fifteen year ~erm i.e. with effect Nov 1, 2015 on mutually agreed tariff and

terms and conditions. Moreover clause 7.6 of the PPA mandates BKPL to use LNG as the

fuel upon its availability in Kochi. It also says that the Heat rate and increase in capital for gas

conversion will be su!tably adjusted in tariff.

3. Considering the enabling clauses in the PPA as cited above and the expected availability of

LNG in Kechi, BKPL by its letter to KSEBL dated April 4, 2012 had initiated the process for

seeking approval for conversion .. of the plant from Naphtha to gas (LNG) along with extension

of the PPA term. Subsequent to ·various rounds of discussions, presentations and

submissions, BKPL submitted its comprehensive proposal for gas conversion along with

ex'~cnsion of PPA term in January 2015. . .

4. KSEBL's bo:;rd of directors, in its meeting held in the month of May '15, accorded in-principle

sanction to continue operation of the plant using Naphtha as fuel for two more. years with

effect from Nov 1, 2015 so as to study and facilitate conversion to gas in the due course after

considering various issues involved.

5. KSEBL,. vide its letter dated Sept 29, 2015, directed BKPL to submit petition before Hon'ble

Kerala State Electricity Regulatory Commission (KSERC) for approval of PPA along with tariff

for the two years' extension for which in principle sanction was accorded by KSEBL's board

of directors. Accordingly, BKPL filed a petition in Oct.2015. First hearing on the petition was

held on Oct 27, 2015. Commission in its daily order dated Oct 28, 2015 referred herein above

issued following directives to both the parties:

a. to reach mutual agreement on the tariff and terms and conditions of the PPA for the

extended perio·d.

b. KSEBL to file a petition for approval of PPA, if required, along with the draft PPA

initialled by both the parties.

c. An extension for 1 month granted for complying point a and b mentioned above, the

charges for which shall be decided by the Commission in the final order.

6. After various rounds of negotiations with KSEBL and in line with the applicable regulations,

BKPL submitted its revised proposal to KSEBL on Dec 14, 2015. The Annual Fixed Charges

proposed by BKPL for the first and second years of the extended period are Rs 43 Crores

3

204

and Rs 44.7 Crores respectively. Income Tax on return on equity as per KSERC (Terms and

Conditions for Determination of Tariff) Regµlations, 2014 and land lease paid by the company

to Travancore Cochin Chemicals Limited (TCCL) are proposed as reimbursement on actual.

7. Since the original PPA was signed as per order of the Government of Kerala (GoK) 1 the

extension of PPA involved a policy decision by the GoK. Accordingly, KSEBL sought

approval CJf the Government for the said extension. GoK vide its ·order G.O.(MS)

No.03/2016/PD dated Feb 24, 2016 accorded in-principle approval for extending the term of

the PPA for two more years from the.date of expiry of the existing PPA subject to approval of

tariff by KSERC. The tariff so approved has to be ratified by the Government. The order also

permitted KSEBL to. firm up its dedsion on converting the plant to gas in consultation with

KSERC and approach the government for its approval at the appropriate stage.

Current Status:

8. Subsequent to the in-principle approval by Govt., discussions were held between BKPL and

KSEBL on 13 and 1'6 April 2016 to reach mutual agreement on tariff and terms and

conditions of the PPA as directed by the Commission. Although majority of the terms and

conditions of the PPA were agreed! agreement with respect to a few terms, especially related

to Tariff could not be reached. Hence as decided during the meeting, the draft PPA along

with points of disagreement, jointly signed by the parties was submitted to KSERC by KSEBL

vide its letter dated April 25, 2016 with a prayer to the Commission to decide upon the points

of disagreement. The matter was heard by the Hon'ble· Commission on June 22,2016 and the

final hearing is posted on July 19,2016 ..

Request:

Considering that BKPL has submitted its comprehensive proposal for extension of PPA as early

as in January 2015; as well the in-principle approvals accorded by KSEBL's Board of Directors

and Government of Kerala, we seek your kind interventi.on and advice for expediting the process

for approval of the PPA for the extended period.

205

Note 2: Conversion of the Plant from Naphtha based· operations to Gas based

operation

Background:

1. In compliance with clause 7.6 of the PPA which mandates BKPL to use LNG as fuel for the

plant· upon its availability in Kechi and considering the expected availability of LNG in Kochi

in view of the commissioning of Petronet's LNG terminal, BKPL has initiated the process

seeking approval for converting the fuel for the plant ·trom Naphtha to gas by its letter to

KSEBL dated April 4, 2012.

2. Further to the discussions with KSEBL a comprehensive proposal for gas conversion along

with extension of PPA term was submitted in January 2015.

3. KSEBL, in July, 2015 has communicated to BKPL the in principle sanction accorded by its

board for extending the PPA on Naphtha· for two more years and that a decision on

converting the plant to gas will be taken in the due course after detailed assessment of the

issues involved.

4. The 165 MW Plant of BKPL consists of Three Gas Turbine of 43 MW each and a Steam

turbine of 36 MW. Smaller capacity gas turbines and modular design offer enhanced

operational flexibility to adjust to demand variation quickly. Two gas turbines can be operated

in combined cycle mode throughout the day supplying about 105 MW and the third gas

turbine can be started to meet the evening peak. Since combined cycle is already in

operation, the third machine can be taken to combined cycle m.ode quickly.

5. The plant is located in the load centre of Kalamasserry and hehce transmission and

distribution losses are practically nil.

6. Our proposal for conversion of fuel for the plant from Naphtha to gas dated April, 2012 was

followed by several rounds of discussion and meetings including presentation by Original

Equipment Manufacturer. We have also taken up with Central Electricity Authority (CEA) and

Ministry of Power (MoP) our request for allocation of domestic gas for the· plant, as instructed

. by KSEBL. CEA has noted our requirement and informed us that the request can be

considered only when additional domestic gas availability for power plant~ is notified by

MoPNG/MoP.

7. GAIL in the meantime had laid· pipelines to BKPL premises and commissioned all the

required infrastructure for supplying gas from Petronet LNG's Kechi terminal to the plant.

Current Status:

8. Regarding gas conversion of the plant the main concerns raised by KSEBL were price

volatility exhibited by LNG, price being indexed to crude, penalties in standard gas contracts

if committed quantities are not taken and additional investment for gas conversion. In order to

5

206

mitigate the risks associated with .gas supply contracts we have been in continuous

discussion with various gas suppliers including Petronet.

9. We are in receipt of indicative offers from vendors for supply of gas with prices fixed for 5 to 8

year terms, copies of which are enclosed for your kind reference. For the period beyond the

first 5 years, the price will remain indexed to the Brent Crude Price but Seller can consider

fixing this price 1-2 years before the end of the initial fixed price period. It is sug.gested that

KSEBL/GoK and BKPL jointly negotiate these contracts so as to achieve best possible

contract benefitting the state.

10. Based on the preliminary non negotiated offers, the variable cost of power will be in the range

of Rs 4-4.5 /kWh. The cost is comparable with the rate at which KSEBL procures power from

sources outside the state. When power can be generated at this rate within the state, the

capacity utilisation of the plant can be improved substantially as compared to utilisation of the

plant using Naphtha as fuel.

11. With regard to the investment required for gas conversion 1 we look foiward to work closely

with the committee constituted by· KSEBL to evaluate the proposal submitted by BKPL for

converting the plant from Naphtha to gas. Once the committee gives its feedback, we can

freeze the scope and start the negotiation process with General Electric, USA the· supplier of

gas turbine;s installed at BKPL. The time line indicated by the supplier for converting the

machines to gas including the lead time for material delivery, once a firm order is issued is 8-

1 O months. We can also work with the suppliers to further reduce these timelines.

Request:

Considering the time frame required for processing the approvals and physical conversion of the

plant, we humbly request your kind intervention to expedite:

1. Approval for conversion of the plant from Naphtha to gas incurring additional capital

expenditure and further extension of the PPA term by another eight years.

2. Approval for executing Gas Supply and Transportation Agre~ments.

207

Note 3: Amendment in the land lease Agreement between TCCL and BKPL

Background:

1. The plant is located in 20 acres of land leased out to BKPL by TCCL as per the order of the

Government..

2. The IC?nd lease charge paid by BKPL to TCCL as per the lease agreement executed is

reimbursed to BKPL by KSEBL.

3. The current lease rent inclusive of applicable taxes is Rs 5.5 Crores and is subject to revision

every five years.

4. GoK vide its order G.0.(Ms) No.33/2015/PD dated Sept 19, 2015 has directed TCCL to

submit a proposal to Revenue Department through District Collector, Ernakulum for

transferring the land to KSEBL in lieu of the electricity arrears TCCL owes to KSEBL.

5. As submitted by KSEBL before Hon'ble· KSERC, Government Order if implemented will

absolve KSEBL of the need to reimburse the lease rent paid by BKPL to TCCL.This in turn

will reduce the tariff of the electricity generated from BKPL.

6. Also BKPL vide its letter dated Jan 9, 2016 has conveyed its agreement to the GoK for

transfer of the said land by TCCL to KSEBL on ownership basis or on lease hold basis and to

extend its support for suitable amendment/ changes/ assignment/ novation etc. in respect of

existing lease agreement between TCCL and BKPL.

Request

In view of the above mentioned facts we earnestly seek your kind intervention for expediting the

process for incorporation of suitable amendment/ changes/ assignment/ novation etc. in respect

of existing lease agreement between TCCL and BKPL.

208

e .... ·L1· . . -

Reliance lnfrastrueture. Limited Reliance Ci:lntre Third Flpor, B Wing

Te.I; +91 11 30331060 Fax: +91 11 3046 32'7'3 www.rinfra.com Maharaja Ranjit Singh Mar*1

NewDE1lhi - 110'002. GIN: L99999MHi929PLb.001530

BKPL/KSEB/PPA extension/2015-16/08 June 18., 2016

The Chairman & Managing Director, Kerala State Electricity Board Limited, Vydyuthi Bhavanam, Thiruvananthapuram.

Dear Sir,

Sub: Appraisal of the issues with respect to the BSES Kerala Powe.r Umit~d

Ref: 1.

2.

3. 4. 5.

6. 7.

8.

BKPL proposal to KSEBL dated 29.01.2015 for conversion of plant from Naphtha to LNG and exten$ion ·of PPA for 15 years. KSEBL letter to BKPL dated 13.07.2015 according in-principle approval of its Board of Directors for extehsion of PPA for 2· years Petition filed by BKPL dated 03.10.2015with KSERC KSERC Order dated 28.10.2015 ' C3overnrnent Order dated 24.02.2016 according in-princ~ple approval for extension of PPA for 2 years KSEBL submission dated 25.04.2016 in compliance with directions of KSERC . BKPL submission dated 08.06.2016 in response to KSEB letter dated 26.04;2016 Our meeting at your good office on 14,062016

1. We would like to thank you for giving us time to discuss and brief you about the proposal for extension of the Power Purchase Agreement (PPA) between KSEBL and BSES Kerala Power Limited (BKPL) and the conversion of plant operations from Naphtha to gas.

2. As you are aware, BKPL. supplied electricity to KSEBL under the PPA dated 03.05.1999 which expired on 31.10.2015. Pursuant to various discussi:ons and actions taken by both BKPL and KSEBL, today the draft for extension of PPA for further two years is before the Hon'ble KSERC for its approval.

3. However, there are certain areas where further association between KSEBL and BKPL may create . a win--win -situation for both parties where your kind intervention Will be instrumental. Thes.e issues, which are further elaborated for your kind peru$al in the form of separate notes to this letter, are listed as below:

Note 1: Expediti_ng the process of extension of PPA

Note 2: Conversion of BKPL plant operations from N~phtha to Gas

Note 3: Suitable amendment in the Land Lease Agreement between TCCL and BKPL

contd ................ 2/-

Registered Oflice: H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai 400 710

209

Reliance Infrastructure Utnited Reliance Cent~ Third Floor, B Wing MaharajaJ'lanjit Singh Marg New OeJhi - 11.0 002 .• GIN: L999S9MH1929PL.C001530

Tel; +91 11 3033 1060 Fax,: +91 i 1 ·3045 3273 www;ririfra.com

4. We hereby request you to peruse our referred notes, consfder our specific requests made therein and extend your support and cooperation for resolution of all pending issues.

Thanking You,

Yours faithfully,

for Reliance lnfrastructur-e Limited

Dr. A.K.Balyan Chief Executive Officer

Encl: As above

Registered Office: H Block, 1st Floor. Dllirubt1ai Ambani Knowledge City, Navi Mumbai 400 710

210

Note 1: Extension of the Power Purchase Agreement between BKPL and KSEBL

.Background:

1. BKPL has set up the 165 MW Naphtha based Combined Cyc.le Power Plant at Udyogamandal,

Kochi as·;.Jer the decision of Government of Kerala .. The plantis fullyc;ledicated to KSEBL and

the PPA for the Combined Cycle Power Plant was executed on May 3, 1999 and the initial

fifteen years term of the agreement has expired on Oct ·31, 2015.

2. Clause 15.1 of the PPA provides for extension of the term for ten more years from the date of

expiry of the initial fifteen year term i.e. with effect Nov 1; 2015 on mutually agreed tariff and

terms <:1nd conditions. Moreover clause 7.6 of the PPA mandates BKPL to use R-LNG as the

fuel upon its availability in Kochi. It also says that the Heat rate and increase in capital for gas

conversion wiU be suitably adjusted .in tariff.

3. Considering the enabling clauses in the PPA as cited above and the expected availability of

LNG in Kochi, BKPL by its letter to KSEBL dated April 4, 2012 had lnitiated the .process for

~eeking approval for conversion ofthe plant from Naphtha to gas(LNG) along with extension of

the PPA term. Subsequent to various rounds of discussions, pres-entatrons and submissions,

BKPL submitted its comprehensive proposal for gas conversion along with extension of PPA

term in January 2015 referred herein above.

4. KSEBL's board of directors, in its meeting held in the month of May '15, accorded in-principle

sanction vide its letter date 13.07.2015 referred herein above to continue operation of the plant

using Naphtha as fuel for two more years with effect froin Nov 01, 2015 so as to study and

facilitate conversion to gas in the ou.e course after considering various aspects involved.

5. KSEBL, vide its letter dated Sept 28, 2015, directed BKPL to submit petition before Hon'ble

Kerala State Electricity Regulatory Commission (KSERC) for approval of PPA along with tariff

for the two years' extension for which in principle sanction was accorded by KSEBL's ·board of

directors. Accordingly, BKPL filed a petition in Oct 2015. First hearing on the petition was held

on Oct 27, 2015. Commission in its daily order dated Oct 28, 2015 referred herein above

issued fc;>llowing directives to both the parties:

a. To reach a mutual agreement on the tariff and terms and conditions of the PPA for the

~xtended perioi:f.

b. KSEBL to file a petition for approval of PPA, if required, along with the draft PPAinitialled

by both the parties.

c. An extension for one (1) month granted for complying point a c:;md b mentioned above, the

charges for which shall be decided by the Commission. in the final order.

211

6. After various rounds of negotiations with KSEBL and in line With the applicable regulatio:ns,

BKPL submitted its revised proposal to KSEBL on Dec 14,. 2015. The Annual Fixed Charges

proposed by BKPL for the first and second years ofthe extended period are Rs.43 Crores and

Rs.44.7 Crores respectively. Income Tax on return on eqµity as per KSERC (Terms and

Conditions for Determination of Tariff) Regulations, 2014 and land lease paid by the company

to Travancore Cochin Chemicals Limited (TCCL) are proposed. as reimbursement on actuals.

7. Since the original PPA was signed as per order of the Government of Kerala (GoK}, the

extension of PPA involved a policy decision by the GoK Accordingly, KSEI3L sought for

approval of the GoK for the said extension. GoK vide its order dated Feb 24, 2016 referred

herein above accorded in-principle approval for extending the term ofthe PPA for two more

years from the date of expiry of the existing PPA subject to appro.val of tariff by KSERC. The

tariff so approved has to be ratified by the Government. The order also permitted KSE.BL to firm

up its decision on converting the plant to gas in consultation with KSERC and approach the

government for its approval atthe appropriate stage.

Current Status:

8. Subsequent to the in,.principle appr-0val by Govt, discussions were held between BKPL and

KSEBL only on i31h and 16111 April 2016 to reach to a mutual agreement on tariff and terms

and conditions of the PPA as directed by the Commisslbn. Although majority of the terms and

conditions of the PPA were agreed upon, agmement with respect to a few terms, especially

relatec to Tariff could not be achieved. Hence as decided during the meeting, the draft PPA

along with points of disagreement, jointly signed by bath the parties was submitted to KSERC

by KSEBL, vide its letter dated April 25, 2016referred herein above with an additional prayer to

the Commission to decide upon the points of di~agreement. The matter is to come up for

hearing before KSERC on June 22, 2016.

Request:

Considerlng that BKPL submitted its elaborate proposal for the exercise for extension of PPA as

early as in .January 2015; as well as in-principle approvals have been sanctioned by KSEBL's

Board of Directors and Government of Kerala, following are our requests:

1. Expedite the process of approval the extension Qfthe P.PA;

2. Collab::irate fn the process of resolution of the points of disagreement in order to facilitate

speedy disposal of the matter.

212

Note 2: Conversion of the Plant from Naphtha based ·oper@tions to Gas based operations

Background:

1. In compliance with the clause 7.6 of the PPA which mandates. BKPL to use R-LNG as the fuel

upon its availability in Kochi, BKPL initiated requesting for conversion ·Of plant due to the

expected availability of LNG in Kochi by its letter to KSEBL dated April 4, 2012. A

comprehensive proposal for gas conversion along with extension of PPA term was also

submit:ed in January 2015. KSEBL in July 2015 accorded in-principal approval for extension of

PPA only for two years in order to study and facilitate the conversion of plant operations from

Naphtra to Gas.

2. The 165 MW Plant .of BKPL consists of Three Gas Turbine 9f 4~ MW eacn cind a Steam turbine

of 36 VlW. Smaller capacity gas turbines and modular design offer enhanced Operational

flexibility to adjust to demand variation quickly. Two gas turbines can be operated in combined

cycle mode throughout the day supplying about 105 MW and the third gas turbine can be

started to meet the evening peak. Since combined cycle is already in operation, the third

machine can be taken to combined cycle mode quickly. The plant is located in the load centre

of Kalamasserry and hence the transmission and distl'ibution.Josses are practically nil.

3. Our proposal for conversion of fuel for the plant from Naphtha to gas dated April, 2012 was

followed by several. rounds. of discussions and meetings in.cJuding presenfatkm by Original

Equipment Manufacturer. As instructed by KSEBL, we have also taken up with Central

Electricity Authority (CEA) and Ministry of Power our request for allocation of domestic gas for

the plant CEA has noted our requirement and informed us that the request can be considered

only when additional domestic gas availability for power plants i.s notified by MoPNG/Mop. ·

GAIL i1 ihe meantime had laid pipelines to BKPL premises and commissioned tbe required

infrastructure for supp!ying gas from Petronet LNG'sKochi terminal.

Current Status:

4. Regarding gas conversion of the plant the main concerns raised by KSEBL were price volatility

exhibited by LNG, price being indexed to crude, penalties in standard gas contracts if

committed quantities are not taken and additional investment for gas conversion. In order to

mitigate the risks associated With gas supply contracts we ar-e in .continuous dlsCU$$ions with

various gas suppliers including Petronet LNG Ltd (PLL).

213

5. We are in receipt of indicative offers from vendors for supply of gas with prices fixed for upto 5

year term. copies of sC}me are enclosed for your kind reference as A.nnexure.:1 & ll.B:ased on

the preliminary non negotiated offers., the variable cost of power will be around Rs 4/kWh. It shall also be noted that the present power purchase cost of KSEB is already in the range of Rs.

3.5 to 4 /kWh and any future .power procurement is likely to be more expensive than this cost

For the period bey9nd the first 5 years, the price will remain indexed to the Brent Crude Price

but Setler can consider fixing this price 1-2 years before the end of the initial fixed price period.

Further LNG Suppliers are also willing to consider specific mechanism to minimize the volatility.

It is sungested that KSEBL and BK.PL jointly negotiate these contracts so as to achieve best

possible contract benefitting the state.

6. With regard to the investment required fOr gas conv~rsion, we look forward to work closely with

the committee constituted by KSEBL to evaluate the proposal submitted by BKPL for

conversion of the plant from Naphtha to gas. Once the committee gives its feedback, we can

· freeze the scope anri start the negotiation process with General Electric, USA the supplier of

gas turbines installed at BKPL The time line. indicated by the supplier for converting the

machines to gas including the lead time for material delivery once a firm order is issued is 8-10

months. We can also work with the suppliers to further red\I® these timetines.

Request:

Considering the time frame available for processing the approvals and physical conversion of the

plant, we hereby request:

1. To expedite approval for conversion of the plant from Naphtha to gas incurring additional

capital expenditure and further extension of the PPA term by another eight years.

2. Approval ior executing Gas Supply and Transportation Agreements.

214

Note 3: Amendment in the land lease Agreement between TCCL and BKPL

Background:

1. The plant is located in 20 acres of land leased out to BKPL by TCCL as per the order of the

Govt of Keral.a (GoK).

2. The land lease charge paid by BKPL to TCCL, which is as per the lease agreement executed is

reimbursed by KSEBL. Th.e current le;ase rent inclusive of applicable taxes is Rs 5.5 Crores

and is subject to revision every five years.

3. GoK vide~ its order G.O.(Ms) No.33/201~/PD dated Sept 19; 2015 has directed TCCL to submit

a proposal to Revenue Department through Distrie,t C0Uector1 £;.rnaku\urn for transferring the

land to KSEBL in lieL1 of the huge electricity arreareTCCL o.we.s to KSEBL.

4. Government Order when implemented will absolve KSEBL of the need to reimburse the lease

rent and it is learnt that same is kept in abeyance.

5. Also BKPL vide its l.etter dated J,an 9, 2016 has conveyed its agreement to th'e GoKfor transfer

of the sald land by TCCL to KSEBL on ownership basis or on lease hold basis and to extend its

support for suitable amendment/ changes/ assignment/ oovation etc. in respect of existing

lease agreement between TOCL and BKPL.

Re guest:

In view of the. ab.ove mentioned facts we earnestly seek your kind intervention in expediting the

process of incorporation of suitable amendment/ changes/ assignment' novation etc. in respect of

existing lease agreement between TCCL and BKPL.

215

Indicative Pr.oposal-1 for the sale Qf LNG

gth June2016 .. _ .............................. _ ...................... _ ................... r---------~-----............. ~ .................. ___ .. ________ ~-.. ~-· -----------------· -1 ; 1. Buyer I Reliance Power Limited · i

i ! ······-·-·-·---.......................... ___ ~ .... --.................... _, ___________________ . __ ,, ..... -.. ---.. --·-------· -~--~ ; . . . . I

Term i 1st April 2017 to31stMarch2025 i l · . I I l

·-·--··-'"·-~--·-·-··------'·--·!"""'--.. "-----------··-·····-·--"" .. '"''--~---.. --·-- -----·---..------·---··-······"'"''''"--· .. 1

· 3.. Description l Four(4) firm LNG cargoes per year at the Delivery Terminal on a DES ' i basis. i

' ! ! '--..... --.. - .. -·------··--.. ~---,...---------·-------··------------.. -·---------.,~-.--. _____ ...... _ ............ -[ ' 4. Quantity ! The number of cargo lots in each Contract Year (CY} fordelivery is four [

\ (4}. . . t

! The Contract Quantity (CQ) of each cargo. lot shall be between 3 .. 0 and ! 13.6 TB tu, and shall be subject to an operational tolerance of+/- 5%. 11

. l :-·-··---~-···-·----......... - .. --·-r--·-----··-"-"•"'"'""""''-·-·· . . ---~-............... , ..................... _, __ , ___ , ..... -~-----·

i 5. Annual Delivery I The cargo deliveries will be evenly spread throughout each Contract I Programme /Year (CY) and each CY runs from lstJanuaryto 31st December. l

' I \ I

! The pro.cess for establishing this Delivery Schedule and for ! j s.ubsequently updating it through a Ninety Day Sqhedule is to be a.greed j l between the parties as per the MSPA 1

; : .......... ·-···-···••'>•""•••''''"'''""•---· ··- ·········f ............... ·:·-··--------·---·-. ----------~------.:. .. ~-··---.--.. ---~--'"···- ... ·-··-'''"""""'~~,...,. ... ..,~---···-··-,.;--•--------i. i 6. Delivery Terminal i Buyer's receiving facilities in India at the following receiving terminals: i

l ' 1 .. Ko chi

1----i----------.--·-••"""'-""·•••"•••••••·~··.:., ...... ~ .. ,. ... --,.., .. ,._,,_.,.. ____ ., __ , .... -••-•·-•-•JO""'"""~".;...,, .. ,., __ ....,;.....,

7. Quality Specs i LNG specification will be consistent with requirements at the Buye'r's j receiving facilities and shall have a Gross Heating Value in a gaseous /

l state of not less than one thousand (l,000 .. ) BTU/SCF and not more than 1:

one thousand one hundred and seventy (1,170) BTU/SCF I j ................... _____ .......... _ •.... - ................. +.--.--.. ····-···-----··"·--"·---........... -... ·-·----··-"·""'_ ........ ., .. _ .... ~ .... ,., ...... "._""""'"""'-"'"'~·--.. ·---·-· ............ 1

! 8. Contract Price I The Contract Price (CP) for LNG delivered at the Delivery Point in i I ' . . '

' ! (USD/MMBtu) shall be as specified below: l \ CP = 11.88% Brent (3.0.1) \ i !

!

I . I i Based on the above formula, the CP can be converted to a Fixed Price I / for the first 5 years of this transaction and the current expected level f

l would be ( 6.89 ]. This price will be set once any final contract is J

l agreed. . . i

I ... ---··~·--· ... ·~·-..L ... ·--~··· !

O •oo•oo•o•OOO"'""'"··~-··"""' ""'"" Oo o• -·•·•••··-· ·-.......... M ••.••• ,,_ ................ , ...... OO>O• ••OOOOOOoHOO••o••••o••oO•M-o•oo'•"'"•'"•"\~··M¥"""••'•"H•"""'""""" ooH•·---··--···---.... , .. 1

216

••• •••••••••·•--•~·- W•H• o H"O"H-···--eM---. --·--"•-••'•'••H-•-H•H•-H•H~-·.,,~ •• :--.. --~"-"-~'~ ............................ , ...... HOO""''''' ___ ......... , .. , ...... ,.~, ... , .... ,.,~~·- .......... ,., __ .,. __ , .. ,,,,, ....... ,,,,.-,,,,_,.,,,.-,,"''''''-HO• .. _H•O•

: i

I The period beyond the first S years wiH remain according to the Brent l I . . . I \ formula but Seller can consider fixing thi.S pric~ h2 years bgfore the f

j end of the initial fixed price period. [ j

j Brent (3.0.1) means, for a given DeHvery Month, the un-weighted. ·

I arithmetic average (expressed in USD per barrel) of all settlement I

I prices of the front month ICE Brent Crude Futures contract as published by the lnterc.ontinental Exchange at www.theice.com for

I each quoted day ofthethree months immediately prior to the Delivery r

Month Delivery Month means the month in which the unloading for I

; each Cargo is scheduled as per the Delivery Schedule. l 1 I . I

r~·:······~~~ ~~~·~·~·;············-········t·~~~;·~~·~~-;;~·~:;;;~···~-~~-~~·~~~-;~-~--~NG ~-~·~~~-;~··~~~·~~;~~~~--:i~~-·~:~·~~;·~ l I . . .

! receiving facilities as necessary to fulfil the obligations under the i ' MSPA.

f I LNG Vessels will have a minimum capacity of 130,000m3 and a I I maximum capacity of 180,000 m3. t

; I ,--··--··--·-···---·---·-····----r---··········--··-----------·-·-·-----·----··---·-··---.--·~--- -·. : 10. Transactie>n j Pursuant to the relevant Master Sale and Purchase Agreement (MSPA) j

Terms l to be agreed between Buyer and Seller. .

1

1

······••••¥••······-·············-·-· .. ·-······---~·-·--·-·--~--·"-·----··-·---·-..................... - ..... ; ... -------·-··-·-------.. --··-----... ------·-·-~·--"-·····-·----... --.. ·--------;

• 11. Term extension I The Term of this transaction can be extended at any time by mutual I ' . I ! agreementbetween Buyer and Seller. I

[.

1~-···---··---·-·---·----·----t--·-·-·--------------·------------·----- ·-··-----·-·-----·-·-1 j 12. Confidentiality j This Term Sheet shall remain strictly private and c.onfidential I

. : I r--···-·-•···--··--·--·-·······-1-~-----····---·-·--· ·-·····--·····------··--········-· .. -------

! Further items to be discussed inelude~ but are not l.imitedto: f ; !

i 13. Other

t . . . . . . ! ! Failure to deliver, take or pay, FM, liability, terminatton, tax, credit, I ! assignment, invoicing, law, documentation ! l . ~

i 1 f ;._ _____ ,_. ___ w•••¥ .. .,.... .... ,.,,, ____ ••••o<•-•••--•-••--L..•-•-•'"•-•• ----•·--·--........ ----· -------·------•···~-····-•••·~·---.}

217

Annexure-JI

Indicative Proposa1 .. 2 ·for the sale of LNG (As on os·~oQ.-201:6)

Please note that due to ongoing volatiJlty the prices may be adjusted any time prior fo making a firm offer

This indicative offer is equivalent to 11. 7 % Brent which is a competitive offer. However this is all subject to the credit team working out a decent proposal to manage the credit risk inherent in selling them fixed price for 3 ye.ars.

I d. f n 1ca 1ve non b" d. ff mm~ o er ! Buyer BSES Kera.I Power

-: DES/FOB DES

! Unloading Port Koc hi !

#of cargoes 2017: 4 Cargoes 2018: 4 Cargoes

! 2019: 4 Cargoes

I 2020~2027: Carnoes to b.e discussed l

I Scheduled Arrival 1 Cargo per quarter.. ADP proce$S to be complete no later than 1st I I Window September ofthe vear before delivew. I J Quality 1000~1180 GHV I

I '

· Vessel Size 125·175k m3 l

j Contract Quantity 2.9-3.7tbtu Operational +/-5% Tolerance LNG Cargo Price Fixed Price:

2017: USD 6.40 per MMBTU

2018: USD 6.6'1 per MMBTU

2019: USO 6.65 per MMBTU

2020-2027 - Price to be drscussed

Allowed Laytime 48 hours

Credit Support To be discussed ...

Buyer's To be discussed Performance Bond Demurrage 45,000 +boil off per day, pro-rata'.

~·-··~--

Deemed Boil .. Off 0.15% Rate Other Terms Buyer and Seller to execute stanqard MSA

// TRUE COPY //

218

KERALA STATE ELECTRICITY REGULATORY COMMISSION Thiruvananthapuram

OP No.34/2015 (File No.1935/DD/BKPU2015/KSERC)

In the matter of petition under Section 86 (1) (b) of the Electricity Act, 2003, for approval of agreement for extension of power purchase agreement dated 03.05.1999 between KSEB Ltd and BSES Kerala Power Ltd.

Petitioner

Respondent :

BSES Kerala Power Ltd Udyogamandal P .0 Kochi 683 501.

Represented by Adv. P. G. Jayashankar Sri. Robin Sebastian, Director, BKPL Sri. Suresh Gehani, Consultant,· BKPL Sri. Harikumar Pillai, H~ad, OEM, BKPL

Kerala State Electricity Board Ltd, Vydyuthi Bhavanam, Pattern, Thiruvanan,thapuram-695 004.

Represented by Sri. N.S. Pillai, Director, Finance, KSEBL . Sri. N. Venugopal, Chief Engineer, KSEBL Sri. B. Pradeep, DY.CE-II, TRAC, KSEBL Sri. Bipin Sankar P., Dy.CE, TRAC, KSEBL Sri. Anil. J, EE,. TRAC, KSEBL Smt. Latha S.V., AEE, KSEBL , Smt. Sudha V.P., AEE, KSEBL

Order dated 26.10.2016

1. Mis BSES Kerala Power Ltd (hereinafter referred to as the petitioner or BKPL) has filed a petition dated 03.10.2015 with the following prayers to,-

(i) Admit the petition

ANNEXURE-P/16219

//True Copy//

(ii) Approve the agreement for extension of PPA between KSEB Ltd and BKPL including tariff for two years as. prayed with effect from the first November 2015 pending finalization of the proposal submitted to KSEB Ltd for gas conversion of the plant and extension of PPA term.

(iii) Grant interim approval for continuing purchase of power from BKPL by KSEB Ltd during the intervening period beyond 31.10.2015 till the time extension of PPA is approved and signed, at the tariff proposed in the draft agreement for extension of PPA, subject to adjustment with respect to tariff approved by the Hon'ble Commission.

(iv) Condone any inadvertent omissions I errors I rouhding of differences I short · comings in the petition.

(v) Allow additions I alterations I changes I modifications I amendments to the petition at a future date.

(vi) Dispose of the petition expeditiously. (vii) Pass any such orders as deemed fit."

2. After preliminary scrutiny of the petition, the Gornmissio·n issued lidtice to the petitioner and the respondent directing them to appear for the hearing . on 27.10.2015. The Commission had, as per letter dated 14.10.2015 directed the petitioner to submit the following information and clarification on the petition.

( 1) The capital cost adopted for· computing the fixed charges as per prevailing· PP A.

(2) Technical and financial parameters adopted for computing tariff as per prevailing PPA.

(3) Actual O&M cost for last. 5 years based on audited accounts with documentary evidence.

. .

(4) Tariff computation for operating the plant under open cycle mode. (5) Steps taken to convert the fuel to LNG I RU\JG (6) The petition is for extension of PPA and as per the PPA heat rate

adopted is 2000kCal/kWhr. The reason for claiming higher heat rate to be substantiated with documentary evidence.

(7) The methodology adopted and computation of O&M charges proposed in the tariff."

3. The Commission had, as per letter dated 14.10.2015, directed the respondent to submit the following information and clarification

(1) Whether the generation from M/s BKPL is required for meeting the power requirement of the State during the next two years especially considering

' .

2

220

the power already tied up through DBFOO (865MW), Maithon (300MW) and DVC ( 1 OOMW).

(2) The year wise details of the energy schedule from Mis BKPL since. its COD till date, separately for KSEB's own use as well as the power scheduled for sale to outside the state on cost plus basis.

{3) The year wise details of the fixed and variable charges paid to Mis BKPL till date (Fixed and variable charges may be shown separately)

(4) Whether there is any obligation from the part of KSEBL I State to extend the PPA beyond October 2015.

(5) ·The Commission vide order dated 301h April 2013 in petition OP No.

2/2013 in the matter of ARR & ERC for KSEBL for 2013-14 has directed that "Cr expi'Y 0f prevailing PPA with liquid fuel based IPPs such as BSES, KPCL etc. power should not be drawn from these statidns under .any circumstances, unless the developers convert the stations to LNG or pool sufficient quantum of cheaper power from other sources, so that the · pooled tariff is well within the merit order dispatch. Appropriate advance notice may be issued to such developers within 3 months from the date of this ·order''. KSEBL may report the action taken on the matter and steps if any taken for conversion of the plant

(6) KSEBL's separate proposal if any on the fixed and variable charge commitment for next two years including lease charges, taxes other charges et., in the event of extension of PPA.

(7) KSEBL's proposal, if any on operating the plant on open cycle mode including its financial commitment.

(8) The estimated price of naphtha and variable charges for .the. next two years.

(9) The expeded power availability, including rate of power purchase through short term market including that from energy exchanges.

(10) Detailed comments on the proposal of M/s BKPL with related documents to substantiate the proposal."

4. Accordingly the Respondent submitted available. details as per its letter No.KSEBfTRAC/KSERC/BSES/2015-1612233 dated 26.10.2015 and requested

. . .

for furthE>r time for submitting detailed comments from the petitioner. It was also submitted that the preliminary views of KSEB Ltd would be presehted during the hearing on 27.10.2015.

5. The first hearing on the petition was conducted on 27.10.2015. In the hearing, the . authorized representative of the petitioher namely Shri. Suresh Gehani, presented the case of the petitioner in brief and submitted the prayers as quoted

3

221

in para 1 of t~is order. Shri. B. Pradeep, Deputy Chief Engineer,. TRAC, KSEB Ltd, Shri. Venugopal, Chief Engineer, TRAC, KSEB Ltd. and Shri. Sivasankara Pillai, Director (Finance) KSEB Ltd pres·ented the case of the Respondent.

6. On behalf of the Respondent it was submitted that it has, as per letter

No.CP/BSES/ 2015-16/164 dated 13.07.2015 accorded 'in principle' sanction to allow the BKPL plant (157 MW) to run on naphtha fuel for a period of two more

years from the date of expiry of existing PPA subject to the following conditions,-

(i) Terms of existing PPA have to be suitably modified. (ii) Re-ascertain the fixed charges applicable for the extended period, as

the existing plant is a fully depreciated one. (iii) Obtaining approval from KSERC for the above.

It was also submitted by KSEB Ltd that the above decision was taken by the Board of Directors after duly examining the probable availability of power and transmission corridors. Hdwever no consensus had been arrived at with BKPL in

respect of the fixed cost, heat rate, variable cost and such other conditions of the draft PPA proposed by the petitioner. It was also submitted that the proposal to convert the existing plant to LNG based plant would be highly risky if there is a

'take or pay' condition in respect of the purchase of LNG for the plant and therefore KSEB Ltd has not taken a final decision on this issue.

7. Mis BKPL informed that a copy of the letter No. KSEBffRAC/ KSERC/BSES/2015-16/ 2233 dated 26.10.2015 in which KSEB Ltd has stated their responses in detail, has not been received. by them. The Commission served a copy of the said letter on M/s BKPL during the course of hearing.

8. The following parties submitted petitions for impleading themselves in this

petition.

(1) The Kerala High Tension and Extra High Tension Industrial ~lectricity

Consumers Association, Productivity House, Jawaharlal Nehru Road,

Kalamassery.

(2) Kerala State Productivity Council, Productivity House, Jawaharlal Nehru

Road, Kalamassery ..

Copies of the petitions submitted by them were served on Mis BKPL and KSEB Ltd for their remarks. Shri. Dejo Kappan, Managing Trustee, Centre for Consumer Education had also submitted a representation expressing his views

on the issues involved in the extension of the impugned PPA dated 03.05.1999.

4

222

Representing the consumers he expressed the concerns with regard to the adverse impact of extending the impugned PPA, on the tariff applicable to consumers.

9. The Commission vide the daily order dated 28-10-2015 had issued the following directions to the petitioner and respondent that, (i) KSEB Ltd shall submit a detailed appraisal on the demand and supply

position of power during 2016 and 2017 duly considering the availability of power from its hydel stations, Central Generating Stations, power. purchase agreements with traders I generators, KSEBL's own diesel stations, other liquid fuel stations including RGCCPP-Kayamkulam and from short-term markfJt, the average cost of power purchase for a period of two years from November 2015, availability of corridor and such other details to substantiate the necessity for extending the PPA with BKPL for a· further period of two years from November 2015 for which in principle sanction has been accorded by the Board of Directors of KSEB Ltd.

(ii) KSEB Ltd may, if found necessary, file petition under clause (b) of subsection (1) of Section 86 of the Electricity Act, 2003, for the extension of the original PPA dated 03. 05. 1999 as per the Article 15. 1 and Article 7. 4 therein, wl1h mutually agreed tariff and terms and conditions incorporated in the draft PPA initialled by both the parties to the agreement.

(iii) Time up to 27.11.2015 is granted to the petitioner BKPL and the respondent KSEB Ltd for complying with the directives (i) & (ii) above.

(iv) KSEB Ltd and BKPL may, till 30.11.2015, extend the PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein subject to the condition that the payment for the period of one month from 01. 11.2015 to 30. 11. 2015 shall be as decided by the Commission in the final order.

1 o. In compliance of the direction of the Commission, the respQndent KSEB Ltd vide letter dated 25.4.2016 has submitted that:

(i) Since a mutually agreed tariff and terms and conditions could not be arrived at in spite of discussions with M/s. BKPL, KSEB Ltd informed M/s BKPL that KSEB Ltd will not be liable for payment of fixed charges or any other charges with effect from 1 .12. 2015.

(ii) Government of Kerala vide the order dated 24-2-2016 accorded 'in principle sanction' for extending the PPA between KSEB Ltd. and M/s. BKPL for the combined. cycle power plant at Kechi for two more years from the date of expiry of the existing PPA, subject to the condition that no · Government Guarantee would be allowed for any payment obligations of .

5

223

KSEB Ltd. and the final tariff should be decided by KSERC and it should be brought back to Government and approval of Government obtained. It was also ordered that KSEB Ltd. was permitted to study and firm up its decision on the option of fuel conversion of the plant from naptha to LNG. in consultation with KSERC and obtain Government approval at the appropriate stage.

(iii) It was submitted before the Commission that, KSEB Ltd. and Mis. BKPL could not arrive at a consensus on the 1tariff for the extended period. The differences between the two parties were mainly on the following tariff parameters.

(1) Return on Equity. (2) O&M Charges. (3) Cost of spares included in the computation of Interest on

Working Capital. ( 4) Calculation of fuel stock for the computation of Interest on

Working capital. {5) Reimbursement of Tax on Returns. (6) Reimbursement of Land Lease charges payable by BKPL to

TCCL. (7) Effective date of application of the extended PPA for the

purpose of p~yment of fixed charge.

(iv) The power position of the state was positively impacted due to a · combination of factors(which were remaining uncertain till recently) like

commissioning of. Mysore-Areecode 400KV line, commissioning of Narendra-Kolhapur 765KV line at 400KV level and resolution of disputes with CTU through orders of . Hon'ble CERC. Jhis has resulted in· substantial improvement in quantum of imported power. by full operationalization of 397MW MTOA from Chattisgarh, operationalization of 300MW STOA/MTOA from Simhapuri Energy Pvt Ltd., operationalization of L TA for 235.25 MW from Maithon (140.SMW) and DVC (94. 75MW). It was also submLtted that, on the basis of petition filed by KSEB Ltd. before CERC for operationalization of LTA as per power contracted under DBFOO bid guidelines from December 2016 and October 2017, it is reasonably expected that power flow will further improve during the time frame.

6

224

(v) The costliest source of power purchase of KSEB Ltd.( except for liquid fuel stations) was IGSTPS(Jhajjar) and the rate at KSEB bus was Rs.5.671/unit. The power allocation from Jhajjar has been discontinued from March 2016. The next in the bottom of merit order is the short term contract with PTC-Simhapuri and the rate at KSEB end is Rs.5.477/unit which is also expiring in May-16. The costliest.source of power on expiry of these contracts is from NLC-11 Expansion and the rate at KSEB end is Rs.5.516/unit. The delivered rate of power from other sources (except for liquid fuel stations) is below Rs.5 per unit

11. The petitioner M/s BKPL in its letter dated 8.6.2016 submitted that,

(i) As per the CERC I KSERC regulations, the residual value is to be 1 O % of capital cost and that the depreciation will be charged up to 90%.

(ii) Useful life of liquid based generation station as per schedule to KSE:RC regulation is 25 years.

(iii) O& M expenses is to be escalated in line with KSREC regulations.

(iv) ·Spares are to be considered based on historical cost.

(v) For working out Interest on .Working Capital, naphtha stock may be considered based on the storage capacity of BKPL.

(vi) Income T13x and land lease are reimbursable

12. M/s BKPL made additional submission dated June 14, 2016 on conversion of fuel to gas, based on Clause 7.6 of the PPA. BKPL has provided the tentative cost of generation using gas as Rs. 4.42/ KWH based on an LNG price of USD 6.31/ MMBtu ( USD 7.99 delivered price).

13. In the mean time, the following individuals I organizations showed interest to participate in the further proceedings of the petition.

(i) KSEB Officers Association, TC 25/2969, Mallar Road, Vanchiyoor, Thiruvananthapuram.

(ii) Sri. A. N. Rajan, Ambattumelil House, Kolazhi P.O, Thrissur. (iii) BSES employee unions.

7

225

· 14. The Commission conducted the second hearing on the petition at the court room o_f the Commission on 22-6-201_6. Sri. P G Jayashankar, advocate representing Mis BKPL presented the petition. Smt. Latha. S. V representing K S E B Ltd. presented the statements filed by K S E B Ltd. Sri A R Satheesh, made a presentation on the views of the Kerala HT & EHT Industrial Electricity Consumers' Association. Adv P G Jayashankar responded to the queries of the Commission. Advocate Smt. Surya Binoy filed vakalath on behalf of Sri A N Rajan, AITUC and expressed the views on the petition. Sri M G Suresh Kumar representing K S E B Officers Association. and Sri Dijo Kappen representing domestic consumers of the State also presented their views. Advocate Sri V Surendran filed vakalath on behalf of the four labour unions of BKPL and requested for an opportunity to present the views of the trade unions. The Commission scheduled final hearing on the petition on 19-7·2016. Subsequently, based on the request of the employee trade unions of the BKPL, the Commission rescheduled the final hearing on 10-8-2016.

15. Meanwhile, M/s BKPL, vide letter dated 27th July 20"16 submitted ,a request for certain amendments in the petition, explaining the power of the Commission to adjudicate upon the issues w.r.t the PPA. The additional request made by the petitioner is to " adjudicate and take a decision on the points of differences raised by the respondent in relation to the initialled draft PPA submitted before this Hon'ble Commission by the respondent"

16. The Commission conducted the final hearing on 10.8.2016 as scheduled. Adv. V Suresh represented the labour unions of Mis BKPL and presented their views. Adv Jayashankar made submissiOns for the amendment to. petition explaining the legal positions of the case quoting the relevant provisions of the Electricity Act, 2003 and decided case laws. Representatives of KSEB Ltd submitted that no consensus could be reached even after several rounds of discussion. The Commission expressed its vi"ew that a PPA cannot be imposed on KSEB Ltd. The agreement to purchase power would be a valid · agreement only if it is

· characterized by consensus · ad - idem, arrived out of free will of the parties· to contract. So far what has been made clear is that Mis BKPL is willing to sell the power. KSEB Ltd, as per its order No. CPIBSES/2015-16 1164 dated 14.7.2015 has only shown its willingness to extend the contract subject to the terms and conditions to be finalised. Government order No. GO (MS) No. 03120161PD dated 24.02.2016 does only show an 'in principle' sanction for extending the PPA. Commission clarified that only when KSEB Ltd submits the application for approval of PPA, can the Commission take a view. This has been made clear by the Commission in the daily order dated 28-10-2015. Therefore

8

226

KSEB Ltd has to state in unequivocal terms whether or not it requires the power from M/s BKPL and if so on what terms and conditions including the rate. KSEB Ltd submitted .that ·one month time is required to submit their final version. The Commission vide the daily order dated 16-8-2016 allowed time upto 8-9-2016 to KSEB Ltd to submit the details as directed by the Commission.

17. Subs_eq',Jently, the KSEB Ltd vide letter dated 31-8-2016 requested for time extension -till first week of October-2016 to submit the details. As requested by the KSEB Ltd, the Commission allowed time extension upto 7-10-2016 to file the written su~mission in compliance of the daily order dated 16-8-2016. KSEB Ltd has· not filed the written submission within the time limit. However, the KSEB Ltd vide the l~tter dated 18-10-2016 has again requested for time extension for submitting the details till last week of November-2016.

Analysis and Decision

18. As per the details submitted by the petitioner BKPL, the respondent KSEB Ltd and other sta~e ·holders who participated in the proceedings pf the subject petition, the Commission finds that, -

(i) The original PPA dated 03.05.1999 was entered into between the petitioner and the respondent in view of the following Government orders:

(a) G.O (MS) No.18/1997/PD dated 29.04.1997

{b) G.O (MS) No.17/1997/PD dated 25.04.1997

(c). G.O (MS) No.30/1996/PD dated 16.12.1996

As per the GO dated 16.12.1996 the Government had approved the PPA to be signed by KSEB for setting up small power project by Mis BSES Ltd which is the predecessor-in-interest of M/s BKPL and KSEB was permitted to sign the PPA with Mis BSES Ltd who had quoted for power project as per the tender floated by KSIDC, Thiruvananthapuram. As per the GO dated 25.04.1997, the Government had accorded sanction to shift the 40 MW power project originally proposed to be set up at Technopark,

· Thiruvananthapuram to Kechi along with the 40 MW project proposed .In the Trava.ncore Cochin Chemicals site subject to the condition that KSEB should negotiate and bring about corresponding reduction in power tariff. As per GO(Ms) No.18/97/PD dated 29.04.1997, the Government had accorded sanction to extend the PPA approved by the Government as per

9

227

G.O (MS) No. 30/1996/PD dated 16.12.1996, to the BSES Kerala Power Project Ltd to be established at the premises of T ravancore Cochin Chemicals Ltd, Eloor, Ernakulam with the modification that the benefit arising out of Rs.10 crore grant should also be discussed and incorporated by KSEB in the tariff. KSEB was also allowed to sign the PPA with BKPL who was a strategic partner of KSIDC for this project.

(ii) The term of the original PPA dated 03.05.1999 expired on 31.10.2015.

(iii) Clause 15.1 of the PPA dated 03.05.1999 provides for extension of the term of PPA as stipulated hereunder,-

. "The agreement can further be extended for a period of 1 O tariff periods beyond the 15th tariff period on a mutually agreed t~riff as per . clause 7.4 taking into account the fuel charges, operation and maintenance charges and a nominal net residual value of the project which the company would have normally expected on dismantling and selling the same at its cost"

In view of the above condition, the term of PPA dated 03.05.1999 can be . extended only after the parties to the agreement arrives at a mutually agreed tariff taking into account the fuel charges, O&M charges and· the nominal net residual value of the project. The intention of such clause is to enable KSEB Ltd to avail power with a comparatively low fixed charge and

. affordable variable charge.

(iv) The petition has been filed by the generator namely BKPL, under clause (b) of sub-section (1) of Section 86 of the Electricity Act, 2003. As per the said provision in the Act, the Commission can approve only the purchase of electricity of a distribution licensee including the price at which electricity shall be procured from the generating companies or licensees or from other sources through. agreements for purchase of power for distribution and supply within the State.

In this case the distribution licensee namely, KSEB Ltd has not submitted any application for approval of the purchase of electricity by it

(v) KSEB Ltd vide its letter No. KSEB/TRAC/ KSERC/BSES/2015-16/ 2233 dated 26.10.2015 and the oral submission made during the hearing on 27.10.2015 submitted that the parties to the PPA dated 03.05.1999 have not agreed on the rate of fixed charges or variable charges of electricity,

10

228

especially in view of the differences in assessment of O&M cost, return on equity, interest on working capital.

(vi) The conversion of the naphtha based plant of BKPL to a LNG based plant or to a dual fuel (naphtha and LNG) based plant would involve an additional investment of about Rs.170 crore as indicated by M/s BKPL and KSEB Ltd. This will definitely increase the fixed cost of the plant considerably. Further, the 'take or pay' condition, if any, in the fuel supply agreement is likely to increase the variable cost. The price of LNG in the international market is highly volatile. If the price of LNG increases to such prohibitive level that the electricity generated using LNG will not come in the merit order dispatch, the risk will be extremely high. KSEB Ltd has to consider such risk factors while taking a decision on this issue.

19. The Commission vide the daily order dated 28-10-2015 had issued the followi·ng directions to the petitioner BKPL and respondent KSEB Ltd that,

(i) KSEB Ltd shall submit a detailed appraisal on the demand and supply position of power during 2016 and 2017 duly considering the availability of power from its hydel stations, · Central Generating Stations, power purchase agreements with traders I ·gene.raters, KSEBL's own diesel stations, other liquid fuel stations including RGCCPP-Kayamkulam and from short-term market, the average cost of power purchase for a period of two years from November 2015, availability of corridor and such other details to substantiate the necessity for extending the PPA with BKPL for a further period of two years from November 2015 for which in principle . sanction has been accorded by the Board of Directors of KSEB Ltd.

(ii) KSEB Ltd may, if found necessary, file petition under clause (b) of subsection (1) of Section 86 of the Electricity Act, 2003, for the extension of the original PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein, with mutually agreed tariff and terms and conditions incorporated in the draft PPA initialled by both the parties to the agreement.

(iii) Time up to 27 .11.2015 is granted to the petitioner BKPL and the respondent KSEB Ltd for complying with the directives (i) & (ii) above.

(iv) KSEB Ltd and BKPL may, extend the PPA dated 03.05.1999 till 30.11.2015 as per the Article 15.1 and Article 7.4 therein subject to the

11

229

condition that the payment for the period of one month from 01.11.2015 to 30.11.2015 shall be as decided by the Commission in the final order.

20. The Commission has examined the report submitted by the respondent KSEB Ltd and the petitioner BKPL in compliance of the directions issued by the Commission vide the daily order dated 28-10-2015. KSEB Ltd has submitted that, it had contracted sufficient quantum of power from outside the State through competitive tenders on long term and medium term terms to meet the power requirement of the State. With the commissioning of the MysoreAreekode 400 kV line, commissioning of Narendra-Kolhapur 765 kV line and the resolution of disputes with CTU with the intervention of the CERC, the power contracted from various sources is expected to flow in to the State as scheduled. The month wise details of the demand and supply position submitted by the KSEB Ltd also reveals that, there is hardly any power shortages within next few years.

21. Both the respondent KSEB Ltd and the petitioner BKPL submitted that, they could not arrive at a consensus on the tariff for the extension of PPA. KSEB Ltd has produced a copy of the Government order G.O (Ms) No. 03/2016/PD .dated 24-03-2016 regarding the extension of PPA between KSEB Ltd and M/s BKPL The· relevant portion of the Government order is extracted bet ow.

'6) Government have examined the matter in detail in the fight of the Board Order read as 4h paper and the order of KSERC read as 5th paper above, are pleased to accord inprincipal sanction for extending the PPA between ·KSEB Ltd and Mis BKPL for the · combined cycle power plant at Kochi for two more years from the date of expiry of the existing PPA subject to the condition that no Government guarantee will be allowed for any payment obligations of KSEB Ltd and the final tariff shall be decided by KSERC shall be brought back to the Government and approval of Government obtained. The KSEB Ltd is also permitted to study and firm up its decision on the option of fuel conversion of the plant from Naphtha to LNG in consultation with KSERC and obtain Government 9pproval at the appropriate stage'.

Hence above Government order is only an in principle sanction for extending the PPA.

22. Regulation-78 of the KSERC (Terms and Conditions for determination of Tariff) Regulation, 2014 (hereafter referred as Tariff Regulation, 2014) deals with the procedures for approval of the power purchase agreement/ arrangement between the distribution licensee from the generating company/ from other

12

230

sources. The relevant provisions in the Tariff Regulation, 2014 is extracted below.

'·

78. Approval of power purchase agreement/arrangement. - (1) Every agreement or arrangement for procurement of power by the distribution business/licensee from the generating business/company or licensee or from other· source of supply entered into after the date of coming into effect of these Regulations shall come into effect only .·with the approval of the Commission:

Provided that the approval of the Commission shall be required in accordance with this regulation in respect of any agreement or arrangement for power procurement by the distribution business/licensee from the generating business/company or licensee or from any other source of supply on a standby basis:

Provided further that the approval of the Commission shall also be required in accordance with this regulation for any change to an existing agreement or arrangement for power procurement, whether or not such existing agreement or arrangement was approved by the Commission.

(2) The Commission shall examine an application for approval of power purchase agreement/arrangement having regard to the approved power procurement plan of the distribution business/licensee and the following factors:-

(a) requirement of power under the approved power procurement plan; (b) adherence to a transparent process of bidding in· accordance with guidelines issued by the Central Government undf!r Section 63 of.the Act; (c) adherence to the terms and conditions for determination of tariff specified under chapter VI of these Regulations where the process specified in clause (b) above has not been adopted; (d) availability (or expected availability) of capacity in the intra-State transmission system for evacuation and supply of power procured under the agreement/arrangement; and

(e) need to promote co-generation and generation of electricity from renewable sources of energy.

(3) Where the terms and conditions specified under chapter VJ of these Regulations are proposed to be· adopted, the approval of the power purchase agreement/arrangement between the generating business/company and the distribution business/licensee for supply of electricity from a new generating

13

231

station may comprise of the following two steps, at the discretion of the applicant:- . (a) approval of a provisional tariff, on the basis of an application made to the Commission at any time prior to the application made under clause (b) below; and (b) approval of the final tariff, on the basis of an application made not later than three months from the cut-off date.

However, the distribution licensee KSEB Ltd has not filed proper application for approval of PPA as per Regulation 78 of the Tariff Regulation, 2014 and also as per clause (b) of subsection (1) of Se¢tion 86 of the Electricity Act-2003.

23. The Commission vide the daily order dated 16-08-2016 has expressed that, 'a

PPA cannot be imposed on KSEB Ltd. The agreement to purchase power would be a valid agreement only if it is characterized by consensus - ad - idem, arrived out of free will of the parties to contract. So far what has been made clear is that M/s BKPL is willing to sell the power. KSEB Ltd, as per its order No. CP/BSES/2015-16 /164 dated 14.7.2015 has only shown its willingness to extend the contract subject to the terms and conditions to be finalised. Government order No. GO (MS) No. 03/2016/Pb dated 24.02.2016 does only show an in principle sanction for extending the PPA. The Commission can take a view' only when KSEB Ltd submits a proposal for approval.

24. The Commission further directed the KSEB Ltd to state in unequivocal terms

whether or not it requires the power from M/s BKPL and if so on what terms and conditions including the rate. The Cominission has granted time up 8-09-2016 to submit the same and further granted time extension upto 07 -10-2016 to submit the details. KSEB Ltd has not submitted the required details till date. ·KSEB Ltd

vi de the letter dated 18-10-2016 has again requested for time extension for submitting the details till last week of November-2016.

25. Mis BKPL has filed the petition under clause (b) of subsection (1) of section 86 of the Electricity Act-2003 for approval of agreement for extension of power purchase agreement dated 03-05-1999 between KSEB and BKPL. For the

purpose of power procurement, the tariff is either determined under section 62 of the Electricity Act-2003 or adopted under section 63 of the Electricity Act-2003.

The relevant sections of the Electricity Act-2003 extracted below.,

"62. (1) The Appropriate Commission shall determine the tariff in accordance with provisions of this Act for-

(a) supply of electricity by a generating company to a distribution licensee:

14

232

"

"63. Notwithstanding anything contained in section 62, the Appropriate Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government."

26. The Commission is empowered by the clause (b) of subsection (1) of section 86 of the Electricity Act-2003 to regulate the power procurement of the Distribution licensee. The relevant section of the Electricity Act~2003 is extracted below.

"86. (1) The State Commission shall discharge the following functions, namely:

(b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State;"

From the above provision of the Electricity Act-2003, it is evident that it is the statutory responsibility of the Commission to regulate the power procurement of the distribution licensee including the price of power. The distribution licensee has to file the application with necessary and sufficient details for the approval of the PPA. Despite repeated directions issued by the Commission vide the daily orders dated 28-10-2015 and 16-08-2016, KSEB Ltd has failed to file the application with sufficient details.

27. Considering all these factors, the Commission is of the considered view that, the petition filed by M/s BKPL under section 86(1)(b) of the Electricity Act-2003 for approval of the extension of power purchase agreement (PPA) dated 03-05-1999 between KSEB and Mis BKPL is not maintainable. However, as and when KSEB Ltd submits application with a proper PPA initialed by both KSEBL and BKPL as per Regulation 78 of the Tariff Regulation, 2014 read with clause (b) of sub section (1) of section 86 of the Electricity Act-2003, with mutually agreed tariff as stipulated under Clause 15.1 of the PPA dated 03-05-1999, the Commission would take a decision on merits as per the provisions of the Electricity Act-2003 and relevant regulations.

Order of the Commission

Considering the oral and written submissions of the petitioner M/s BKPL, the respondent KSEB Ltd and other stakeholders, the Commission is of the considered. view that, the petition filed by M/s BKPL purporting to be a draft PPA

15

233

under section 86(1)(b) of the Electricity Act-2003 for approval of agreement for extension of power purchase agreement dated 03-05-1999 between KSEB and Mis BKPL is an inchoate document and is not maintainable under the relevant provisions of the Act and ·the relevant regulations. Hence the petition is dismissed.

. Ordered accordingly.

Sd/-

K. Vikraman Nair Member

Sd/-

S Venugopat Member

Sd/-

T M Manoharan Chairman

Approved for issue

Santhosh Kumar· K. B Secretary

// TRUE COPY //

234

B5E5 BSES KERALA POWER LIMITED CIN:U40105KL 1996PLC010257

Regd. Office & Works:

Systems Certified ,., Integrated Management •• .. ISO 9001 : 2008 · · ~ ISO 14001 : 2004 OHSAS 18001 : 2007 llfl KERA.LA.

UDYOGAMANOAL P.O., KOCHl-683 501 Ph: (91-484) 3085050, Fax: (91-484) 3052007

BKPUKSEBUPP A/2016-17 /03

The Chairman & Managing Director, Kera la State Electricity Board Limited, Vydyuthi Bhavanam, Thiruvananthapuram

Dear Sir,

ISO 50001 : 20i1

December 9, 2016

Sub: Extension of Power Purchase Agreement dated 03.05.1999 between KSEB and BKPLGeneration of power using Naphtha stock available at BKPL

Ref: 1. Final order of the Hori'ble KSERC in OP 34/2015 dated 26.10.2016

2. Our letter to KSEBL dated October 26, 2016

3. Our e-mail to KSEBL dated 15.01.2015 intimating the Naphtha stock

4. KSEBL Dispatch Instructions in Nov, 2014

1. We invite your kind attention to the Dispatch Instructions from Load Dispatch Centre, · Kalam-asserry given -to us in 1he month--ot~mber-wt-4-whereby-·9eneratie11--ef-.-~ewer-f.romBKPL was scheduled. Based on the same and in anticipation of continued scheduling of power generation from the plant as per the PPA in force, BKPL had purchased Naphtha from IOCL and maintained stock. It may please be appreciated that due to the non-availability of product on short notice from Kechi Refinery we were even forced to bring the product from IOCL, Chennai.

2. However, after 22.11.2014 the plant had been scheduled only for a brief period between 04.05.2015 and 06.05.2015.This resulted in BKPL holding for more than two years about 10400 MT of Naphtha (about 6600 MT of Naphtha in our tanks and another 3800 MT at IOCL, lrumpanam) bought exclusively for the purpose of generating and selling power to KSEBL. We have duly informed KSEBL of this stock through our e"mail dated 15.01.2015.

3. In this context we would like to bring your kind attention the final order of the Hon'ble Commission dated 26.10.2016 in our petition (OP 34/2015) for approval of PPA and tariff for the two years' extension of term, filed as directed by KSEBL. Commission has dismissed our petition citing that the petition filed by BKPL is not maintainable and also stated that as and when KSEBL submits application with a proper PPA initialled by KSEBL and BKPL, the Commission would take a decision on merits as per the provisions of the Electricity Act-2003 and relevant regulations.

4. The Company has been maintaining the aforementioned stock of Naphtha worth more than Rs 68 Crores incurring huge inventory 'carrying cost ,under the legitimate expectation that PPA will

CORPORATE OFFICE : RELIANCE ENERGY BUILDING: 'st'FL'OOR,' DEVi~A~fXNE, BORIVALI WEST, MUMBAI_ 400 103

-ANNEXURE-P/17

235

//True Copy//

be extended, for which in principle sanction was accorded by KSEBL's Board of Directors in May 2015 and the Government in February,2016.

5. In view of the Hon'ble Commission's final order in OP 34/2015 ,it is not certain when the Naphtha stock which had been brought exclusively for KSE6L during the pendency of the PPA dated 03.05.1999 can be liquidated by generating power.

6. As you are kindly aware Naphtha is a highly volatile and hazardous petroleum product which has to be stored and handled with utmost care. Company, which has been classified as a Major Accident Hazard Unit owing to the storage of Naphtha is compelleq to spend large sum of money towards maintenance of systems required to ensure safe storage of Naphtha.

7. Approximately 60 MU of electricity can be generated using the said stock of Naphtha. In view of the continuing uncertainty and inordinate delay in communicating a decision regarding PPA extension/buy out of the plant by KSEBL as requested vide our letter dated 26.10.2016, we earnestly request KSEBL to initiate urgent action for utilizing this Naphtha stock and generating power in the larger interest of public safety. This will also help to meet the shortage of power being faced by the state due to the failure of monsoon. We are agreeable to the terms and conditions of Tariff as per the PPA in force at the time of procurement of this fuel for running the plant and generating power using the said Naphtha stock.

8. We sincerely request KSEBL to favourably consider our request and communicate a decision in this regard urgently.

Thanking You,

Yours faithfully,

For BSES Kerala Power Limited,

Plant-in-Charge

Copy to: Director (Finance)

Enclosures

1. Our e~mail to KSEBL dated 15.01.2015 intimating the Naphtha stock 2. Our letter to KSEBL dated October 26, 2016

2

236

BSES KERALA p,QWER LIMITED KERA.LA.

CIN:U40105KL 1996PLC010257 Regd. Office & Works:

UDYOGAMANDAL P.O., KOCHl-683 501 Ph: (91-484) 3085050, Fax : (91-484) 3052007

BKPUKSEBUPPA/2016-17 /02

The Additional Chief Secretary,

Department of Power,

Govt. Secretariat.

Thi ruvana nthapuram.

Respected Sir,

Integrated Managementll. •. Systems Certified · ·&1

ISO 9001 : 2008 ' AJ ISO 14001 : 2004 OHSAS 18001 : 2007 -ISO 50001 : 2011

December 09, 2016

): Extension o-= Power Ptirchase Agreement dated 03.05.1999 between KSEB and BKPLGeneration ·Jf power using Naphtha stock available at BKPL

.ef: 1. Final order dated 26.10.2016 of the Hon1ble KSERC in OP 34/2015

2. Our letter to KSEBL dated October 26, 2016

3. Our e-mail to KSEBL dated 15.01.2015 intimating the Naphtha stock

1. We invite your kind attention to the Dispatch Instructions from Load Disoatch Centre. KSEBL given to us 1n the ·month of November 2014 whereby generatfon of power from BKPL was scheduled. Based on the same and in anticipation of continued scheduling of power generation from the plant as per the PPA in force, BKPL had purchased Naphtha from IOCL and maintained stock. It may please be appreciated that due to the non-availability of product on short notice from Ko1,;hi Refinery we were even forced to bring the product from IOCL, Chennai.

However, after 22.11.2014 the plant had been scheduled only for a brief period between 04.05.2015 and 06.05.2015.This resulted in BKPL holding for more than two years about 10400 MT of Naphtha (about 6600 MT of Naphtha in our tanks and another 3800 MT at IOCL, lrumpanam) bought exclusively for the purpose of generating and selling power to KSEBL. We have duly informed KSE'BL of this stock.

3. In this context we wollld like to bring your kind attention the final order of the Hon'ble Commission dated 26.10.2016 in our petition (OP 34/2015) for approval of PPA and tariff for the two years' extension of term, filed as directed by KSEBL. Hon'ble Commission has dismissed our petition. citing that the petition ·filed by BKP.L is nQt maintainable and as and when KSEBL submits application with a proper PPA in1tialled by both KSEBL and BKPL, the Commissian would take a deciston on merits as per the provisions of the Electricity Act-2003 and relevant regulations.

4. The Company has been maintaining the afor.ementioned stock of Naphtha worth m.ore than Rs 68. Crores incurring huge inventory carrying cost ,under the legitimate expectation that PPA wili·

1

CORPORATE OFFICE: RELIANCE ENERGY BUILD1Nd:•tkt"FC6ok; DEVibAs2r.4..NE, BORIVALI WEST, MUMBAI- 400 103

237

be extended, for which in principle sanction was accord~d by KSEBL's Board of Directors in May 2005 and the Government in February,2006.

5. In view of the Hon'ble Commission's final order in OP 34/2015 ,it is not certain when the Naphtha stock which has been brought exclusively for KSEBL during the pendency of the PPA dated 03.05.1999 can be liquidated by generating power.

6. As you may please be aware Naphtha is a highly volatile and. hazardous petroleum product which has to be stored and handled with utmost care. Company, which has been classified as a Major Accident Hazard Unit owing to the·storage of Naphtha is compelled to spend large.sum of money towards maintenance of systems required to ensure safe storage of Naphtha.

7. Approximately 60 MU of electricity can be generated using the said stock of Naphtha. In view of the continuing uncertainty and delay in communicating a final decision regardihg PPA extension/buy out of the plant by KSEBL, as requested vide our letter dated 26.10.2016, ·we . request the kind intervention of the Government to initiate urgent action for utilizing this Naphtha stock and generating power in the larger interest of public safety. This will also help to meet the shortage of power being faced by the state due to failure of monsoon. We are agreeable to the terms and conditions of Tariff as per the PPA in force at the time of procurement ·at this fuel. for running the plant and· generating power using the said Naphtha stock.

8. We seek your kind intervention in firming up a decision in this regard urgently.

Thanking You,

Yours faithfully,

Plant-in-Charge

Enclosures

1. Our e-mail to KSEBL dated 15.01.2015 intimating the Naphtha stock 2. Our letter to KSEBL dated October 26, 2016 3. Final order dated 26.10.2016 of the Hon'ble KSERC ·in OP 34/2015

2

// TRUE COPY //

238

.~,ES . KERA Li\

BSES KERALA 'POWER LIMITED CIN:U40105KL1996PLC010257

Regd. Office & Works: UOYOGAMANDAL P.O., KOCHl-683 501

Ph: (91-484) 30850501 Fax: (91-484) 3052007

BKPUKSEBUPP A/2016-17102

The Deputy Collector

DDMA,

Ernakulam.

Respected Sir,

Sub: Written statement regarding safety of Naphtha storage

Ref: Your notice dated 01-97603/16 dated 15/12/2016

Integrated Managementll. • Systems Certified ,,,

ISO 9001 : 2008 «< .

ISO 14001 : 2004. OHSAS 1·aoo1 : 2007 Ill ISO 50001 : 2011

December 17, 2016

1. KSEBL has given instruction to us in the month of November 2014 whereby generation of

power from BKPL was scheduled. Based on the same and in anticipation of continued scheduling of power generation from the plant as per the PPA in force, BKPL had purchased Naphtha from .IOCL and maintained stock.

2. However, after 22.11.2014 the plant had been scheduled only for a brief period between . 04.05.2015 and 06.05.2015.ThiS resulted in BKPL holding for more than two years about

10400 MT of Naphtha (about 6600 MT of Naphtha in our tanks and another 3800 MT at IOCL, lrumpanam) bought exclusively for the purpose of generating and selling power to KSEBL We have duly informed KSEBL of this stock.

3. In the final order of the Hon'ble State Electricity Regulatory Commission dated 26.10.2016 'in our petition .(OP 34/2015} for approval of Power Purchase Agreement and tariff for the two years' extension of term, filed as directed by KSEBL, the Hon'ble Commission has dismissed

our petition citing that the petition filed by BKPL is not maintainable and as and when KSEBL

submits application with a proper PPA initialled by both KSEBL and BKPL, the

Commission would take a decision on merits as per the provisions of the Electricity

Act~2003 and relevant regulations.

4. The Company has been maintaining the aforementioned stock of Naphtha under the legitimate expectation that PPA will be extended, for which in principle sanction was accorded by KSEBL's Board of Directors in May 2015 and the Government in February,2016.

5. rn view of the Hon'ble Commission's final order in OP 34/2015 ,it is not certain when the

Naphtha stock which has been brought exclusively for KSEBL during the pendency of the PPA dated 03.05.1999 can be liquidated by generating power.

6. Naphtha is· a highly volatile and hazardous petroleum product ~hich has to be stored and

handled with utmost care. Company, which has been classified as a Major Accident Hazard Unit owing to the storage of Naphtha is compelled to spend large sum of money towards

1

ORPORATE OFFICE: REUANCE ENERGY BUILDING., 1st FLOOR, DEVIDAS LANE, BORIVALI WEST, MUMBAI - 400 103

ANNEXURE-P/18 239

//True Copy//

maintenance of systems required to ensure safe storage of Naphtha .The. company has a fool proof naphtha storag~ and protection system to keep it safe .

. 7. In view of the continuing .uncertainty and delay in communicating a final- decision regarding PPA extension/buy out of the plant by KSEBL, we requested KSEB and the Government of Kerala to initiate urgent action for utilizing this Naphtha stock and generating power in the larger interest of public safety Vide our letters dated 09.12.2016 .This will also help to meet the shortage of power being faced by the state due to failure of monsoon.

8. In view of the above, it is requested that this authority may be kind enough to issue appropriate directives to the concerned to permit us to operate the plant and exhaust the fuel as requested Vide our letter$ dated 09.12.2016 as mentioned above without further delay, so as to avoid any likely hazard associated with indefinitely long storage of naphtha in the.premises.

Thanking You,

Yours faithfully,

Director

Enclosures

1. Our letter to KSEBL date December 09, 2016 2. Our letter to GoK date December 09, 2016

// TRUE COPY //

240

Proceedings of the Chairman District Disaster Management Authority & District Collector, Ernakulam

Present: K Mohammed Y Safirullah IAS

D/1/97603/16 Date: 29.12.2016

Sub: Disaster Management - Removal of naphtha stored in BSES Kerala Power Limited - The

Disaster Management Act 2005, order issued under S. 30(1), 33

Ref: 1.Complaint of Shri MS Sivasankaran dated 09.12.2016, Convenor, Joint Action Council of Trade

Unions of BSES.

2. Report of the Joint Director of Factories and Boilers no E 11429/16 dated 15.12.2016

As per reference (1) above, it is pleaded that BSES Kerala Power Limited is engaged in generation of

electricity using naphtha fuel ,the factory has stored 6800 MT Naphtha in the premises ,the factory

stopped working ,the factory is under Lay off, as the naphtha is fast and highly inflammable fuel ,in

case of fire, would spread to 50 sq kms area and hence urgent action shall be taken from the side of

the District Collector , in the interest of safety . In the hearing held on the basis of the complaint,

Director BSES, Dy. Chief Engineer of KSEB, Chemical Inspector for the Department of Factories and

Boilers and the complainant were present.

The Company Director stated during the hearing that 6800 MT of naphtha is stored ,which has been

brought in stock for the purpose of generating electricity during the period of validity of the Power

Purchase Agreement with KSEBL and the stock remains even now since the PPA has expired on

31.10.2015 and has not been renewed so far.

As per the statement submitted by Shri A S Anand appeared for KSEBL, as of now KSEBL has no

agreement with the company for purchase of electricity and as the price of power generated using

naphtha is on the higher side and KSEBL is purchasing power from sources making electricity

available at a lower price as mandated under the Electricity Act 2003 and KSEBL has no objection in

selling the electricity generated using the naphtha stored in the company to anybody.

As per the submission by the complainant during the hearing, it is desirable to ensure safety by

withdrawing lay off to the workers in the company and exhausting the fuel stock by generating

electricity.

With regard to this, as per ref (2) above ,the Joint Director Factories and Boilers in the report

submitted by him, states that the company is storing 6879.37 MT naphtha ,the license to store

naphtha is up to 31.12.2017 ,still since the company is in Lay off ,absence of experienced workers

may lead to increased possibility for safety lapses ,naphtha is highly inflammable petroleum product

and hence the naphtha now in stock should be removed either by generating power or by other means.

Since it is convinced from the report under ref (2) above that as the company is under Lay off till

date, lapses are likely to happen in the absence of expert workers with regard to the safety

procedures of naphtha ,this may lead to extensive danger to life and property ,it is hereby ordered

ANNEXURE-P/19241

//True Copy//

under S 30{1) and 33 of Disaster Management Act 2005 that BSES company shall get rid of the

6879.37 MT of naphtha stored in the factory premises within a period of 7 days from the date of

this order either by generating electricity or by other means .It is also ordered that ,in case of any

lapse in implementing this order, further actions will be initiated under S 51 (b)of the said Act.

Signature

Chairman, District Disaster Management Authority & District Collector

Copy to,

1. Director, BSES Kerala Power Ltd, Udyogamandal, Kochi 683501

2. Shri MS Sivasankaran ,Convenor, Joint Action Council of Trade Unions of BSES

3. Joint Director ,Factories and Boilers ,Ernakulam

By order

Dy. Collector (Disaster Management)

// TRUE COPY //

242

Ref: H'.eSO/CfBSESf2016-17 Date: ~07.02.2017 ] . . . . . . . . .·

/

Sub: WP ( C) 540/2017N ·before Hpn'bl~ high court of Kerafa filed: bv Mis BSES K~rala Power · Limited - Exp.ert Committee. repo~t - "Submitting of - regarding ·

Ref: 1. Hon'ble Court order dated 20:01.2017 2. Hearing conducted by District collector on 24.01.2017 3. Site Inspection on 27:01.2017 4. Order by District collector ref: Dl-97603/16 dated 04.02.2017

1

As directed by the Hon'.ble hig]l court;.ofKeraia in the above referred orders, !()CL.officials "including safety· officer were present on 24.01.2017 for heanng conducted by Distrtct collector and for site inspection on27.01.2017 (3 PM to 6 PM) atM/s_BSES preiuises along with District collector.

After going t::irm~gb. the site. inspection; IOCL is of the opinic)u that Mis BSES is well ca~~bie of storing; and handling of Nanhtha with their 15 years.experience without any.untoward. iuc1dent with respect to s.:i.tet)'. It is observ.ed tl1at they :i.re employing. ad~quate man. power of q\l.aJified operR.t.10na1 engineers, nre safety and security crew. It is. observe.ct that s~fety systems· menti9Q.ed ·in the .affidavit given by Ml s BSES are availabl~ and functio11al in. their prei::oises and same is·a,dequate to handl¢ Naphtha in a.sa~e manner. tt may also be noted that- they have: valid statut9ry licenses s:U:c;h as. :factory and explosives license which were granted after inspection of their. premises "by competent authorities .. rt was .al~o observed that Mis BSES was awarded for best" safety perforn:lance by Factoiies ·and.Boilers h Ole recent past.. We are of the opinion that so long as the above .fa.cilities i~· maintained with competeb.~ aod adequate man power, it_"is, safe to store and· handle Naphtl?.a in'the said premises. . . ·

With regard to· feasibility of r~transuiittjng Naphtha through the underground ·pipelines to'. IOC.; same is not possible due to following-reasons.

• Underground pipeline which was used· to transfer Naphtha from IOCL to lvl/s BS:f:S was found ~eaky during mandatory hydro testing and declared Unserviceable in· Sep 20 i5 as it is beyond reyairs.

•

•

•

Only one tank of 7000 Kilo litre is availabl~ in IOCL Irumpanam Terminal for Naphtha storage which is curr'ent1y storing 6000. kilo litre ofNaphtha. Th.is produ~t was brought earlier from Chennaj for exclusive usage by Mis BSES in. 2014 aud balance quantity of 6000- KL is lying dom1ant for past two· years.· ij~ce, there is. no· a~equate storage provision available at IOCL terminal to-accOJ:mnodate Mfs BSES's·product · ·

Facilities for pµroping Naphtha baL:k to 1rn:L tlrrough pipdu~e is not av;,,ilable at Mis BSES: . . . .

IOCL Will not be able. to dispose offtfils. product since there iS: no ·customer in Kerala. for usage . The existing stock at IOCL ·terniina.l (6000 KL) was brought ~a.rliei' frohi C:hennai as indented by Mis BSES in .2014_.: IOCL is also-facing difficulties to ·dispose~off .this product as there is no provision to pump it to.. oc ::m J" · • ex;s. a 0ui- p.r~!Dlses. _ · ·

. . . ·· · l'iO. , \' \\\YS~ ~\ \Yi . . . . .

Issued to ~r; /. Smr . ·l'\oc.~ tf o>Uc~ ·· · ·. . ..... ~ .... 'i' •. , •••• N,, .. ,, •• , •• ,{.,"···········

undE;r Right to In.formation Act,· 2005 . ·

p ~ &"1 age.(: ...... / ...... )

ANNEXURE-P/20 243

//True Copy//

fosue~tion repo:rt on. Mis BSES Kera.l:.: ·piYW er. Limlten . . .

Ref; KeSO/CfBSES/2016-17 Date: 07.02,2017

/

' . ;~

Sub.: WP ( C) 540/2017N before Hon'ble high court of Keral.a filed by Mis BSES Kerala P·ower Limited - Expert Committee report ..:_:Submitting.o.f- regarding

Conclusion:

• As detailed above, it is safe to continue storage and handling of Naphtha at Mis BSES's·premises With all the facilities and adequate experience an<l qualified trtan power round the clock

• Naphtha available at Ws BSES premises and IOCL terminal can. be eX.hausted by temporarily operating the plant for power genera~ion for a short period :dW'Ulg peak ·demand season ( cu.'Tent summer s~ason) in view of safety of th~ area and over all m_terest.

• Alternatively, Naphtha can be disposed off ilirough local Refinery. for reprocessing and disposal.

Arun Anto C, . · Assistant Manager (Health, Safety & EnVironment) IOCL

Page 2 of2

ASuresh . "'· ~~~"VO \~' T

Chief Manager (Consu:mt:r Sal~s) IOCL ..

244

Report Oli the po'-tentiar hazard due to the storage of Naphtha- a't BSES Kerala · ·· Pow~r Ud/s plant premises ·atP·athala·m. Udyogamandaf

Introduction: "" ./

Mis BSES Kerala _ Po~er Umitetj "had. filed WP(C):-54012017N ·bef~re the Hon1ble High Court challenging ·the. order of the KSE_R Commission. and 'the· orc;ier ·of the-.. District · Collector dated- 29.12.2016. Hon'ble. High. court in its order ·dated 20~·C>1.2017 had .. · .

.. difected the District collector, Emakulam to tarry.out site inspection. along with expert team consisting of the Senior Joi~t Director, Factories_.~ -Boilers, Emaku_lam1 Safety Officer, Indian Oil Corporation and. an officer rrotn. KSEB ttd.

Vide DGEIG1/BDPP/Genl/2016--.17 dtd. 25·.01~2917 the .Deputy ~hief Engineer~ BOPP.· was authorized to· represent KSEBL ·during: the BSES site inspecti6n of the· District·. · Collector, Emakufam on 27·.01 ~2017. · · · · . . . · . . . .

Now vide Proceedings . of the·· District coUector, . Emakulam, No.Dl-97603'/16 · dated 04. 02.2017 it was ordered that the expert committee should submit their report oil or . before 07.02.2017. ·

. . . .

Fire/Explosion· hazard ~ue to stock of naphtha: · .

With regard to the all~ed :potential ·fir~/expJosion, haiar.d due· to the.storing. of naphtha at the BKPL.plant premises the followin~· is·submitted~ ·

Th~re i$ no potentiaJ. fi.re/explo9ion haz;a.·rd due· to the §>to'rage of na.p_htha as ~uch. as. there has be·en storsge or' naphtha· In ih~ BKPL premises since the rncs.ption of. t~e plant in 199.7. Kind reference is . invited to the .submiSsioiiof Mis BKPL in their reply gffidavit filed in W.P.(C) no.540 012011 ~ N., (Para 3 ofthe Order dated 2o.o·t.2017). the plant is

classlfJed as a Major .AccJdent Hazard_ (M!,H)'UniHrom Its inceptJon and hence :ihe plant covered by Distributed Contror Syste~1 {DCSJ ·and .paramet~rs of yarious equipments

including levels of water a11d fUel storage· tank are m·ade available. in- the· Planf'C'ontrol Room (PCR). The PCR i$ said. to· -be mann~d. round· the. clock by .experienced Operations Engineers ~nd . the team' -also· reports to ·the Head . - . Operations & M.aintenance. This is· ·,~id to be over and· above ·.ihe Fire, Safety and Security. crew carrying on periodic · safefy. inspection~; "which are- logged- ·an.d dorium~nted. It is categorically stated that there is ·no· ·dilution· ·of tile safety standards and the premise$ are- manned .by suffici~nt safety personnel. . .· .

Things being so, the alleged· apprehension of an explosion is totaJly misplaced and unfounded. The BKPL. management may be directed .to m_ain~ain the. required perso.nal for the continued safe storage of naph · · · · · · ·

245

Optj,on:s for di:spo:s.ai of naphtha:

KSEBL wo~ld iike t~ pui: forth the 'following options forthe safe disposal cf the stock of naphthfi.

1. :1Generating power on Unscheduled Interchange (UI) basis iri co-ordination with the Load Despatch Centre of KSEBL subject to the approval, from KSERC thereby consuming· the naphtha stock.

/ 2. Mis BKPL could explore possibilities on generation of power and sale to any one by utilizing the grid of KSEBL as· open aceess is being p~rmitt¢d nOw. . .

3. Any other feasible option including transfer to other . napht~ . consuming industries like nearby FACT availing the services of oil marketers like IOCL

Ernakulam 07.02.2017

No.~\ .tt>>'i. 4,.:i t4 ..

I d t S ... /: c:::' t ~t:)) e..- \/i7l1C:.~ . . .

ssue o . n ...,m ... ,~ ..................... { ............... . ·under Right to lnformation Act, 2005

~··· l h'" • ~~-~~,.) ,_.1,_ .. e P~~ Officer &

Co\ro~•orate, Ernakularn Date:~\\~\\"'\-:

···~-.. •·~·-·-.. ' .. ·" 1 ··

// TRUE COPY //

246

KERALA STATE ELECTRICITY BOARD .LIMITED

Office of the Chief Engineer (Commercial and Tariff)

Thiruvananthapuram

No: CML/EE1-AEE3/BKPL/PPA Extension/2015-16/566 dated 25.03.2017

From:

Chief Engineer (Commercial & Tariff)

Vaidyuthi Bhavanam, Pattern ,Thiruvananthapuram

To:

Director

BSES Kerala Power Limited (BKPL)

Udyogamandal, Kochi 683501

Sir,

Sub: Regarding onward functioning of BKPL Power Station

References

1. Your letter No: BKPL/KSEBL/PPA/2016-17/01dated26.10.2015

2. Order dated 26.10.2016 of Electricity Regulatory Commission in the Petition OP No 34/2015

3. Letter pf the Chairman and Managing Director No: CML-EE1-AEE3/BKPL/PPA

Extension/2015-16/398 dated 03.12.2016

4. Your letter to the Hon'ble Chief Minister of Kera!a No BKPL/CM/2016-17 /3 on 02.02.2017

5. Letter from this office No CML-EE1-AEE3/BKPL/PPA Extension/2015-16/559 dated

17.03.2017

Invite your attention to the above references. KSERC vide reference no ( 2) ~bove has issued order

;dismissing Petition no 34/2015 which was filed for extension of the agreement dated 03.05.1999

with Kerala State Electricity Board Limited for purchase of electricity from your BKPL Power Station

in view of expiry of the said agreement on 31.10.2015.The same was reviewed by the Director Board

of Kerala State Electricity Board and considering the situation of availability of electricity from

outside the state at a very low price ,it was decided not to proceed with extension of the agreement

for purchasing the more expensive electricity from your power plant. However, it was also decided

to consider whether Kera la State Electricity Board can take over the power plant after assessing the

present price of the same by an independent agency .However, this being a matter requiring a

policy decision of the Government ,the same is submitted for decision of the Government as per

reference (3) above. The explanations required by the state government in this matter have been

submitted vide reference (5) above. Since this is under the active consideration of the Government,

KSEBL will be taking future steps as per orde.r~ is.s.ued by the Government.

ANNEXURE-P/21247

//True Copy//

Along with this, the various labour unions of your organization have submitted a petition before the

Hon'ble High Court of Kerala pointing out that there is possibility of accident due to naphtha stored

in the plant and the same is to be disposed off. You have also submitted a petition before the

Hon'ble High Court against the order issued QY the District Collector, Ernakulam in this matter.

Hence generation of power using naphtha stored in the power station will be subject to the orders

of the Hon'ble High Court and KSERC.

Yours faithfully,

Chief Engineer (Commercial & Tariff)

// TRUE COPY //

248

Tuesday, the 4th day of Apnl 2017/i4th Ch.a,it;;hra, 1939

M./ S . B . S • E , S KERltl.A £)0W£R LTD. / UDYOCliMAHD.t.:L, ERNJIJ{IJLAH I Rl!':PRl?.Sl!'.N'YED BY 1 'l'S DU~CTOR SRI. ROBIN S~'BASTI.P..N.

1 ' STATE or i{ERAJ~A ( Rel?RES:E~'?EP BY ITS ADDITlOl<U\L C:HU::e' ~l&CRETARY, IJE:PARTMENT CF POWE.R, GO~SNl' SEC~'l'ARlAT, THIRuVANANTHA.PtlHllM - 69S 001.

}l.,ND OTHERS.

Wn.t Pet:i t:Lr.:m (c.::iviJ.) praying inter .aJ.j,a. th~t in the ~::i.i:(lulitstances

:·.i.t1'>tod rn thi.21 a:f:fi.r.'.lavit. fi.led a.lo.fig witJ1 the. W.J?(C) the Hi9h Court :be

::;:.1,,,,,!l.t::::l'N:i t:o stay !:h;c; ()p~u:-at.ion of E.xhl.bit l?~6 a.nd all CJ'OE!rcive stE'1ops i:•n:csuant

u,f,1J:ii:\to, pend:i.ng di3po£Hi!1 of th::.s Wr.:i.t l?e:titio.r1 (Civil),

20/0:1./17 and the

P SRE'.Ef,,A.KSHMI, RES.HM!:\ Rt".\JU & N.S.HASHli. ~OL 1 Advoc.::ates for t:h!:i! p>$titior1e.r,

GOVE:RNNJ!!N'r PLE/illER for Rl & R4, M/S,1;u\JU JOSElrn1 .$filtU01' AD\lO:Cl\tfE along w:i,th

SRI. eE'.<JRCm l<tl'l'TY NA'l'HfilW,. Adv·ocate f·o:r. R2, SR.:i;. S •. SUJ:tN (S'J.:'.J\NDING COUNSbU .. ) fe:i::

R3 :'tnd of S't\:[, M. GOPIK.H.ISHNAN H~EIA.1~, j\d.vocati;i for .b,.ddl, R5 1 the CO!.t:r."'t passed

ehe foll-i::iw1.n9: -

(P.T.Q]

ANNEXURE-P/22

249

//True Copy//

K .. VINOD CHAN'DRAN~ J~

W.P.-(C)Nos.40257 of 2011 .. F ,and 540of2Gl7-·N

-- - _... - -- ......... ,,._ .... - ---- ........... -· ..,......,.·~:,...,..-:~·.._i;----~ ...... ~ -------------~--------~--

ORDER

The petittoner in W.P.(C) No.540 of 2017 chatlen!Jed

Ext.P26 order of the Dtstri~t Collector bearing ,.No.Dl/97608/16

dated 29.12.2016 and Ext.Pl8 order of the Kerala State

Electrkity Regulatory Commission. · ExtP18 declined

interference lnsof ar as the Kerala State Electricity Board (KSEB.)

having refused to extend the Power Purchase Agreement

(PPA). The petltloner's challenge against Ex:tP18 is to the.

effect that the Commission did not e.xerdse the Jurisdiction

conferred on tt property,to dectde :as to whether the PPA coutd

be extended or not and merely rejected the prayer on the .

consent being declined by the KSEB. More than the chaUenge

to Ext.Pl81 this Court was concerned with Ext.P26 order passed

by the District Collector as Chairman o.f the District Disa?ter

250

W.P.(QNos.40257 of2016 and 540/2.017

Manag.ement Authqrlty/ wherein sedotis; apprehetl:s:tons were

expressed on s:afety of the storag,e ·of 6~7937MT .()f naphtha1

.which the petitioner had procured fo.r the· purpose of

generating power.

2. The petitioner had a contention that Ext.P26 was "'

passed without hearing the petttroner. It was ,atsP contended:

by the learned Senior Counsel appearing for the- KSEB that the

procurement and storage of naphth(l had been going on for

the last 15 years and the generation of electricity by the

petlttoner was only when the KSEB requested for .it The

storage of naphtha for long periods was a necessary

requirement of the PPA1 for reason of the petttloner being

obliged to keep the plant in read:~nes:S1 to generate electr(city

at short notice as per the .PPA. Considermg the confiictmg

contenttons, the apprehended dts~:Ster and also the· plea of no

hearing havlng been afforded; this Court pas$ed ·an interim

251

~,-. '·

1N.P.(C)NosA0257 ,of 2016 and 540/2017

order dated 20.01.2017, the operative portlo:t1 of which,is as

follows.:-

fn .such drc:umstance,. the petittone't.sha~talsoexp.lore possibilities and place its options before the District Collector. The District Collector shalt hence carcy·out inspection with . notice 'to the .p~tlt1oner, a rij<spensible officer of the K.S.E.B and Safety ,Offlcers deptrted·from the f OCi the Senior Joint· Director of Fa,cteries and

. - _-- . . -- : - : .. _. ·_- ' . .. .. : 11· . . . • ~

Sollers, Ernakulam and conduct a heariQg (tfrthe same day. The petitionershaU be present bef.or!:}~e Distrlct CoUector on 24.0l.20l7 at 11 AM and the District ·Collector shalt take a decision in the matter, within one week after ~onducting an inspection of the premises as directed herein above. The petitioner-shall be Lntimated. the date of inspection on their appearance on 24.01.2017 and the other.sshatLalso be tnt1mat1::d the date of inspection. The f ndian {Jil Corporation, Cochin Divlslonat Offic;e,. Panamfi)ilty Avenue, . PanarrlpUiy Nagar POi Cochin-.682036, represented by the Chlef Divlsiooal Retail Sates Manager is suo ma-tu impleaded ·as. the additkinat 5111

respondent and Sri. Goptkrishnan Ntt·mbtar, learAed Standing Counset is directed to take notte:e for the additional 5th respond¢nt, sao rnatu tmpleaded. The IOC shall co-operate with the Cltstrict CoUector tn conducting an inspection and also making su:bmlssions on the safety ~:~Petts, which has tb be with reference to the report of the $entor Joiht Director of Factories and Boilers. The District Coltectot may also seek oplnion of the IOC1 as to the feasibility ot re· transmitting of naphtha . through the under ground pipe Unes to the JOC. The District CoUector shall verify the genuineness of the daim made by the petitioner in · thei:r reply affidavit as spoken of in paragraph 3 above.

252

W.P.{C)Nos,40257 of 2016 a,nd .540/2017

4

3. The District CoUect<Jr has complied with the

directions 15sued by this Cou.rt and fLlt:d a detailed report,

which ts produced along: wlth the memo d~ted .21.02.2017.

The report of the Senior Joint ,Director of Factories ;:3-nd Bo.Uersl

Ernakutam, the Chief Mana9er1 (Consunler sales; Assistant ·II>

Manag.er (Health, Safety and Environm~nt)/ Indian OU

Corporation Llmlted OOCt) and Deputy Chier Engineer, BDPP,

KSEB were looked into before .coming forth with specific

recom,mendattons.

4. The report ofthe Offiters of the IOCL indicates

that on maintaining the above facilities avaUabt~ at the time

of inspection with cotnpetent and c;tdequate man power/ it ls

safe to store and handle naphtha ln the premises of the

petitioner. The Deputy Ch~ef Engineer of the KSEB also is of

the opinion thatthere is no potentiaf.fire/exptosion hazard due

to the storage· of naphtha. As lndlcated earlier, there has heen

253

v .. rP.(C)Nos.40257of2016 arid 540/2017

storage of naphtha in the petitionerls premises since the

inception of the plant tn the year .1997., The .Plan~. of the

petition~r is dassifled as a Major Acctdent Haza.rd (MAH) unit

para meters of various equipm'ents including tevels o{ water

and fuel storage tank are made available in the Ptant Control

Room (PCR). The fire safety &security crew; carry on periodic

safety Inspections to ensure that no such disaster as

apprehended would be occasioned.

5. This Court hov1ever is disturbed with the report of

the S·enior Joint Dfrector of Factories aad Jitiiters:· that the

naphtha storage tanks have valid explosive Ucence only upto

31.12.2017. There after the storage tanl<S have· to he emptied,

deane9 and maintenance if any, has to be carried out, before

submittLng the storage tanks for inspecttort Normally the

stock of naphtha avp ilable in the premtses of the pe:titioner

254

W.P.(C)Nos.40257 of 2016 and 540/2017

6

would be around 6500MT, whith is about SS% of 'the total

the storage of naphtha beyond the i;1eriod as indicated heteln,

when the explosive licence expires. The maintenance and

deaning of the storage tanks also woiuld require the naphtha "

to be removed. lt Is also ind-teated from the report of the

Officers of JOCL that there ts no posslbUity of the stored

naphtha in the premises of the petitioner ,being transmitted

back to the lOCL TheJOCL ls al$,O, .storing, JiOOO Kl ofnaphtha, .

procured for the purpose of the petitioner's pow,er 9eneration,

which is also stored in the premises of the lOCL;. which also

does not have any other market than disposal by power

generation.

6. Considering the fact that the. explosive: ltcence qf

the petitioner wULexplre .on 31.12~2017; despite the opinion of

the IOCL as also the KSEB as to the safety of the naphtha

255

W.P.{C)NosA0257 of 2016 and 540/2017 ·

7

stored in the petitioner's pre·mtses, one c.annot completely

ignore the human error1 which could lead to a m.ajpr disaster.

The classification of the petitione(s unit as a MAH Unit and the

DCS as also the para.meters being ava:ttabte tn the PCR all

would depend upon human effittency, ·which could be· "

comprbrnised by a slight error, causing a disaster as is

appreijended by the Disaster Management Authority. For the

preser1t thls Court is of the opinion that it ts expedient that the

napht~a in the petitioner1s premises and the premises of the

IOC.L b)e used up, in the interest of public safety. This would

necess1arUy require consideration of the .larger issue projected

of the feasibility of extension of PPA and the sustainabUity of

ExtP18.

7. Wtth respect to the challeng,eagalrlst· Ext.PlSj the

petltioner and the KSEB.h~ve rival contentions. The Board is of

the optnion that there could be no ·e'xte·nsion of the PPA since

256

\N.P.(QNos.40257 of 2016 and 540/2017

as of nowl the Board is procuring power from>· sources at far

lesser prices and procurement of power. from the pe;titioner

would only result in public funds being frittered away" The

Board asserts that the decision taken by the Government

relied on by the petitioner Company ls only a sanction

accot~ded to the Board to decide on the extension. The :Board

independently has decided not to go ahead with the PPA,

which Ln any event \)\fas there for on.Ly 15 years and extension is

not of right The petitLoner Company however; has a

contention that the Government and the KSEB bad agreed for

extension of the PPA for another two years withtn which ttme,

the petitioner was also required to convert the plant to one

generating power from LNG. The KSEB however submits that

the petitioner was not willing for extension, on the terms as

st{pulated by the KSEB and hence, there would be no extension

possible. rt is also submitted by the learned Senior. Co unset

257

w, P~ (C)Nos;402S-t .of 2 016 and 540/2017

that the petitioner cannot have any claim of .te.gttimate

expectation since PPA 'its,etf stood expired, on expiry of 15

years and there was no agreem,ent by the KSEB that the

naphtha procured even during the tlm,e of the agre,ern'ent

would be used up after th,e expiry Gf the PPA. ,

8. The compelling concern of this Court, at

present, is the apprehended disaster and this Court is of the

opinion that the option submitted by the KSEB has to be put

into effect, subJect however to further orders passed in the writ

petition. The options for disposal o~ naphtha1 as suggested by

the KSEB, has been placed on record tn tbe report ,of the

District Collector, which are as follows:

1. Generating power on Uns.<;h:edu.led Interchange {Ur) basis' in co..-qrdinatioo with the Load Despatch Centre of KSEBL suiject to the approval fforn KSERC thereby· con~uming the naphtha stock

2. M/s. BKPL cou:ld e({p:lore pO:SS0tbititt.es on. g-eneration of power and sale ·to any ·Otie by utilizing the grid·of KSEBL as ·open a:cces5l ~·being permitted now.

258

'vV. P .(C)Nos.40257 of20l6 and 540/2017

3; Any other feasible option in<:luding transfer to otner naphtha co11suming industries like nearby FACT availing the service of oil ma rketeres like IOCL

9. The l~Jetittoner could d:efinitely .explore posstbilities

at option numbers 2 and 3f hut how,everthe same w·ould have

to be fina.llsed., within a period of one month from. today and

the disposal of the naphtha as per e:ither ofthe options started

vv'Lthin the said peri-0d and concluded within the time herein

after sttpu lated. i[f the petitioner does not intend to carry out

·the said options, then they shall generate power on

Unscheduled lnterchan.ge (UI) basis ln co-ordination with the

Load Despatch Centre· of KSEB~; subject to approval of KSERC

and also subject. to further orders to be pa.ssed in the writ

petition. The· petitioner could deftnitely ;ipproach the KSEB

immediately for such generation of power on UI basis. It is

made clear that the entire naphtha available at the petitioner

Companies premises. and that available at IOCL would be

259

VV.P.{C)No~.40257 of 2·016 and 540/2017

d1Lsposed of before 01.07.2017. · If the same ts not so disposed

ot then definitely, the Chairman of the Disaster Management

Authority1 the District Collector would b.e ~ntitted to. take such

steps for dl5posal of the naphtha without even reference to

this Court AU tssues ralsed by all parties are left open for

consideratton in the writ petition .. The petitioner Company

shall file periodic reports hefore the District Collector, ie: every

three vveeks as to the stage of disposal of naphtha as directed

here~n.

SD/~ K.'VINOD CflANDR.AN1 JUn:GE

SB/05/04/2017

// TRUE COPY //

260

Kerala State Electricity Regulatory Commission Thiruvananthapuram

Present Shri T.M.Manoharan, Chairman Shri K.Vikraman Nair, Member Shri S.Venugopal, Member

In the matter of application filed by M/s BSES Kerala Power Limited (BKPL} for

the approval required for implementing the interim order dated 04.04.2017 of the Hon'ble High Court of Kerala in Writ Petition WP(C) No. 540/2017.

Petitioner

Respondent

BSES Kerala Power ltd Udyogamandal P.O, Kechi 683 501

Kerala State Electricity Board Limited VydyuthiBhavanam, Pattom

Order dated 27.04.2017 in File No. 590/DD<TVBKPL·naphtha /2017/KSERC

1. Mis BSES Kera la Power Limited (herein . after referred as BKPL)has, vide application No. BKPUKSERC/PPA Extension/20.15-16/17dated18.04.2017, requested for granting necessary approval in connection with the implementation of the interim order of the Hon'ble High Court dated 04~04.2017 in Writ Petition WP(C) No. 540/2017. The issues raised by the BKPL are extracted below for ready reference.

1. The Hon'b/e High Court of.Kera/a has, in its order dated 04.04.2017 in WPC No.54012017 directed BSES Kera/a Power Limited (BKPL) to generate electricity to use up, in the interest of public safety, the 6879 MT Naphtha stored in our premises and the 6000 KL of Naphtha stored in the premises of Indian Oil Corporation Limited (IOCL). The said order .i?as been issued by the Hon 'bie Court considering the fact that the

1

ANNEXURE-P/23 261

//True Copy//

generating unit of BKPL is a Major Accident Hazard (MAH) unit and the explosive license granted to BKPL will expire on 31.12.2017.

2. The Hon,ble High Court a/so observed that the possibility of human error, leading to a major disaster cannot be totaily excluded in spite of the satisfactory safety and security arrangements made by us.

3. The Hon'ble High Court has directed that the stock of naphtha has to be exhausted on or before 01. 07. 2017. Since exhausting naphtha can be prudently done only by way of generation of electricity, the Hon 1ble High Court has directed that power can be generated in co-ordination with the load dispatch centre of KSEBL, subject to the approval of KSERC and a/so subject to further orders to be passed by the Hon'ble Hig/1 Court in the Writ Petition.

4. It has a/so been clarified by the Hon'ble High Court that the entire Naphtha available at the premises of BKPL and at the premises of /OCL should be disposed off before 01.07.2017. It has further been clarified by the Hon'ble High Court that all issues raised by all parties are left open for consideration in the writ petition. .

5; The only feasible and prudent option to dispose naphtha is to generate electricity. For purchase of power by any licensee approval of KSERC is inevitable. Since the approval of KSERC is mandated under the interim order dated 04. 04. 2017 of the Hon'ble High Court, it is respectfully requested that the Hon 1ble KSERC may be pleased to Issue directions to KSEBL and State Load Dispatch Centre (SLOG) to schedule power from BKPL, to use up the Naphtha available with BKPL and at the premises of IOCL as per the terms of the referred PPA in accordance with law.

6. All the other issues, including the rate, being sub judice, and as directed by the Hon'ble High Court, are left open, the above prayer is without prejudice to our rights under the PPA, and only intended for the purpose of implementation of the orders passed by the Hon'ble High Court. We specifically reserve our rights under the PPA to proceed against the licensee, subject to our rights under the PPA. 11

2. The Commission has, in view of the serious concerns expressed by the Hon'ble High Courtin the interest of public safety and the consequent urgency of the matter, foiwarded a copy of the application filed by M/s BKPL to the KSEB Ltd for their urgent remarks. KSEB Ltd, in its letter No. KSEB/TRAC/ KSERC/BSES/ 2017-18/3871 dated 25.04.2017 submitted as follows.

1. The writ petition no.54012017 was·filed by BKPL before the Hon'ble High Court of Kera/a challenging an order of the District Collector, Emakulam

2

262

dated 29-12-2016 and a/so order dated 26-10-2016 of Hon'ble KSERC in OP No.3412015, declining approval for extension of the PPA, the petitioner had with KSEBL.

"\..

2. BKPL challenged the order of District Collector, Ernakulam citing that the impunged order was passed by District Collector without hearing the serious apprehensions raised by the petitioner on the safety of the storage of6879.37 MT of naptha at BKPL premises.

3. On this writ petition, the Hon'ble Court had issued an interim order, direcNng District Cof/ector to submit a report after carrying out inspection of the· premises jointly with the petitioner, officials from KSEBL, JOCL, Senior Joint Director of Factories and Boilers, Emakulam and after conducting hearing of the above officials. The District Collector after carrying out inspection and hearing all concerned submitted a detailed report before Hon'ble High Court of Kera/a.

4. In the said report, there was no safety issue as raised by BKPL in their premises due to storage of naptha. It was a/so observed that there has been storage of naptha in the premises of BKPL since the inception of the plant in the year 1997.

5. KSEBL had submitted before Hon'ble High Court that the PPA with BKPL had expired on 31-10-2015 and extension claimed by BKPL is not right. It was a/so submitted that Board had decided not to go ahead with the PPA with BKPL as a mutual agreement could not be reached on tariff and other terms of extension of PPA. Hence it was submitted before Hon'ble High Court by KSEBL that the claim of BKPL for usirig the stored naptha by relying on the defunct PPA is illegal.

6. However, the· Senior Joint Director of Factories and Boilers had reported that the naptha storage tanks have valid explosive license only upto 31-12-2017 and there is no possibility of the stored naptha in the premises of BKPL being transmitted back to IOCL. Further, it is also stated that IOCL is a/so storing 6000 KL of naptha, which also does not have any other market than disposal by power generation.

7. Even though there exist no PPA between KSE_BL and BKPL, considering the observation made by Hon'ble High Court and in public interest, KSEBL had submitted before District Collector, Ernakulam, various options for disposal of naptha at BKPL storage tank, which in tum was submitted before Hon'ble High Court. Various options proposed by KSEBL and submitted by District Collector, Emakulam before Hon'ble High Court for disposal of naptha were:

3

263

1. Generating power on Unscheduled Interchange basis in coordination with the Load Despatch Centre of KSEBL subject to the approval from KSERC thereby consuming the naptha stock.

2. BKPL could explore possibilities on generation of power and sale to any one by utilizing the grid of KSEBL as open access is being permitted now.

3. Any other feasible option including transfer to other naptha consuming industries like nearby FACT availing the service of oil marketers like IOCL.

8. Hon'ble High Court, considering the facts and submissions made, issued following orders vide the interim order dated 4-4-2017: "9. The petitioner could definitely explore possibilities at option numbers 2 and 3 , but however the same would ·have to be finalised, within a period of one month from today and the disposal of the naphtha as per either of the options started within the said period and concluded within the time herein after stipulated. If the petitioner does not intend to carry out the said options. then they shall generate power on Unscheduled Interchange (UI) basis in co-ordinatio_n with the Load Despatch Centre of KSEBL : subject to approval of KSERC and a/so subject to further orders to be passed in the writ petition. The petitioner could definitely approach the KSEB immediately for such generation of power on UI basis. It is made clear that the ·entire naphtha available at the petitioner Companies premises and · that available at IOCL would be

. disposed of before 01.0.7.2017. If the same is not disposed of, then definitely, the Chairman of the Disaster Management Authority, the District Collector would be entitled to take such steps to disposal of the naphtha without even reference to this court. All issues raised by all parties are left open for consideration in the writ petition. The petitioner Company shall file periodic reports before the District Collector, ie: every three weeks as to the stage of disposal of naphtha as directed herein. "

9. As per the order of Hon'ble High Court, BKPL has to explore the options 2 and 3 of the report of DC, Ernaku/am i.e. generation of power and sale to any one by utilizing the grid of KSEBL through open access or any other feasible option including transfer to other naptha consuming industries like nearby FACT availing the service of oil marketers like IOCL as a first alternative within one month from 4-4-2017.

10. This option as the first alternative was ordered by Hon'ble Court considering the fact and reality that the PPA of KSEBL with BKPL has

4

264

already expired and KSEBL cannot be enforced the purchase of power as per the terms of the defunct PPA.

11. Hon 'ble Court has further ordered that if the petitioner does not intend to carry out the said options, then they shall generate power on Unscheduled Interchange (UI) basis in co-ordination with the Load Despatch Centre of KSEBL; subject to approval of KSERC and also subject to further orders to be passed in the writ petition.

12. Now, without exercising the first alternative ordered by Hon'ble High Court, BKPL has approached KSEBL on 17-4-2017 to schedule the generation of electricity using about 6879 MT of naptha available at BKPL plant and about 6000 KL naptha lying at IOCL in stock so as to dispose the same before 1-7-2017 as per the second alternative ordered by Hon'ble High Court and has now filed the instant application before Hon 'ble Commission praying:

"to issue directions to KSEBL and State Load Dispatch Centre(SLDC) to schedule power from BKPL, to use up the naptha available with BKPL and the premises of IOCL as per the terms of

· the referred PPA in accordance with law."

13. BKPL has further stated in the petition that "all other issues, including the rate, being sub-Judice, and as directed by Hon'ble High Court, are left open, the above prayer is without prejudice to our rights under the PPA, and only intended for the purpose of implementation of the orders passed by the Hon'ble High Court; We specifically reserve our right under the PPA to proceed against the licensee, subject to right under the PPA".

14. KSEBL strongly disagree with BKPL in the claims made in the instant application by referring to the already expired and defunct PPA. The Claim of BKPL is totally illegal and against the orders of Hon'ble High Court in letter and spirit as submitted below:

(i) As already submitted, there exist no PPA between KSEBL and BKPL. Hence there is no obligation cast upon KSEBL to purchase power from BKPL plant on whatever crisis -emerging.

(ii) The original PPA between BKPL and KSEBL had expired on 31-10-2015, almost one and a half year back and the order of Hon'ble KSERC rejecting the petition of BKPL for extending the PPA for 2 more years was made on 26p 10~2016, six months back. Relying still on the PPA that expired long back, by BKPL is only an effort to hide

5

265

the inaction of BKPL in not having taken timely steps for utilizing the stored fuel optimally for generation and supply to utilities or consumers other than KSEBL by availing open access.

(iii) Hon'ble High Court has also acknowledged the fact that the claim of BKPL on the extinct PPA for disposal of naptha is i/fegal as is evident from paragraph 9 of the order issued on 4-4-2017, wherein it was clearly mentioned that BKPL shall dispose naptha by exercising sale to any one by availing open access or transfer stored naptha to other naptha consuming industries or back to !OCL( options 2 and 3 in the report of the District Collector).

(iv) It is further submitted that Hon'b/e High Court had directed BKPL to explore the possibilities· of the above options and the same would have to be finalised within a period of one month from the date of the order (i.e. before 3'd May 2017). However, it is observed that that BKPL has not complied with the orders of the Hon'ble High Court to explore options 2 and 3 of the report of District Collector. Instead they have approached Hon'ble Commission on 18th April, 2017 itself requesting to issue directions to KSEBL to purchase power, the said action being non compliance of the direction of Hon'b/e High Court. It is also pertinent to mention that no approval from Hon'ble Commission is required for BKPL to sell power under open access.

(v) As· per the orders of Hon'ble High Court, the option for sale to KSEBL was only to be exercised if the sale as per the option 2 and 3 of the report of the District Collector does not work out and in view of the fact that disposal of naptha is required in public interest.

(vi) Considering and acknowledging the fact that BKPL has no PPA with KSEBL, Hon'ble High Court has further ordered that such sale to KSEBL shall be on Unscheduled Interchange (UI) basis in coordination with the Load Despatch Centre of KSEBL; subject to approval of KSERC and also subject to further orders to be passed in the writ petition. Hon'ble High Court has further ordered that BKPL could definitely approach KSEBL immediately for such generation of power on UI basis.

(vii) Hon'ble High Court has specifically ordered that sale to KSEBL if required due to non materialization of the other options shall be .onlv on UI rates only. Thus the claim of BKPL in the instant

6

266

application for the sale by referring to the PPA expired long back is illegal and against the spirit of the orders of Hon'ble High Court KSEBL is not bound to and not willing to purchase power at rates and terms of an in-..:atid agreement.

(viii) It is further submnted that BKPL vide paragraph 6 of the appt;cation has mentioned that as per the order of Hon 'ble High Court, all other issues, including the rate is sub-judice and are left open and BKPL reserve their right under the PPA to proceed against the licensee. This statement of BKPL is not correct and is illegal. But the Hon'ble Court has already decided on the rates which is the UI rates and therefore not "Subjudice", but Resjudicata". Hon'ble High Court while issuing the interim order dated 4-4-2017 has clearly specified that sale if any to KSEBL shaJ/ be on UI basis, which mean the rate shall be as per the UI (Unscheduled Interchange) rates. KSEBL cannot and will not purchase the power at a higher rate than UI rate.

(ix) BKPL has mentioned in paragraph 3 of their letter to Hon 'ble Commission that the stock of naphtha is to be exhausted on or before 1-7-2017. As per clause 9 of the order of Hon'b/e High Court, the entire naphtha available at the companies' premises and that available at IOCL would be disposed of before 1-7-2017. This comes to 6879. 37MT at BKPL premises· and 6000KL at /OCL premises, which corresponds to around 39MU of electricity generation from the storage at their premises and about 24MU from the storage at JOCL premises.

(x) It is submitted that KSEBL does not have a requirement of 65MU of BKPL power at this stage i.e. before 1-7-2017, as KSEBL has already tied up its requirement of power in advance for the said

" period under long term and medium term contracts.

(xi) The maximum generation possible from BKPL is 157MW Even if the plant is run on full load for 24 hours, the generation possible is about 3. 75MU/day, which means BKPL will require at least 18 days of continuous generation to dispose the fuel. The injection of power may not be uniform throughout the day1 which could increase the number of days reqUired to dispose the full quantum of fuel further: Injection of power on UI basis is also constrained by the. minimum load conditions of the state especially with the onset of monsoon and may result in surrender of CGS or L TA availed by KSEBL.

(xii) It is further submitted that as already submitted in the preceding paragraphs, there no obligation on the part of KSEBL to absorb

7

267

power from BKPL. As per the order of Hon'b/e High Court, if the fuel is not disposed off before 1-7-2017, the Chairman of the Disaster Management Authority, the District Collector would be entitled to take such steps to disposal of the naphtha without even reference to this court.

15. KSEBL humbly request Hon'ble Commission to kindly consider the facts and submissions made in the preceding paragraphs while issuing orders on the application filed by BKPL.

16. Thus it is pleaded that 1. KSEBL may not be enforced to purchase power from BKPL at a

rate higher than UI rate ordered by Hon'ble High Court. 2. KSEBL may not be enforced to schedule and absorb power

that would result in·surrender of already tied up power. 3. KSEBL may not be enforced to purchase more power than that

could be generated from reported and existing stock of BKPL. 4. BKPL may be directed to exercise other options ordered by

Hon'ble High Court viz (a) Selling of power through open access and exchanges to any

other party. (b) Selling back to any party or transfer to other naphtha

consuming industries, the excess naphtha fuel stock with them, and

(c) KSEBL may be enforced to buypower as last resort only."

Analysis and Decision of the Commission

3. The Power Purchase Agreement (PPA) dated 03.05.1999 entered into between BKPL and erstwhile KSEB (predecessor in interest of KSEB Ltd) expired on 31.10.2015. As per the clause 15.1 of the PPA, the PPA can be extended further, on a mutually agreed tariff as per clause 7.4 of the PPA taking into account the fuel charges, O&M cost, and a nominal net value of the project. However, BKPL and KSEB Ltd could not arrive a mutually agreed tariff for the extension of the PPA beyond 31.10.2015. BKPL had filed a petition under Section 86( 1 )(b) of the Electricity Act, 2003, before the Commission on · 03.10.2015, for approval of agreement for extension of PPA dated 03.05.1999. After conducting several public hearings, oral and· written submissions filed by the stake holders, the Commission vide its order dated 26.10.2016 had dismissed the petition fiied by BKPL, on the reason that the petition is not maintainable as per the provisions of the Electricity Act, 2003, the Tariff

8

268

Regulations, 2014 notified by the Commission and other relevant regulations and statutes in force.

4. BKPL has filed the Writ Petition W.P. (C) Nos 40257 of 2016-F and 540 of 2017-Nagainst the order of the Commission dated 26. 10.2016 and also against the order of the District Collector, Ernakulam (No. 01/97603/2016 dated 29. 12.2016).

The District Collector) as the Chairman of the District Disaster Management Authority, has expressed serious apprehensions on safety of the storage of about 6500 MT of naphtha., which the petitioner BKPL had procured and stored in their premises for the purpose of generating power.

5. Hon'ble High Court vide the interim order dated 04.04.2017 in Writ Petition W.P.(C) 540/2017,stated that it is more concerned about the stock of naphtha at the premises of the BKPL pqwer plant and about the fuel purchased and kept in the premises of the. supplier namely Indian Oil Corporation Limited (IOCL)

exclusively for generationofpower at BKPL. The directionsissued by the Hon'ble

High Court in this regard are extracted below.

5. This court however is disturbed with the report of the Senior Joint Director of Facto6es and Boilers that the naphtha storage tanks have valid explosive licence only upto 31. 12. 2017. There after the storage tanks have to be emptied, cleaned and maintenance if any, has to be carried out, before submitting the storage tanks for inspection. Normally the stock of naphtha available in the premises of the petitioner would be around 6500MT, which is about 58% of the total capacity of the plant. The petitioner cannot, hence continue the storage of naphtha beyond the period as indicated herein, when the explosive licence expires. The maintenance and cleaning of the storage tanks also would require the naphtha to be removed. It is also indicated from the report of the Officers of /OCL that there is no possibility of the stored naphtha in the premises of the petitioner being transmitted back to the IOCL. The IOCL is a/so storing 6000 KL of naphtha, procured for the purpose of the petitioner's power generation, which is a/so store~ in the premises of the IOCL; which also does not have any other market than disposal by power generation.

6. Considering the fact that the explosive licence of the petitioner will expire on 31.12.2017: despite the o.oinion of the IOCL as a/so the KSES as to the safety of the naphtha stored in the petitioner's premises, one cannot completely ignore the human error, which could lead to a major

9

269

disaster. The classification of the petitioner's unit as a MAH Unit and the DCS as also the parameters being available in the PCR all would depend upon human efficiency, which could be compromised by a slight error, causing a disaster as is apprehended by the Disaster Management Authority. For the present, this Court is of the opinion that it is expedient that the naphtha in the petitioner's premises' and the premises of the /OCL be used up, in the interest of public safety. This would necessarily require consideration of the larger issue projected of the feasibility of extension of PPA and the sustainability of Ext. P18."

6. Further, regarding the disposal of the naphtha available at the premises of the BKPL and at the IOCL, Hon'ble High Court endorsed the suggestions of KSEB Ltd in this regard. The relevant portion of the judgment of the Hon'ble High Court is extracted below.

"8. The compelling concern of this Court, at present, is the apprehended disaster and this Court is of the opinion that the option submitted by the KSEB has to be put into effect, subject however to further orders passed in the writ petition. The option for disposal of naphtha, as suggested by the KSEB, has been placed on record in the report of the District Collector, which are as follows: ·

1. Generating power on Unscheduled Interchange (UI) basis in coordination with the Load Dispatch Centre of KSEBL subject to the approval from KSERC thereby consuming the naphtha stock.

2. Mis BKPL could explore possibilities on generation of power and sale to any one by utilizing the grid of KSEBL as open access is being permitted now.

3. Any other feasible option including transfer to other naphtha consuming industries like nearby FACT availing the service of oil marketers like /OCL.

9. The petitioner could definitely explore possibilities at option numbers 2 and 3, but however the same would have to be finalised, within a period of one month from today and the disposal of the naphtha as per either of the options started within the said period and concluded within the time herein after stipulated. If the petitioner does not intend to carry out the said options, then they shall generate power ,...,., I lns,..hc..r/11/r..rl /..,fr,,,.,..h,,,,,..,~.o 11111 1-.f:'c-is in "'"··"r,,lin~fi""" u..i.ifh fh,o J r.nrl YI f "-'' f VI l\iit\:..fl.-11\.t\A fl fl.VI VI f(ll l~V \VI) fJV:VI II V'-1' VI \if t~UYI f .-=YJl"f:fl 4-rlV WV''-f\rf

Dispatch Centre of KSEBL; subject to approval of KSERC and also subject to further orders to be passed in the writ petition. The

10

270

petitioner could definitely approach the KSEB immediately for such generation of power on UI basis. It is made clear that the entire naphtha available at the petitioner Companies premises and that available at IOCL would be disposed of before 01.07.2017. If the same is not so disposed of, then definitely, the Chairman of the Disaster Management Authority, the District Collector would be entitled to take such steps for disposal of the naphtha without even reference to this Court. All issues raised by all parties are left open for consideration in the writ peation. The petitioner Company shall file periodic reports before the District Collector, i.e.; every three weeks as to the stage of disposal of naphtha as directed herein.

7. As per the above judgment of the Hon'ble High Court dated 04.04.2017, the petitioner BKPL has to take the following steps for the disposal of naphtha available at the premises of the BKPL and that available at IOCL, before 01.07.2017.

(i) The petitioner BKPL could explore the possibilities of disposal of naphtha as suggested by KSEB ltd as option-2 and Option-3, and the same would be finalized within a period of one month from 04.04.2017. The disposal of naphtha as per the either of the options-2 and 3 started within the said period and concluded within 01.07.2017.

The option-2 and option-3 are extracted below for ready reference.

6ption-2. Mis BKPL could explore the possibilities of generation of power and sale to any one by utilizing the grid of KSEB Ltd as open access is being permitted now.

Option-3.Any other feasible option including transfer to other naphtha consuming industries like nearby FACT availing the service of .oil marketers like IOCL.

(ii) If the petitioner BKPL does .not intend to carry out the said options, then BKPL shall generate power on Unscheduled Interchange (UI) basis in coordination with the Load Despatch Centre of KSEB Ltd; subject to the approval of the KSERC and also subject to further orders to be passed in the writ petition. The petitioner BKPL shall approach the KSEB Ltd immediately for such generation of power on UI basis.

11

271

(iii) The entire naphtha available at the premises of the BKPL and that available at IOCLwould be disposed of before 01.07.2017.

(iv) If the petitioner BKPL could not disposethe naphtha within the time limit specified by the Hon'ble Court, the Chairman of the Disaster tv1anagement Authority; the District Collector should take necessary steps for disposal of naphtha without even reference to the Court.

(v) Hon'ble High Court also stated in this regard that, all issues raised by all parties are left open for consideration in the writ petition. BKPL, the petitioner shall file periodic reports before the District Collector, ie: every three weeks to as to the stage of disposal of naphtha as directed herein. ·

8. The Commission has examined in detail, the application filed by BKPL fot the implementation of the interim order of the Hon'bte High Court dated 04.04.2017, in Writ Petition W.P. (C)No. 540/2017, the submissions of KSEB Ltd regarding the disposal of naphtha available at the premise of BKPL and with IOCL. From the facts and records submitted before the Commission, it is noticed that,-

(i) The total stock of naphtha available premises of the petitioner BKPL is about 6500 MT, and the stock of naphtha available with IOCL for power generation at BKPL is 6000 KL (4450 MT) . · The fuel required for generating 1 unit of electricity at BKPL is about 176 gram. Thus, the total electricity can be generated with the fuel stored at the premise of BKPL and at the storage facility at IOCL is about 62 Million Units {MU) of electricity. The installed capacity of the BKPL plant is 157 MW. After accounting the auxiliary consumption etc, the maxjmum generation possible from BKPL plant is about 3.00 MU/day. Thus, even the plant is operated continuously for 24 hrs per day, about 21 days will_ take to dispose the entire naphtha stored at the premise of the BKPL and at the storage facility at IOCL.

(ii) Hon'ble High Court has directed the petitioner BKPL to explore the possibilities to dispose the naphtha as option-2 and option-3, as stated in the interim order dated 04.04.2017, i.e., (1) the possibilities of generation of power and sale to any one by availing open access facility and, (2) the possibilities of transferring the naphtha to the FACT or other similar naphtha consuming industries. However, BKPL has not submitted any details on the efforts taken for disposal of the naphtha, by exploring the possibilities at the options 2 and 3. Hence it is reasonably concluded that,

12

272

the petitioner has not so far explored the possibilities at the options 2 and 3, for the disposal of naphtha as per the interim direction of the Hon'ble High Court.

(iii) Hon'ble High Court, in its interim order dated 04.04.2017 in Writ Petition W.P (C) 540/2017 had made it clear that, if BKPL does not adopt the options-2 and 3 for the disposal of the naphtha, the BKPL shall generate

power on UI basis, subject to the approval of the KSERC.

9. The Commission had, in para 10.3 of the tariff order dated 30.04.2013 for the financial year 2013-14, given the followingdirective to KSEB Ltd in view of the prohibitive cost of naphtha and of the electricity generated therefrom,-

"10. 3 On expiry of the prevailing PPA with liquid fuel based IPPs and such as BSES, KPCL etc., power should not be drawn from these stations under any circumstances, unless the developers convert the stations to LNG or pool sufficient quantum of cheaper power from other sources, so that the pooled tariff is well within the merit order for dispatch. Appropriate

advance notice may be issued to such developers within 3 months from

the date of issue of this order. "

Accordingly no approval was given for scheduling power from BKPL, though provision was approved for payment of fixed charges as per the PPA. Similarly in the tariff order dated 14.08.2014 for the financial year 2014-15 also no approval was given by the Commission for scheduling power from BKPL. The validity of the said order dated 14.08.2014 has been extended till 16.04.2017. As per the tariff order dated 17.04.2017 for the financial year 2017-18 also, no approval has been granted by the Commission for scheduling power from BKPL. The Commission had also dismissed the application filed by BKPL for granting permission to extend the PPA beyond 31.10.2015, the date of expiry of the

original PPA. Therefore after 31.10.2015, there is no approval for scheduling

power from BKPL or for payment of fixed charges.

10. Clause (b) of sub-section (1) of Section 86 of the Electricity Act, 2003, states as follows,-

"86. Functions of the State Commission.- (1) The State Commission shall discharge the following functions, namely:-(b)regulate electricity purchase and procurement process of distribution licensees, including the price at which electricity shall be procured from the generating companies er licensoos or from other sources through agreements for purchase of power for distribution and supply within the State."

13

273

Therefore, approval of the Commission is necessary for scheduling power. The Hon'ble High Court has also, in para 9 of its order dated 04.04:2017, stated that if BKPL does not intend to carry out options 2 and 3, then they shall generate power on unscheduled interchange basis in coordination with load dispatch centre of KSEB Ltd: subject to approval of KSERC and also subject to further orders to be passed in the Writ Petition. The Hon'ble High Court has also given directions to the effect that the entire naphtha available at the petitioners company premises and. that available at IOCL should be disposed of before 01.07.2017. It has been further clarified by the Hon'ble High Court that, all the issues raised by all the parties are left open for consideration in the Writ Petition. Therefore, the Commission has to issue only the approval under Clause (b) of sub-section (1) of Section 86 of Electricity Act, 2003, in accordance with the directions of the Hon'ble High Court.

11. The Commission has also noted the following facts. The 157 MW power plant of BKPL is an intra-state generating station with in the State. KSEB/ KSEB Ltd has been scheduling power from the plant as and when required from the project, on· merit order, duly considering the energy and peak demand, energy availability from its on hydel and thermal sources, CGS, traders, generators etc. The validity of the PPA entered into between KSEB and BKPL on 03.05.1999expired on 31.10.2015. The present direction of the Hon'ble High Court is only to schedule power from plant for the sole purpose of disposal of the naphtha available at the premises of BSES and IOCL through power generation, in view of the probable major accident hazard of storing such huge quantity of inflammable fuel, as expressed by the Hon'ble High Court in public interest.

12. The variable cost of generation of electricity from naphtha is much higher than the energy available from other sources including traders, energy exchanges etc. Any amount incurred by KSEB Ltd for purchase of power from BKPL at an additional cost shall have to be ultimately borne by the 120 lakh consumers of the State. In the tariff order dated 17.04.2017, the Commission has, in table 9.15 in para 9.38, approved the purchase of 1946.98 MU of power by way of short term purchase at a rate of Rs.4.00 per unit. Hence, the Commission here by directs KSEB Ltd to purchase power from BKPL to the extent of 62 MU that can be generated by BKPL from the naphtha available at its premises and at the premises of IOCL, on unscheduled interchange basis as directed by .the Hon'ble High Court in its order dated 04/04/2017.

14

274


In view of the facts, circumstances and statutory provisions explained above, approval under clause (b) of sub-section (1) of Section 86 of the Electricity Act, 2003, is grantedin accordance with the directions of the Hon'ble High Court in its order dated 04.04.2017, to the SLDC of KSEB Ltd for scheduling power and to Strategic Business Unit-Distribution of KSEB Ltd for purchasing the power generated on unscheduled interchange basis, from the 6500 MT of naphtha purchased and stored in the premises of BKPL and the 6000 kilo litre of naphtha

purchased and stored by BKPL in the premises of IOCL.

This order is being issued only for the purpose of implementing the interim order dated 04.04.2017 of Hon'b!e High Court in Writ Petition No.540/2017.

Sd/-K. Vikraman Nair

Member

Sd/S.Venugopal

Member

15

Sd/T.M.Manoharan

Chairman

Approved for issue,

Secretary

// TRUE COPY //

275

JN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:

THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR

TUESDAY, THE 31ST DAY OF OCTOBER 201719TH KARTHIKA, 1939

WP(C).No. 540 of 2017 (N) .................. - .... '!I' ........................ ...

PETITIONER :

M!S.BSES KERALA POWER LTD, UDYOGAMANDAL, ERNAKULAM, REPRESENTED BY ITS DIRECTOR, SRI.ROBIN SEBASTIAN.

BY SRI.JOSEPH KODIANTHARA,SENIOR ADVOCATE ADVS.SRl.P.G.JAYASHANKAR

SMT.P.SREELAKSHMI SMJ._B.fiSHMA g.A JU SMT.N.S.HASNA MOL

RESPONDENT($);

1. STATE OF KERALA, REPRESENTED BY ITS ADDITIONAL CHIEF SECRETARY, DEPARTMENT OF POWER,GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

2. KERALA STATE ELECTRICITY BOARD LTD, VYDUTHI BHAVAN,PATTOM, THIRUVANANTHAPURAM-695 033, REPRESENTED BY ITS SECRETARY.

3. KERALA STATE ELECTRJCffY REGULATORY COMMISSION, K.P.F.C.BHAVANAM,C.V.RAMAN PILLAI ROAD, VELLAYAMBALAM, THIRUVANANTHAPURAM·695 0101

REPRESENTED BY ITS SECRETARY.

4. DISTRICT COLLl;CTOR AND CHAIRMAN, D'STRICT DISASTER MANAGEMENT AUTHORITY, COLL.ECTORATE,CIVIL STATION ERNAKULAM-682 020.

\' .'!

l--~·:.::::_~.Y::.::: .. :·~~ ..

21-

ANNEXURE-P/24 276

//True Copy//

WP'(C).No. 540 of 2017 (N}

sts

*ADDL.R5 IS sue MOTU lMPLEADED

*ADDL.R5: THE lNDIAN OIL CORPORATION, COCHIN DiVISIONAL OFFICE, PANAMPILLY AVENUE, PANAMPILLY NAGAR.P.O., COCHIN~682.036, REPRESENTED BY THE CHIEF DIVISIONAL . RETAIL SALES MANAGER.

*ADDL.R5 IS SUO MOTU IMPLEADED AS PER ORDER DATED 20/01/2017.

**ADDL.R5 DELETED

**ADDL.R5 IS DELETED AS PER ORDER DATED 07/08/2017 IN IA.N0.12336/2017.

R1 & R4 BY STATE ATTORNEY SRl.K.V.SOHAN R2 BY SRI.RAJU JOSEPH,SENIOR ADVOCATE

SRl.SUDHEER GANESH KUMAR R.1 SC, SRl.GEORGEKUID MATHEW, SC,

R3 BY SRl.S.SUJIN, SC,

THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD Orf 20·10-2017, ALONG WITH WPC.NO. 22464/2017 AND WPC.NOA0257/2017, THE COURT ON 31-10~2017 DELIVERED THE FOLLOWING:

277

A.K.JAYASANKARAN NAMBIAR, J. ------~----~-·--~~-·-----------

W.P.(C).N0.40257 OF 2016 (F) W.P.(C).N0.540 OF 2017 (N)

& W.P.(C).N0.22464 OF 2017 (G)

·-···-··--·-··-------------··~····· Dated this: the 31st day of:October, 2017

. JUDGMEN'f

As these writ petitions involve a common issue, they are taken

up together for hearing and. disposed by this common judgment. For

the sake of convenience, the reference to facts and exhibits is from

W.P.(C).No.540/2017.

2. The petitioner is a company registered in India and operating

a thermal plant. 1t entered ·mte. -a. Power Purchase,, Agreement

(hereinafter referred to as 'PPA1) with the Kerala State Electricity

Board limited (hereinafter referred to as 'KSEBL'), and .as a· prelude

to that, established a combined cycle power plant that uses

Naphtha/Furnace ·on as fuel. The PPA was for an initial period of

fifteen years with an option for extension for a further period of ten

tariff periods beyond the fifteenth tariff I?eriod, on mutually agreed

tariff.

278

W.P.( C).N o.40257 /2016 & con. cases

2

3. It would appear that, when the term of the initial PPA was

about to expire, discussions. took place between the petitioner

company, the State Government and KSEBL, pursuant to which the

State Government, vide Ext.P4 communication, agreed to . extend the

lease period, in respect of the land on which the power plant was

situated, for a further period of fifteen years. Thereafter, the KSEBL

also conveyed its in-principle approval to the extension of the term of . ~

the PPA for a further period of two years from the date of expiry of the

original term,. subject to modification of the terms of the existing PPA,

aee=asecrtainm:ent M'. nxerl atarnes apphcabfe and obta1n1ng the

approval of the Kerala State Electricity Regulatory Commission ·-

.(hereinafter referred to as 1KSERC') to the said extension. The

extension for a period of two years was envisaged so as to enable the

parties, in the meanwhile, to consider and finalise a proposal to

convert the existing power plant to one that used Natural Gas as fuel.

4. The KSEBL, vide Ext.P7 communication dated 29.09.2015,

requested the petitioner company to file the necessary tariff :Petition

before the KSERC so as to get the latter's approval to the same and,

279

" "it .,

W.P.(q;No.4025712016 '& con. cases

3

acting on the said communication, the petitioner company filed Ext.PB

petition before the KSERC in terms of Section 86 (l)(b) of the

Electricity Act, 2003. The petition so. filed Was cons.idered by the

KSERC,. which after noting the terms of r~ference, sought certain

clarifications from the KSEBL on the disputed ·clauses in the

agreement that needed resolution. It is . significant to note; at this

stage, that the KSERC took note of the fact that in respect of the

two~year extension period, KSEBL had indicated its in~principle

approval to a PPA. Despite this, however, ::inrl ~ftAr ronsidering the

@ta:mea:ttorrs l!l11W wet e mf&t ea Dy KSEBL to ·me qUer1es put by the

regulatory commiss-ion, the KSERC, · by Ext.Pl 8 order dated

26.10.2016, rejected ·Ext.PB petition preferred by ·the petitioner

company as not maintainable under Section 86 of the Electricity Act,

2003. The stand of the KSERC, as revealed from Ext.P18 order, is that

only KSEBL, in its capacity as a distribution licensee, could have filed

a petition under Section 86 of the Electricity Act and not the

petitioner company. Ext.P18 order is impugned in W.P.(C).

No.540/2017 ..

280

W.P.(C).No.40257/2016 & con. cases

4

5. During the pendency of W.P.(C).No.540 of 2017, and acting

pursuant to Ext.P18 order of the regulatory commission, KSEBL

passed ExtPSl ·order indicating t~at it had de.cided riot to go ahead

with the proposal to extend the tenn of the PPA With the petitioner

company. The said order is also produced as Ext.P32 in W.P.(G).No.

22464/2017 and impugned therein.

6. Shortly after Ext.P18 order was passed by the KSERC,

certain Trade Unions representirm wnrkAr~ nf the petitioner company, : . .

pr ernr I ea a. Culllpiamt -nefore the District Dis.aster Management

Authority as also the Minister for Electricity, complaining about the

stalemate that had occurred in respect of the work of electricity

generation in the company and possible loss of employment to the

workers. They also alerted the authorities to the fact of storage of

approximately 6800 MT of Naphtha in the premises, which posed a

danger in the nature of possible fire hazard, to persons in the locality.

Thereafter, challenging the order of the KSERC and seeking,

inter alia, a:? direetion to the KSEBL and the State Government to

either continue the existing PPA with the petitioner company, or in the

281

'\ ''Jrt~. •. .

W.P;( C)~No:402S7 /2016 & con. cases

alternative to make arrangements to take over the facilities of the

petitioner company, the said Trade Unions approached this court

through W.P.(C).No.40257/2016. Acting on the representation of the ' .

Trade Unions, and basing on a report dated 15 .. 12.2016 of the Joint

Director of Factories.and Boilers, the District Collector, Ernakulam, in

his capacity as the Chairman of the District Disaster Management

Authority, passed Ext.P26 order dated 29.12.2016 directing the

petitioner company to take effective steps to utilize for generation, or

otherwise remove, the quantity of Naphtha stored in their premises

witftia . a WfnJlt fI "6"iff the elate M the oruer. Ext.P2 6 order IS . a1$()

impugned in W.P.(C).No.540 of 2017.

7. By an interim order dated 04.04.2017 ~n these writ petitions,

this Court dealt with th~ apprehension, with regard to the danger . ·,

posed through the storing of Naphtha in the petitioner's premises, by . '

directing a utilization of the NaphthA for electricity generation and .. supply of the electricity so generated to the KSEBL on Unscheduled

Interchange (UI) basis, subject to approval by KSERC and subject to . further orders from this Court. The relevant portion· of the said

282

~

'W.P.(C).No.402:57/2016 & 6 con. cases

interim order reads as follows:

i

"8. The compelling co11cem of this Court,,at present, is the apprehended disaster and this Court is of the opinion that the option submitted_ by the KSEB has to be put into effect, subject however to further orders passed in the writ petition. The options for disposal of naphtha, as suggested by the KSEB, has been placed on record in the report of the District Collector, which are as follows:

i. Generating power on Unscheduled Interchange (ill) basis in coordination with the Load Despatch Centre of KSEBL subject to the approval from KSERC thereby consuming the naphtha stock.

2. M/s. BKPL · could explore possibilities on generation of power and sale to Chijl one ()y duliz111g the gnd oi RSEBL as open access is being pennitted now.

3. Any other feasible option includiug transfer to other naphtha eonsttming industries like. nearby FACT availing the service of oil marketeres like IOCL.

9. The petitioner could definitely explore possibilities at option numbers 2. and 3, but however the same would have to be finalised, within a period of one month from today and the disposal of the naphtha as per either of the options started within the said period and concluded within. the time herein after stipuia:ted. If the petitioner does not intend to cany out the said options, then they shall generate power on Unscheduled Interchange (UI) basis in co .. ordination with the Load Despatch Centre of KSEBL; subject to approval of· KSERC and also subject to further orders to be passed in the . writ petition. The petitioner could definitely approach t4e KSEB immediately for such generation of power on UI basis. It is made clear

283

:\ '1\'.~IF.(~) 1No.40257 /2016 & {.:I:

con. cases 7

that the entire naphtha available at the petitioner Companies premises and that available at IOCL would be disposed of before oi.07.2017. If the same is not so disposed of, then definitely, the Chairman of the . Disaster Management Authority, the District Collector would be entitled to. take such steps Jor disposal of the uaphtha without· even reference to this Court. All issues raised by all parties are left open for consideration in the writ petition. The petitioner Company shall file periodic reports before the District Collector, ie: every three weeks as to th~ stage of disposal of naphtha as directed herein.

8. Based on the directions in the interim order referred above,

the KSERC, vide Ext.P46 order, grant~g qnprovpl t" K'"~FRT f"r

sc11eammg power -and to . ]¥rclias~_ ""the ··:a,q~~r uenerated on

unscheduled interchange basis from the 6500 MT of Naphtha

purchased and stored by in the premises of the petitioner and the

6000 KL of Naphtha purchased and stored by the petitioner in the . .

premises of IOCL. While the generation of electricity by the petitioner

company and the supply thereof to KSEBL has since taken place

during the _pendency of these writ petitions, a dispute exists between

the petitioner and KSEBL with regard to the tariff that will govern the

said supply of electricity. based on the interim order of this Court.

284

W.P.(C).N o.40257 /l016 & con. cases

8

9. I have gone through the pleadings in these writ petitions, and

also heard Senior Counsel Sri. Joseph Kodianthara, duly assisted by

Sri. P.G.Jayasankar for the petitioner company, Senior Counsel Sri.

Raju Joseph, duly assisted by Sri. Georgekutty Mathew for the KSEBL

and the learned State Attorney Sri. K.V. Sohan for the official

respondents of the State Government; I have also heard Sri. S. Sujin,

the learned counsel for the KSERC.

10. On a consideration of the facts and circumstances of the

case antFt'he saBnnssions made across thenar, 1 am or the view that,

for the reasons that are furnished hereunder, Ext.Pl 8 order of the

KSERC cannot ·be legally sustained. It will be recalled from the facts

already stated in this judgment that, it was at the instance of the

KSEBL - the distribution licensee - that . the petitioner company

preferred the petition under Section 86 of the Electri9ity Act for a

consideration and approyal, by the regulatory commission, of the

clauses of an agreement, to which the KSEBL had granted in-pFincipl~.

approval· subject to certain modifications. The regulatory authority

was to consider the grant of approval to an arrangement that was

285

W.P.(C).No.40257/2016 & 9 con. cases

contemplated between the E_arties before i!__for the purchase of power.

While the KSERC did not go into the merits of the issues raised before

it, it chose to reject the petition filed }jy the petitioner under Section ' '

86 on a technical _ground of maintainability. It is the stand of the

regulatory commission that insofar as there was no concluded PPA

between the KS.BBL and the petitioner company, the latter cannot

maintain a petition under Section _?6 of the El~g!!'~City Act. The said

finding of. the KSERC cannot be legally countenanced for the following

reasons viz.

• The KSERC overlooked the fact that the Electricity

Ac~, · 2003 is· a coID:prehensive ·code_ on all matters

concerning electricity and that, the 2003 Act had

the effect of distancing the Government from all

forms of regula~ions such as licensing, tariff

regulations, facilitating competition through open

access etc. Furth~r, under the 2003 Act, power

generation has been de-licensed and captive

generation of power is freely permitted, subject to

the approvals . as· contemplated under the Act. A

license, however, continues to be a pre .. condition for

engaging in transmission or distributio~ or trading

286

,''\}'.P.(C).No.40257/2016 & 10 con. cases

of electricity. The Regulation by the KSERC, which

is envisaged under Section 86 of 2003 Act, is of the

purchase and procurement process of distribution . . .

licensees, . including the price at which electricity

shall be procured from the· generating company.

The said regulatory power has to be exercised in the

backdrop of the National Tariff Policy for

development of a power system based on optimum

utilization of resources. (_See: PTC India Limited

v. Central Electricity Regulato.ry Commission - '

/(2010) 4 SCC 603/J. This would mean that the

KSERC, in the instant easel had to look into the

agr eentent between the pebtrone:r and the KSEBL to

ascertain whether the general terms of the

agreement and the trading n1a1 gins enVisaged

· therein could be fixed· in such a way that it would

reduce the cost of electricity to the consumers.

• At the time of preferring the petition before it:,

neither the petitioner nor the KSEBL had a case

that there was no agr~ement betweQn them with

regard to a power purchase. In fact, KSEBL had .

conveyed its in-princi_ple, .appro¥a:l t& aB agFeement

reached between the parties, for extension of the

earI1er1'PA for a period of two years. KSERC was

287

:·P..(p.N o.4025712016 11

con.'cases

l

approached for the limited purpose of settling the

disputed clauses in the said agreement and for an

approval thereof.

The KSERC overlooked the fact that the petition

under Section 86, that was filed before it by the

petitioner, was at the instance of the KSEBL rinri

bi:mf"A A\rAri ~c<::;uming a petition under Section 86 of

the Act could, technically, be filed only by a

distribution licensee, in the instant case, the petition

before it had to be seen as one filed by the said

licensee, through the netitioner, who was none

m.'Ttet umu Ute llifh~rafang company ttom. whom the

power was to ~e _ _pu_rc;hased. In fact, . KSERC · itself

entertained the petition and proceeded with it by

assuming · the existence of an agreement, as is

apparent from the orders passed by it seeking

clarifications on . various aspects from KSEBL.

Notwithstanding the clarifications given to it by the

KSEBL, the ·KSERC avoided a consideration of the

issues on merits and rejected the petition on the

technical plea of maintainability.

, A statutory body, such as the KSERC1 entrusted

with specific regulatory functions1 ought not, and

288

W.P.( C).N o.4025711016 . &t.~ 12 • cor~ ... cases

should not1 shirk from its adjudicatory

responsibilities by relying on venial and technical

irregularities that do not render the petition filed

before it substantially defective. It is trite that

pubUc author_ities entrusted with public duties

should ·be duty consci0l1s rather than power

charged. In the instant case, I am of the view that

the KSERC ought to have considered the issues

before it on merits, and avoided the stalemate that

ensued on account of a non-consideration of the

issues on merits.

1 I. 1,-tnereiore, quash Ext.P18 order of the KSERC, as also

Ext.P51 consequential order passed by the KSEBL, which is based

entirely on Ext.Pl8 order. The KSERC shall consider and ·pass orders

on merits, in respect of the issues raised _in Ext.PS petition filed under

Section 86 (l)(b) of the Electricity Act, 2003, within a period of three

months from the date of receipt of a copy of this judgment. Both the

parties before the KSERC shall be at liberty to produce additional

material before the said Forum, to substantiate their contentions on

merits. The KSERC shall take note that this Court has not pronounced

on the merits of any of the issues in the petition before it, and all

.•

289

w.f~).~o.40257/2016 &,•·· . 13 con. cases

issues are left open to be decideq by the Commission. The only other

point on which the Commission would have to take a decision, while

passing orders as directed above, is the rate/tariff that would govern

the quantum of electricity supplied by the petitioner company to

KSEBL, pursuant to the interim order dated 04.04.20l? of this Court.

While this issue is not raised. in the petition before the Commission,

being a subsequent event, ·the t>etitioner does have a case that,

inasmuch as the Naphtha, that was used for the generation of the said

electricity, was part of the consignment that was stored to meet the

r equ1rements of KSEBL under the PPA that held the field till

131.10.2015, the rates under the said PPA should govern the supply.

The- Commission shall therefore adjudicate on the said issue, as

regards the rate applicable in respect of the above supply of

electricity, also, untrammelled by any of the findings in its order dated

27.04.2017 (produced as Ext.P46 in W.P.(C).No.540/2017 and as

Ext.P27 in W.P.(C).No.22464/2017) granting approval to the KSEBL to

purchase the electricity on unscheduled interchange basis.

In the result W.P.(C).Nos.540/2017 and 22464/2017 are " .

290

. - '\¥·f.( C).N o.4025712016 >··,&,·1'

14 · con. cases

disposed as above, and W.P.(C).No.40257/2016 is dismissed as

infructuous.

prp/

odkA.K.JAYASANKARAN NAMBIAR

JUDGE

--'-----------------------· ··--·---·-·--

291

WP(C).No. 540 of 2017 {N)

--------------------------·-.. ·--· APPENDIX

PETITIONER(S)' EXHIBITS

EXHIBIT P1 TRUE COPY OF THE GO(MS) N0.18/97/PO OATEO 29.04;1997

EXHIBIT P2 TRUE COPY OF THE LETTER N0.4245/B1/t$/PD DATED 30.04.1999, ISSUED BY THE PRINCIPAL SECRETARY TO THE GOVERNMENT. .

EXHIBIT P3 TRUE COPY OF THE RELEVANT EXTRACTS 0.F THE POWER PURCHASE AGREEMENT DATED 03.05.1999 BETWEEN THE 2ND RESPONDENT AND THE PETITIONER FOR COMBINED CYCLE POWER PROJECT,ELOOR,KOCHI

EXHIBIT P4 TRUE COPY OF THE GO(MS}N0.141/2014/D DATED 04.10.2014

EXHIBIT P5 TRUE COPY OF THE LETTER BEARING NO.CP/BSES/2015·15/164 DATED 1~.07.2015 ISSUED BY THE 2NO RESPONDENT

EXHIBIT PG TRUE COPY OF THE LETTER BEARING NO.BKPl./KSEBIPPA EXTENS10~/201.5?_1.§lQj_QAJED ;t.2.oa,iQ-11-i~ iliWUJMilllfiUJJii·· -----------

EXHIBIT P7 TRUE COPY OF THE LETTER BEARtNG NO.CML,;EEl•AEE3/BKPUPPA EXTEN$10N/2014·1S/390 DATED 29.09.2015 ISSUED BY THE 2ND RESPONDENT

EXHIBIT P8 TRUE COPY OF THE PETITION N0.34/201$ FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT ON 03.10.2015

EXHIBIT P9 TRUE COPY OF THE INTERIM ORDER DATED 28.10.2015 PASSED BY THE 3.RO RESPONDENT IN OP N0.34/2015

EXHIBIT P10 TRUE COPY OF GO{MS)N0.03/2016/PD DATED 14.02.2016 ISSUED BY THE 1ST RESPONDENT GRANTING IN PRINCIPAL SANCTION FOR EXTENSION OF 'rHE POWER PURCHASl! AGREEMENT

EXHIBIT P11 TRUE COPY OF THE RESPONSE FILED BY THE 2ND RESPONDENT IN OP N0.34/2015 ·BEFORE THE 3RD RESPONDENT

EXHIBIT P12 TRUE COPY OF THE RELEVANT EXTRACTS OF.THE JOINTLY INITIALLED DRAFT POWER PURCHASE AGRE.&MENT PLACED BEFORE THE 3RD RESPONDENT

EXHIBIT P13 TRUE COPY OFT EH POINTS OF DIFFESRSNOl;S RAlllD SY THE PETITIONER AND THE 2ND RESPONDENT BEFORE THli 3RD RESPONDENT.

EXHIBIT P14 TRUE COPY OF THE AMENDMENT APPLICATION PRIFERRED BY THE PETITIONER BEFORE THE 3RD RESPONOENT

2/-

292

-2-

- .. · .. i'

·;

WP(C).No. 540 of 2017 (N)

EXHIBIT P15 TRUI: COPY OF THE AMENDED OP N0.34/.2015 PREFERRED BY THE PETITIONER SEFORE THE 3RD RESPONDENT

EXHIBIT P16 TRUE COPY OF THE RESPONSE F=ILED BY THE 2NO RESPONDENT TO THE AMENDED OP No;341201s

EXHIBIT P17 TRUE COPY OF THE ARGUMENT NOTES SUBMITIED BY THE PETITIONER BEFORE THE 3RD RESPONDENT

EXHIBIT P18 TRUE COPY OF THE FINAL ORDER DATED 26.10.2016 IN OP N0.34/2015 ISSUED BY THE 3RD RESPONDENT

EXHIBIT P19 TRUE COPY OF THE REPRESENTATION BEARING NO.SKPL/KSEBL/PPAf2016-17/01DATED26.10.2016 PREFERRED BY THE PETITIONER BEFORE THE 2ND RESPONDENT

EXHIBIT P20 TRUE COPY OF THE REPRESENTATION PREFERRED BY THE . . PETITIONER BEFORE THE MINISTER FOR POWER,GOVERNMENT OF KERA LA

EXHIBIT P21 TRUE COPY OF THE COMPLAINT DATED 09.12.2016 PREFERRED ~y THE TB.ADE U_NlQfif_RffQRE :pjE 4tH ™P-9HRi•~is

EXHIBIT P·22 TRUE COPY OF THE HEARING NOTICE DATED 15/12/2016 ISSUED BY THE OFFICE OF THE 4TH RESPONDENT

EXHIBIT P23 TRUE COPY OF THE WRITTEN SUBMISSIONS DATED 17.12.2016 FILED BY THE PETITIONER BEFORE THE DEPUTY COLLECTOR,DISTRICT DISASTER MANAGEMENT AUTHORITY

EXHIBIT P24 TRUE COPY OF THE WRITTEN SUBMISSIONS DATED 23.12.2016 PREFERRED BY THE PETITIONER BEFORE THE .4TH RESPONDENT

EXHIBIT P25 TRUE COPY OF THE REPORT DATED 15.12.2016 OF THE SENIOR JOINT DIRECTOR OF FACTORIES AND BOILERS,ERNAKULAM,OBTAINED BY THE PETITIONER UNDER THE RIGHT TO INFORMATION ACT

EXHIBIT P26 TRUE COPY OF THE ORDER BEARING N0.01/97603/16 DATED 29.12.2016 ISSUED av THE 4TH RESPONDENT ISSUl!D UNDER THE DISASTER MANAGEMENT ACT

EXHIBIT P27 TRUE COPY OF THE U:TTER BEARING NO.CP/lPC/148-E3SES/07/119 DATED 07.02.2007 ISSUED BY THE 2ND RESPONDENT

EXHIBIT P28 TRUE COPY OF THE CERTIFICATE BEARING NO.CP/IPC/148/BSES/07/12 DATED 24.04.2007 ISSUED BY THE 2ND RESPONDENT .

EXHIBIT P29 TRUE COPY OF THE CERTIFICATE BEARING NO.COMMUBKPL/2009-10 DATED 22/04/2009 ISSUED BY THE 2NO RESPONDENT

3/-

293

-4-

WP(C).No. 540 of 2017 (N)

EXHIBIT P44 TRUE COPY OF THE LETTER DATED 17,04.2017 ISSUED BY THE PETITIONER TO THI: 2ND RESPONDENT

EXHIBIT P45 TRUE COPY OF THE APPLICATION Fil.ED BY THE PETITIONER BEf.ORE THE 3RD RESPONDENT FOR THE IMPLEMENTATION OF ORDER DATED 04.04.2017

EXHIBIT P46 TRUE COPY OF THE ORDER DATED 27.04.2017 ISSUEO BY THE 3RD RESPONDENT

EXHIBIT P47 TRUE COPY OF THE LETTER DATED 04.05.2017 ISSUED BY THE 2ND RESPONDENT

EXHIBIT P48 TRUE COPY OF REPLY GIVEN BY THE PETITIONER TO THE 2ND RESPONDE:NT DATED 06.05.2017

EXHIBIT P49 TRUE COPY OF THE LETTER DATED 12.05.2017 ISSUED BY THE 2ND RESPONDENT

EXHIBITP50 TRUE COPY OF THE LETTER DATED 16.06.2017

EXHIBIT P51 TRUE COPY OF THE LETTER DATED 25.03.2017 ISSUED SY THE 2ND !li§PQNQFNJ.l-0 ™fi PF*EPf>MSR-

EXHIBIT PS2 TRUE COPY OF THE LETTER DATED 05.06.2017 ISSUED av THE 2ND RESPONDENT TO THE PETITIONER .

EXHIBIT P53 TRUE COPY OF THE LETTER DATED 07.06.2017 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER . .

EXHIBIT P54 TRUE COPY OF THE LETTER DATED 13.06.2017 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER

EXHIBIT P55 TRUE COPY OF THE LETTER DATED 23.06,2017 ISSUED SY THE 2ND RcSPONOENT TO THE PETITIONER

EXHIBIT P56 TRUE COPY OF THE LETTER DATED 01.07.2017 ISSUED BY THE 2ND RESPONDENT TO THE PETiTIONER.

RESPONDENT(S)' EXHIBITS AND ANNEXURES:

ANNEXURE R4(A) TRUE COPY OF THE REPORT SUBMJTTED BY THE 4TH RESPONDENT, DISTRICT COLLECTOR.

sts

!TRUE COPY/.

~ P •. $.TO JUDGE

294

-3·

WP(C).No. ~40 of 2017 (N)

EXHIBIT P30 TRUE COPY OF THE LICENCE ISSUED BY THE' PETROLEUM AND· SAFETY ORGANISATION,MINISTRY OF COMMERCE AND INDUSTRiES,GOVERNMENT OF INDIA TO THE PETITIONER

EXHIBIT P31 TRUE COPY tOF THE LICENCE ISSUED BY THE DISTRICT INDUSTRIES CENTRE TO THE PETITIONER

EXHrBIT P32 TRUE COPY OF THE CERTIFICATE ISSUED BY THE NATIONAL SAFETY COUNCIL IN CONNECTION WITH THE NATIONAL SAFETY CELEBRATIONS, 2016

EXHIBIT P33 TRUE COPY OF. THE CERTIFICATE ISSUED BY THE NATIONAL SAFETY COUNCIL IN CONNECTION WITH THE NATIONAL SAFETY CELEBRATIONS, 2015

EXHIBIT P34 TRUE COPY OF THE CERTIFICATE ISSUED BY THE FACTORIES AND BOILERS DEPARTMENT, GOVERNMENT OF KERALA IN 2014.

EXHIBIT P35 · TRUE COPY OF THE CERTIFICATE ISSUED BY THE FACTORIES AND BOILERS DEPARTMENT, GQVERNM~NT OF KERALA IN 201 O

' EXHIBIT P3~ _IID.l.~COEY OE :tHERERS.§SJ;N:tA'.lfJQN-.PNFEfl·QQ'1·21iO't·&=B£FefU!

THE ODITIONAL CHIEF SECRETARY OF THE 1ST RESPONDENT

EXHIBIT P37 TRUE COPY OF THE REPRESENTATION DATED 09/12/2016 BEFORE THE CHAIRMAN AND MANAGING DIRECTOR OF Tl IE 2ND RESPONDENT ' ,

EXHIBITP38 TRUE COPY OF THE RESPONSE DATED 26/1012015 FILED BY THE 2ND RESPONDENT BEFORE THE 3RD RESPONDENT (INCLUDING ANNEXURE)

EXHIBIT P39 TRUE COPY OF THE dPERATION REPORT OF SOUTHERN REGIONAL LOAD DESPATCH CENTRE OF THE POWER SYSTEM OPERATION CORPORATION LTD. DATED 30/12/20·16 .

EXHIBIT P40 TRUE COPY OF THE FIJLL TEXT OF THE POWER PURCHASE AGREEMENT DATED 03/05/1999 ENTERED INTO BETWl:EN THE PETITIONER AND THEi2ND RESPONDENT

EXHIBIT P41 TRUE COPY OF THE r.,ONTHL.Y TARIFF INVOICE FOR THE MONTH.;OF NOVEMBER 2014 ISS~ED BY.THE PETITIONER TO THE 2ND -RESPONDENT

EXHIBIT P42 TRUE COPY OF THE L~TTER ISSUED BY THE 2NO RESPONDENT TO THE PETITIONER BEARING NO.CML/EE1·AEE3/BKPUPPA EXTENSION/2015-16/566 DATED 25/03/2016

EXHfBIT P43 TRUE COPY OF THE L(CENCE fSSUED BY THE 1 ST RESPONDENT DATED 03/0711999

4/-

// TRUE COPY //

295

B·s·e·s· KE.·. oA.•: 1t.p·· ... o· ... W'··e·R·· ·L·· ·1M· :1T·e· o· ~ \ r· . ~ . ·~ : \., ~ ~ ; .. : ;· ;: ,: ... - ·~· . :; . ~ \ - !. ~· - ~ . : •

cat.iMH4SK1.;f~fl251

~ Ot11ice& V&xb:: UDYOGAIU_,LP..0..,. lUJCffl.QD 581

Pfc (9t'...f8.(f 38851511. Fax;: (9f..acJ lCJ587

JntE!jfratedMan~e •. : Systems Certifterl · .

ISO 9001 : 2008 ' ISO 14001 : 2004 • OHSAS 18001 : 2001 lfll · ISO fi0001 : .2011

BKPUKSERC/PPA extension/2015-16/18 Nov 20. 2017

The Secretary t Keraia State Electricity Regulatory Commission

K.P.F.C.. Bhavanam, G.V. Raman Pillai Road,

VeUayambatam

Thiruvananthapuram 6·95 010

Dear Sk,

Subject: Request for posting a date for .hearing

References :

1. J.udgement .of the Hon'ble High Court of Kerala dated 31.1'0 .. 2017 in WPC No .. 54012017 and related cases filed by BSES Kerata 'Power Limited (BKPL)

2. Order dated .27:04.2017 of the Hon'ble KSERC in File No. 590/DD{T)/BKPLnaphtha /2017/KSERC (application dated 18.04.2017 filed by BKPL)

3. Interim Order dated 04.04.2017 of the Hon'ble High Court of Kerala in WPC 540/2017

4. Order dated 26.10.2016 of the Hon'ble KSERC in OP no. 34/2015 filed by· BKPL

5. PPA dated 03.05.1999 between KSEB and BKPL

1. We invite kind attention of the Hon1ble Commission to the references cited above.

2. On 31.10.2017 the Hon~ble High Court of Kerala has pronounced the final judgement in WPC

540/2017 and related .cases filed by BSES Kerala Power limited. We hereby enclose -ce.rtified

copy .of the ·said Judgement.

3.. The Hon'ble Court in ~ts judgement dated 31.10.2017 has set aside the order dated 26.102016

of the Hon''ble KSERC in OP no .. 34/2015 filed by BKPL in Oct '15, as instructed by KSEBL for

the approval of two years extension of PPA and the consequential order passed by KSEBL

based on the said order. The Court was a1so pleased to remand the issues raised in OP no.

34/2015 back to Hon'ble KSERC for its fresh consideration and passing orders on merit in

respect of the issue~ raised ln the petition.

4. As per the judger~nt of the Hon'ble High Court dated 31.10.2017 , the Hon'ble Commis5ion

may also please adjudicate on the issue as regards the rate applicable in respect of the

electricity generated and :suppJied to KSEBL in May /June 2017 pursuant to the interim order

dated 04.04 .. 2017 of the Hon'ble High Court in WPC 540/2017,untrammelled by .any of the

ANNEXURE-P/25 296

//True Copy//

findings in its order dated 27.04.2017 granting approval to KSEBL for purchasing the electricity

generated on unscheduled interchange basis.

5. We also crave the leave of the Hon'ble Commission to produce additional materials to support

the additional claims as directed by the Hon'ble High Court of Kerala in its judgment dated

31.10.2017.

6. In such circumstances, it is most respecttully prayed that the Hon'ble Commission may be

pleased to post the above case for hearing, in accordance with the directions issued by the

Hon'ble High Court of Kerala.

Thanking You,

Yours truly


// TRUE COPY //

297

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:

THE HONOURABLE MR.JUSTICE K.VINOO CHAN DR:AN &

THE HONOURABLE MR JUSTICE ASHOK MENON

MONDAY, THE 29TH DAY OF .JJ\N:UARY 20181 STH MAGHA. i939

W.~~.Q· 4~.:LPf :41:vl8JN WPC. 540/2017

AGAINST THE JUOGM:cNT IN WP(G) N0,.540/2017 OF THE. HIGH COURT OF KERALA DATED :3.1-10-2017

A.N. RAJAN AGE!O 68 YEARS, SIO.NARAYANAN, AMSATTUME:UL HOus·e:, KOLAZHI P.O., THRISSUR.

BY ADVS.SRl.V.M.KRlSHNAKUMAR

RJ;:Se~Q.!'.AQ.f;:J~I,§:

S.MT.P.R.REENA $MT.SURYA SJNOY

'L MIS. BSES KERALA POWER LTD. UDYOG.AMANOAL~ ERNAKULAM, REPRESENTED BY ITS DJRECTOR, ROBfN SEBASTIAN, PiN 4 683 501.

2. STATE OF KERALA REPRESENTED BY ITS AOOL. CHfEF SECRETARY. DEPARTMENT OF POWER. GOVERNMENT SECRETAR~AT. THJRUVANANTHAPURAM-695 001.

3. KERALA STATE ELECTRIClTY BOARD L TO. VYDYUTHl BHAVAN, PATTOM. THIRUVANANTHAPURAM- 695 033, REPRESENTED BY ITS SECRET ARY.

4. KERALA STATE ELECTH:ICffY REGULATORY COMMISSION K.P~F.C.BHAVANAMt C.V. RAMAN PILLAI ROAD, VELLAYAMBALAM, THmUVANANTHAPURAM-1595 010 REPRESENTED BY !TS SECRETARY.

5. DiSTR!CT COLLECTOR ANO CHAIRMAN D~STRiCT DISASTER Mt·,NAGEMENT AUTHORITY, COLLECTORATE, CWiL STATlON, ERNAKULAM-682 020.

BY AOVS. SR~.P.G.JAYASHANKAR SRl.S .. SUJlN, SC. ELECTRICITY REGULAT.O'RY

COMMlSSlON S'R.l.SUDHEef'.: GANESH, SC, KSEBL

BY GOVERNMENT PLEADER SMT. K.B. SONY SY STATE ATTORNEY SRt.K.V. SOHAN

THiS WRIT APPEAL HAVlNG CC)ME UP rOR AOMISStON ON 29-01-2011:. THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ANNEXURE-P/26298

//True Copy//

K. VINOD CHANDRAN & ASHOK MENON, JJ. -------~-~----·~-~--------------··

Dated this the 29tn day of January, 2918

J.YQ.GMENT

K. Vinod Chandran, J.

The petitioner, though not a party in the writ

petition, has approached this Court with this writ

appeal 1 challenging the judgment of the learned

Single Judge of this Court in a batch of vvrit

petitions. The grievance of the petitioner is with

respect to the alleged finding of the learned

Single Judge as to the existence of an agreement

between the Kerala State Electricity Board Limited

[for brevity, KSEBLJ and M/s.BSES Kerala Power Ltd.

2. The petitioner was a party before the

Commission when the ini tia 1 adjudication with

respect to the application filed by the M/s. BSES

299

'W.A. No.237 of 2018

Kerala Power Ltd. was considered. The petitioner so

appeared before the Commission and filed his

objection as a consumer on the basis of the

judgment of a Division Bench of this Court in

Annexure I(a), based on Regulation 31 of the Kerala

State Electricity Regulation Commission I Conduct of

Business] Rules, 2803.

3. The only grievance of the petitioner is the

purported finding of the learned Single Judge with

respect to the existence of an agreement.

4, Heard the learned counsel appearing for the

KSEBL, the learned Senior Counsel a pp ea ring for

M/s.BSES Kerala Pow,er Ltd, and also the learned

Government Pleader appearing for respondents 2 & 3.

5. It is the common case that the existence of

an agreement also can be considered by the KSEHC.

It is pointed out by all parties that the KSERC had

already heard the matter and the appellant was also

300

V•LA. No.23/ o.f 2018

heard and novJ orders have been reserved. In vievJ of

the common case of all the parties that the

~xist~nce ~f ar agreement is also left to be

adjudicated before the, KSERC 1 we a re of the op.inion

that the writ appeal can be disposed of, making it

' clear that the said issue would also be adjudicated

by the KSERC. It ~·JOUld be open ·for the KSERC to

reopen arguments, if found necessary, on the

question as to vJhether there is an agreement in

existence. This would not be necessary, if the

issue has already been addressed before the KSERC.

The above writ appeal is disposed of.

sp/29/81/18

Sd/-

K. VINOD CHANDRAN, JUDGE.

Sd/ASHOK MENON,

JUDGE. //'?ROS COPY j I

""' P .~o JUDGE

301

WA.No. 237of2018

ANNEXURE I •

ANNEXURE l(A)·

ANNEXURE U *

ANNEXURE Ill·

ANNEXURE lV •

APPENQlX

COPY OF iHE PETITION ALONG WITH AFFIDAVIT DATED 30.03.2016 FILED BY THE APPELLANT UNDER RULE 31.

COPY OF THE JUDGMENT DATED 11.12,2015 IN WP(C) N0.315876 OF .2015.

COPY OF lHE NOnCE ISSUEO BY THE 4TH RESPONDENT TO THE APPELLANT REGARDING THE HEARING SCHEDULED ON 20.05.2016.

COPY OF THE NOTES OF ARGUMENTS SUBMITTED BY TH!f?: APPELLANT BEFORE THE 4TH RESPONDENT.

. . COPY OF THE NOTlCe OF HEARING DATED 01.01.2018.

RESPON!O:ENTS' EXHIBITS:~ NIL

sp

lrtRUE COPYIJ

P.A~1iJOGE

"

,~·~

.-·····' ; '\ l .i...,_,.,. i_ \i"'.f). \-(Y• ... ,

! \..-2 ...... ::~ :·. . ,,_ .. t-··---~·Z·.1,~~~f """ ;:.,'

302

. HIGH corRT OF KERALA rl1 E., R· · · N·· 1 ·. {/ U'r1·· . 'I\. !I' A '.. 1 AA ~A {Vi

i\~ar and Numbn of Snit 01.' w :\ 2J1t2ms 1N WPf .540t?OJ7

.:Jthcr !:1ti.H:ce1iings

Name of Applicant/Advocate SRl.Pfr.JAYASHANKAR

Date Notifii;d for appearance w 12~0.2~2mx

i·N~dve the ttipy

// TRUE COPY //

303

1

Kerala State Electricity Regulatory Commission Thiruvananthapuram

Present : Shri Preman Dinaraj, Chairman

Shri K.Vikraman Nair, Member Shri S.Venugopal, Member

OP 34/ 2015

In the matter of : Application filed by M/s BSES Kerala Power Limited (BKPL) on 20.11.2017, subsequent to the final order dated 31.10.2017 of the Hon’ble High Court of Kerala in Writ Petitions WP(C) No 40257 of 2016, WP(C) No. 540/2017 & WP(C) No22464 of 2017

Petitioner - BSES Kerala Power LtdUdyogamandal P.O,Kochi 683 501

Respondent - Kerala State Electricity Board LimitedVydyuthi Bhavanam, Pattom

Petitioner represented by - Adv. Joseph KodiantharaAdv P G JayasankarSri. Robin Sebastian, M/s BKPL

Respondent represented by - Adv. Raju JosephAdv. K BhuvanachandranSri B Pradeep, KSEB LtdSri Bipin Sankar, KSEB LtdSmt. Latha S.V, KSEB Ltd

Order dated 05.10.2018

Background of the case

1. M/s BSES Kerala Power Ltd (BKPL), an Independent Power Producer of theState, established a Naphtha based power plant at Kochi, with the approval ofthe State Government during the year 2000. Further, earlier with the approvalof the State Government, the erstwhile Kerala State Electricity Board (KSEB)had entered into PPA with the BKPL on 03.05.1999 for purchasing theelectricity from the plant. The fixed charges and variable cost for the electricitygenerated, payable by KSEB to BKPL, was as per the terms and conditionsspecified in the PPA. The original PPA was valid till 30.10.2015.

ANNEXURE-P/27304

//True Copy//

2

2. The clause 15.1 of the PPA dated 03.05.1999, which provides for extension of the term of PPA beyond 30.10.2015, is extracted below,- “The agreement can further be extended for a period of 10 tariff periods beyond the 15th tariff period on a mutually agreed tariff as per clause 7.4 taking into account the fuel charges, operation and maintenance charges and a nominal net residual value of the project which the company would have normally expected on dismantling and selling the same at its cost”

3. M/s BKPL had filed a petition on 05.10.2015 before the Commission with the following prayers to,-

(i) Admit the petition.

(ii) Approve the agreement for extension of PPA between KSEB Ltd and BKPL including tariff for two years as prayed with effect from the first November 2015, pending finalization of the proposal submitted to KSEB Ltd for gas conversion of the plant and extension of PPA term.

(iii) Grant interim approval for continuing purchase of power from BKPL by KSEB Ltd during the intervening period beyond 31.10.2015 till the time extension of PPA is approved and signed, at the tariff proposed in the draft agreement for extension of PPA, subject to adjustment with respect to tariff approved by the Hon’ble Commission.

(iv) Condone any inadvertent omissions / errors / rounding of differences / short comings in the petition.

(v) Allow additions / alterations / changes / modifications / amendments to the petition at a future date.

(vi) Dispose of the petition expeditiously.

(vii) Pass any such orders as deemed fit.”

4. During the proceedings of the petitions, the following associations/ trade unions

were impleaded in the subject matter.

(1) The Kerala High Tension and Extra High Tension Industrial Electricity Consumers Association, Productivity House, Jawaharlal Nehru Road, Kalamassery.

(2) Kerala State Productivity Council, Productivity House, Jawaharlal Nehru Road, Kalamassery.

(3) KSEB Officers Association, TC 25/2969, Mallor Road, Vanchiyoor, Thiruvananthapuram.

(4) Sri. A. N. Rajan, Ambattumelil House, Kolazhi P.O, Thrissur.

(5) BSES employee unions.

5. The Commission conducted public hearings on the petition on 27.10.2015,

22.06.2016 and 10.08.2016.

305

3

6. KSEB Ltd vide its letter No. KSEB/TRAC/ KSERC/BSES/2015-16/ 2233 dated 26.10.2015 and the oral submission made during the hearings submitted that the parties to the PPA dated 03.05.1999 have not agreed on the tariff of the electricity, especially in view of the differences in assessment of O&M cost, return on equity, interest on working capital etc.

7. The petition submitted by BKPL is for approving the Power Purchase Agreement (PPA) for procurement of power by KSEB Ltd under Section 86(1)(b) of the Electricity Act,2003. The original PPA dated 03.05.1999 was signed much before the enactment of Electricity Act, 2003. After the enactment of the Electricity Act, 2003, KSERC as the appropriate Commission has to regulate the power purchase including price of electricity of KSEB Ltd. Hence the Commission vide the daily order dated 28-10-2015, issued the following directions to the petitioner BKPL and respondent KSEB Ltd that, (i) KSEB Ltd shall submit a detailed appraisal on the demand and supply

position of power during 2016 and 2017 duly considering the availability of power from its hydel stations, Central Generating Stations, power purchase agreements with traders / generators, KSEBL’s own diesel stations, other liquid fuel stations including RGCCPP-Kayamkulam and from short-term market, the average cost of power purchase for a period of two years from November 2015, availability of corridor and such other details to substantiate the necessity for extending the PPA with BKPL for a further period of two years from November 2015 for which in principle sanction has been accorded by the Board of Directors of KSEB Ltd

(ii) KSEB Ltd may, if found necessary, file petition under clause (b) of sub-section (1) of Section 86 of the Electricity Act, 2003, for the extension of the original PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein, with mutually agreed tariff and terms and conditions incorporated in the draft PPA, which is initialed by both the parties to the agreement.

(iii) Time up to 27.11.2015 is granted to the petitioner BKPL and the

respondent KSEB Ltd for complying with the directives (i) & (ii) above. (iv) KSEB Ltd and BKPL may, till 30.11.2015, extend the PPA dated

03.05.1999 as per the Article 15.1 and Article 7.4 therein subject to the condition that the payment for the period of one month from 01.11.2015 to 30.11.2015 shall be as decided by the Commission in the final order.

8. In compliance of the direction of the Commission, the respondent KSEB Ltd vide letter dated 25.4.2016 has submitted that:

(i) Government of Kerala vide the order dated 24-2-2016 accorded ‘in principle sanction’ for extending the PPA between KSEB Ltd and M/s. BKPL for the combined cycle power plant at Kochi for two more years from the date of expiry of the existing PPA, subject to the condition that no Government Guarantee will be allowed for any payment obligations of KSEB Ltd and the final tariff shall be decided by KSERC be brought

306

4

back to Government and approval of Government obtained. It was also ordered that KSEB Ltd is permitted to study and firm up its decision on the option of fuel conversion of the plant from naptha to LNG in consultation with KSERC and obtain Government approval at the appropriate stage.

(ii) Since a mutually agreed tariff and terms and conditions could not be arrived at in spite of the repeated discussions with M/s. BKPL, KSEB Ltd vide the letter dated 08.12.2015 informed M/s BKPL that KSEB Ltd will not be liable for payment of fixed charges or any other charges with effect from 1.12.2015.

(iii) KSEB Ltd and M/s. BKPL could not arrive at a consensus on the tariff for the extended period. The differences between the two parties were mainly on the following tariff parameters.

(1) Return on Equity. (2) O&M Charges. (3) Cost of spares included in the computation of Interest on Working

Capital. (4) Calculation of fuel stock for the computation of Interest on

Working capital. (5) Reimbursement of Tax on Returns. (6) Reimbursement of Land Lease charges payable by BKPL to

TCCL. (7) Effective date of application of the extended PPA for the purpose

of payment of fixed charge.

(iv) KSEB Ltd. stated that the power position of the state improved due to a combination of factors, like commissioning of Mysore-Arecode 400KV line, commissioning of Narendra-Kolhapur 765KV line at 400KV level and resolution of disputes with CTU through orders of Hon’ble CERC. This resulted in substantial improvement in flow of quantum of imported power.

(v) The costliest source of power purchase of KSEB Ltd (except for liquid fuel stations) was IGSTPS(Jhajjar) and the rate at KSEB periphery was Rs.5.671/unit. The power allocation from Jhajjar was discontinued from March 2016. The next in the bottom of merit order is the short term contract with PTC-Simhapuri and the rate at KSEB end was Rs.5.477/unit which also expired in May-2016. The costliest source of power on expiry of these contracts is from NLC-II Expansion and the rate at KSEB end is Rs.5.00/unit. The delivered rate of power from other sources (except for liquid fuel stations) is below Rs.5 per unit.

9. During the proceedings of the subject matter, M/s BKPL submitted that, KSEBLtd vide its letter dated 13.07.2015 communicated their willingness to extendthe PPA for a period of two more years from the date of expiry of existing PPAsubject to the following conditions,-

307

5

(i) Terms of existing PPA have to be suitably modified. (ii) Re-ascertain the fixed charges applicable for the extended period, as the

existing plant is a fully depreciated one. (iii) Obtaining approval from KSERC for the above. .

10. M/s BKPL, vide letter dated 27th July 2016 has submitted request for certainamendments in the petition, explaining the power of the Commission to adjudicate upon the issues with respect to the PPA. The additional request made by the petitioner is to “ adjudicate and a take a decision on the points of differences raised by the respondent in relation to the initialed draft PPA submitted before this Hon’ble Commission by the respondent”.

11. The Commission vide the daily order dated 16-08-2016 has expressed that, ‘aPPA cannot be imposed on KSEB Ltd. The agreement to purchase powerwould be a valid agreement only if it is characterized by consensus - ad – idem,arrived out of free will of the parties to contract. So far what has been madeclear is that M/s BKPL is willing to sell the power. KSEB Ltd, as per its orderNo. CP/BSES/2015-16 /164 dated 14.7.2015 has only shown its willingness toextend the contract subject to the terms and conditions to be finalised.Government order No. GO (MS) No. 03/2016/PD dated 24.02.2016 does onlyshow an in principle sanction for extending the PPA. Only when KSEB Ltdsubmits the application for approval of PPA, the Commission can take a view’.

12. The Commission vide the order dated 26.10.2016 disposed the petition with thefollowing direction and orders.

“ 27. Considering all these factors, the Commission is of the considered view that, the petition filed by M/s BKPL under section 86(1)(b) of the Electricity Act-2003 for approval of the extension of power purchase agreement (PPA) dated 03-05-1999 between KSEB and M/s BKPL is not maintainable. However, as and when KSEB Ltd submits application with a proper PPA initialed by both KSEBL and BKPL as per Regulation 78 of the Tariff Regulation, 2014 read with clause (b) of sub section (1) of section 86 of the Electricity Act-2003, with mutually agreed tariff as stipulated under clause 15.1 of the PPA dated 03-05-1999, the Commission would take a decision on merits as per the provisions of the Electricity Act-2003 and relevant regulations.

Order of the Commission Considering the oral and written submissions of the petitioner M/s BKPL, the respondent KSEB Ltd and other stakeholders, the Commission is of the considered view that, the petition filed by M/s BKPL purporting to be a draft PPA under section 86(1)(b) of the Electricity Act-2003 for approval of agreement for extension of power purchase agreement dated 03-05-1999 between KSEB and M/s BKPL is an inchoate document and is not maintainable under the relevant provisions of the Act and the relevant regulations. Hence the petition is dismissed.”

13. Aggrieved by the order of the Commission, M/s BKPL filed the Writ PetitionWP (C) No. 540/2017 before the Hon’ble High Court.

14. In the meanwhile, serious apprehension was raised before the Hon’ble HighCourt against the safety of the balance stock of the Naphtha at the premises ofthe BKPL and at the nearby premises of the fuel supplier IOC as on

308

6

31.10.2015, i.e., as on at the time of the expiry of the original PPA dated 03.05.1999. In this matter, Hon’ble High Court in its interim order dated 04.04.2017 in W.P.(C).No.540/2017 and in W.P.(C).No.40257/2016, ordered as follows.

5. This court however is disturbed with the report of the Senior Joint Directorof Factories and Boilers that the naphtha storage tanks have valid explosive licence only upto 31.12.2017. There after the storage tanks have to be emptied, cleaned and maintenance if any, has to be carried out, before submitting the storage tanks for inspection. Normally the stock of naphtha available in the premises of the petitioner would be around 6500MT, which is about 58% of the total capacity of the plant. The petitioner cannot, hence continue the storage of naphtha beyond the period as indicated herein, when the explosive licence expires. The maintenance and cleaning of the storage tanks also would require the naphtha to be removed. It is also indicated from the report of the Officers of IOCL that there is no possibility of the stored naphtha in the premises of the petitioner being transmitted back to the IOCL. The IOCL is also storing 6000 KL of naphtha, procured for the purpose of the petitioner’s power generation, which is also stored in the premises of the IOCL; which also does not have any other market than disposal by power generation.

6. Considering the fact that the explosive licence of the petitioner will expireon 31.12.2017; despite the opinion of the IOCL as also the KSEB as to the safety of the naphtha stored in the petitioner’s premises, one cannot completely ignore the human error, which could lead to a major disaster. The classification of the petitioner’s unit as a Major Accident Hazardous (MAH) Unit and the DCS as also the parameters being available in the PCR all would depend upon human efficiency, which could be compromised by a slight error, causing a disaster as is apprehended by the Disaster Management Authority. For the present, this Court is of the opinion that it is expedient that the naphtha in the petitioner’s premises and the premises of the IOCL be used up, in the interest of public safety. This would necessarily require consideration of the larger issue projected of the feasibility of extension of PPA and the sustainability of Ext.P18.

7. With respect to the challenge against Ext P18, the petitioner and KSEBhave rival contentions. The Board is of the opinion that there could be no extension of the PPA since as of now, the Board is procuring power from the sources at far lesser prices and procurement of power from the petitioner would only result in public fund being frittered away. The Board asserts that the decision taken by the Government, relied on by the petitioner company is only a sanction accorded to the Board to decide on extension. The Board independently decided not to go ahead with the PPA, which in any event as there for only 15 years and extension is not of right. The petitioner company however has a contention that, the Government and KSEB had agreed for the extention of the PPA for another two years within which time, the petitioner was also required to convert the plant to one generating power from LNG. The KSEB however submits that the petitioner was not willing for extension, on the terms as stipulated by KSEB and hence, there would be no extension possible. It is also submitted by the learned senior counsel that the petitioner cannot have any claim of legitimate expectation since PPA itself stood expired, on expiry of 15 years and there was no agreement by the KSEB that the naphtha procured during the time of the agreement would be used up after the expiry of the PPA.

309

7

8. The compelling concern of this Court, at present, is the apprehendeddisaster and this Court is of the opinion that the option submitted by the KSEB has to be put into effect, subject however to further orders passed in the writ petition. The option for disposal of naphtha, as suggested by the KSEB, has been placed on record in the report of the District Collector, which are as follows:

1. Generating power on Unscheduled Interchange (UI) basis in co-ordinationwith the Load Dispatch Centre of KSEBL subject to the approval fromKSERC thereby consuming the naphtha stock.

2. M/s BKPL could explore possibilities on generation of power and sale to anyone by utilizing the grid of KSEBL as open access is being permitted now.

3. Any other feasible option including transfer to other naphtha consumingindustries like nearby FACT availing the service of oil marketers like IOCL.

9. The petitioner could definitely explore possibilities at option numbers 2and 3, but however the same would have to be finalised, within a period of one month from today and the disposal of the naphtha as per either of the options started within the said period and concluded within the time herein after stipulated. If the petitioner does not intend to carry out the said options, then they shall generate power on Unscheduled Interchange (UI) basis in co-ordination with the Load Dispatch Centre of KSEBL; subject to approval of KSERC and also subject to further orders to be passed in the writ petition. The petitioner could definitely approach the KSEB immediately for such generation of power on UI basis. It is made clear that the entire naphtha available at the petitioner Companies premises and that available at IOCL would be disposed of before 01.07.2017. If the same is not so disposed of, then definitely, the Chairman of the Disaster Management Authority, the District Collector would be entitled to take such steps for disposal of the naphtha without even reference to this Court. All issues raised by all parties are left open for consideration in the writ petition. The petitioner Company shall file periodic reports before the District Collector, i.e.; every three weeks as to the stage of disposal of naphtha as directed herein.”

15. M/s BSES Kerala Power Limited has, vide application No. BKPL/KSERC/PPAExtension/2015-16/17dated18.04.2017, requested for granting necessaryapproval in connection with the implementation of the interim order of theHon’ble High Court dated 04.04.2017 in Writ Petition WP(C) No. 540/2017.The issues raised by the BKPL are extracted below for ready reference.

“

1. The Hon’ble High Court of Kerala has, in its order dated 04.04.2017 in WPCNo.540/2017 directed BSES Kerala Power Limited (BKPL) to generate electricity touse up, in the interest of public safety, the 6879 MT Naphtha stored in our premisesand the 6000 KL of Naphtha stored in the premises of Indian Oil CorporationLimited (IOCL). The said order has been issued by the Hon’ble Court consideringthe fact that the generating unit of BKPL is a Major Accident Hazard (MAH) unit andthe explosive license granted to BKPL will expire on 31.12.2017.

2. The Hon,ble High Court also observed that the possibility of human error, leading toa major disaster cannot be totally excluded in spite of the satisfactory safety andsecurity arrangements made by us.

3. The Hon’ble High Court has directed that the stock of naphtha has to be exhaustedon or before 01.07.2017.Since exhausting naphtha can be prudently done only by

310

8

way of generation of electricity, the Hon’ble High Court has directed that power can be generated in co-ordination with the load dispatch centre of KSEBL, subject to the approval of KSERC and also subject to further orders to be passed by the Hon’ble High Court in the Writ Petition.

4. It has also been clarified by the Hon’ble High Court that the entire Naphtha availableat the premises of BKPL and at the premises of IOCL should be disposed off before01.07.2017. It has further been clarified by the Hon’ble High Court that all issuesraised by all parties are left open for consideration in the writ petition.

5. The only feasible and prudent option to dispose naphtha is to generate electricity.For purchase of power by any licensee approval of KSERC is inevitable. Since theapproval of KSERC is mandated under the interim order dated 04.04.2017 of theHon’ble High Court, it is respectfully requested that the Hon’ble KSERC may bepleased to Issue directions to KSEBL and State Load Dispatch Centre (SLDC) toschedule power from BKPL, to use up the Naphtha available with BKPL and at thepremises of IOCL as per the terms of the referred PPA in accordance with law.

6. All the other issues, including the rate, being sub judice, and as directed by theHon’ble High Court, are left open, the above prayer is without prejudice to our rightsunder the PPA, and only intended for the purpose of implementation of the orderspassed by the Hon’ble High Court. We specifically reserve our rights under the PPAto proceed against the licensee, subject to our rights under the PPA.”

16. KSEB Ltd vide its letter dated 25.04.2017, submitted the comments on theapplications filed before this Commission regarding the scheduling of powerfrom BKPL plant on UI basis and prayed before the Commission that,

“ (1) KSEBL may not be enforced to purchase power from BKPL at a rate higher

than UI rate ordered by Hon’ble High Court. (2) KSEBL may not be enforced to schedule and absorb power that would result

in surrender of already tied up power. (3) KSEBL may not be enforced to purchase more power than that could be

generated from reported and existing stock of BKPL. (4) BKPL may be directed to exercise other options ordered by Hon’ble High

Court viz (a) Selling of power through open access and exchanges to any other

party. (b) Selling back to any party or transfer to other naphtha consuming

industries, the excess naphtha fuel stock with them, and (c) KSEBL may be enforced to buy power as last resort only.”

17. The Commission, considering the submissions of the petitioner BKPL andrespondent KSEBL, in its order dated 27.04.2017, disposed the applicationfiled by the BKPL for exhausting the Naphtha as per the direction of theHon’ble High Court in its interim order dated 04.04.2017. The relevant portionof the order of the Commission is extracted below.

“ 8. The Commission has examined in detail, the application filed by BKPL for the implementation of the interim order of the Hon’ble High Court dated 04.04.2017, in Writ Petition W.P. (C)No. 540/2017, the submissions of KSEB Ltd regarding the disposal of naphtha available at the premise of BKPL and with IOCL. From the facts and records submitted before the Commission, it is noticed that,-

(i) The total stock of naphtha available premises of the petitioner BKPL is about 6500 MT, and the stock of naphtha available with IOCL for power generation at BKPL is 6000 KL (4450 MT) . The fuel required for generating 1 unit of electricity at BKPL is about 176 gram. Thus, the total electricity can be generated with the fuel stored at the premise of

311

9

BKPL and at the storage facility at IOCL is about 62 Million Units (MU) of electricity. The installed capacity of the BKPL plant is 157 MW. After accounting the auxiliary consumption etc, the maximum generation possible from BKPL plant is about 3.00 MU/day. Thus, even the plant is operated continuously for 24 hrs per day, about 21 days will take to dispose the entire naphtha stored at the premise of the BKPL and at the storage facility at IOCL.

(ii) Hon’ble High Court has directed the petitioner BKPL to explore the possibilities to dispose the naphtha as option-2 and option-3, as stated in the interim order dated 04.04.2017, i.e., (1) the possibilities of generation of power and sale to any one by availing open access facility and, (2) the possibilities of transferring the naphtha to the FACT or other similar naphtha consuming industries. However, BKPL has not submitted any details on the efforts taken for disposal of the naphtha, by exploring the possibilities at the options 2 and 3. Hence it is reasonably concluded that, the petitioner has not so far explored the possibilities at the options 2 and 3, for the disposal of naphtha as per the interim direction of the Hon’ble High Court.

(iii) Hon’ble High Court, in its interim order dated 04.04.2017 in Writ Petition W.P (C) 540/2017 had made it clear that, if BKPL does not adopt the options-2 and 3 for the disposal of the naphtha, the BKPL shall generate power on UI basis, subject to the approval of the KSERC .

9. The Commission had, in para 10.3 of the tariff order dated 30.04.2013 for the financial year2013-14, given the following directive to KSEB Ltd in view of the prohibitive cost of naphthaand of the electricity generated therefrom,-

“10.3 On expiry of the prevailing PPA with liquid fuel based IPPs and such as BSES, KPCL etc., power should not be drawn from these stations under any circumstances, unless the developers convert the stations to LNG or pool sufficient quantum of cheaper power from other sources, so that the pooled tariff is well within the merit order for dispatch. Appropriate advance notice may be issued to such developers within 3 months from the date of issue of this order.”

Accordingly no approval was given for scheduling power from BKPL, though provision was approved for payment of fixed charges as per the PPA. Similarly in the tariff order dated 14.08.2014 for the financial year 2014-15 also no approval was given by the Commission for scheduling power from BKPL. The validity of the said order dated 14.08.2014 has been extended till 16.04.2017. As per the tariff order dated 17.04.2017 for the financial year 2017-18 also, no approval has been granted by the Commission for scheduling power from BKPL. The Commission had also dismissed the application filed by BKPL for granting permission to extend the PPA beyond 31.10.2015, the date of expiry of the original PPA. Therefore after 31.10.2015, there is no approval for scheduling power from BKPL or for payment of fixed charges.

10. Clause (b) of sub-section (1) of Section 86 of the Electricity Act, 2003, states as follows,-“86. Functions of the State Commission.- (1) The State Commission shall discharge the following functions, namely:- (b)regulate electricity purchase and procurement process of distribution licensees, including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State.”

Therefore, approval of the Commission is necessary for scheduling power. The Hon'ble High Court has also, in para 9 of its order dated 04.04.2017, stated that if BKPL does not intend to carry out options 2 and 3, then they shall generate power on unscheduled interchange basis in coordination with load dispatch centre of KSEB Ltd: subject to approval of KSERC and also subject to further orders to be passed in the Writ Petition. The Hon'ble High Court has also given directions to the effect that the entire naphtha available at the petitioners company premises and that available at IOCL should be disposed of before 01.07.2017. It has been further clarified by the Hon'ble High Court that, all the issues raised by all the parties are left open for consideration in the Writ Petition.

312

10

Therefore, the Commission has to issue only the approval under clause (b) of sub-section (1) of Section 86 of Electricity Act, 2003, in accordance with the directions of the Hon'ble High Court.

11. The Commission has also noted the following facts. The 157 MW power plant of BKPL is

an intra-state generating station with in the State. KSEB/ KSEB Ltd has been scheduling power from the plant as and when required from the project, on merit order, duly considering the energy and peak demand, energy availability from its on hydel and thermal sources, CGS, traders, generators etc. The validity of the PPA entered into between KSEB and BKPL on 03.05.1999expired on 31.10.2015. The present direction of the Hon'ble High Court is only to schedule power from plant for the sole purpose of disposal of the naphtha available at the premises of BSES and IOCL through power generation, in view of the probable major accident hazard of storing such huge quantity of inflammable fuel, as expressed by the Hon'ble High Court in public interest.

12. The variable cost of generation of electricity from naphtha is much higher than the energy

available from other sources including traders, energy exchanges etc. Any amount incurred by KSEB Ltd for purchase of power from BKPL at an additional cost shall have to be ultimately borne by the 120 lakh consumers of the State. In the tariff order dated 17.04.2017, the Commission has, in table 9.15 in para 9.38, approved the purchase of 1946.98 MU of power by way of short term purchase at a rate of Rs.4.00 per unit. Hence, the Commission here by directs KSEB Ltd to purchase power from BKPL to the extent of 62 MU that can be generated by BKPL from the naphtha available at its premises and at the premises of IOCL, on unscheduled interchange basis as directed by the Hon'ble High Court in its order dated 04/04/2017.


In view of the facts, circumstances and statutory provisions explained above, approval under clause (b) of sub-section (1) of Section 86 of the Electricity Act, 2003, is grantedin accordance with the directions of the Hon'ble High Court in its order dated 04.04.2017, to the SLDC of KSEB Ltd for scheduling power and to Strategic Business Unit-Distribution of KSEB Ltd for purchasing the power generated on unscheduled interchange basis, from the 6500 MT of naphtha purchased and stored in the premises of BKPL and the 6000 kilo litre of naphtha purchased and stored by BKPL in the premises of IOCL. This order is being issued only for the purpose of implementing the interim order dated 04.04.2017 of Hon'ble High Court in Writ Petition No.540/2017.”

18. Hon’ble High Court in the final judgment dated 31.10.2017 in WP (C) No. 540/2017 has ordered on this issue as follows. “ The only other point on which the Commission would have to take a decision, while passing orders as directed above, is the rate/tariff that would govern the quantum of electricity supplied by the petitioner company to KSEBL, pursuant to the interim order dated 04.04.2017 of this court. While this issue is not raised in the petition before the Commission, being a subsequent event, the petitioner does have a case that, in as much as the Naphtha, that was used for the generation of the said electricity, was part of the consignment that was stored to meet the requirements of KSEBL under the PPA that held the field till 31.10.2015, the rates under the said PPA should govern the supply. The Commission shall therefore adjudicate on the said issue, as regards the rate applicable in respect of the above supply of electricity, also, untrammelled by any of the findings in its order dated 27.04.2017 (produced as Ext.P46 in W.P.(C).No.540/2017 and as Ext.P27 in W.P.(C).No.22464/2017) granting approval to the KSEBL to purchase the electricity on unscheduled interchange basis.”

19. M/s BSES Kerala Power Limited (herein after referred to as the petitioner or

BKPL), on 20.11.2017, placed a copy of the judgment of the Hon’ble High Court of Kerala, dated 31.10.2017 in Writ Petition WP(C) No. 540/2017 for

313

11

compliance and to issue subsequent orders. The relevant portion of the judgment of the Hon’ble High Court dated 31.10.2017 is extracted below. “ I, therefore, quash Ext.P18 order of the KSERC, as also Ext.P51 consequential order passed by the KSEBL, which is based entirely on Ext.P18 order. The KSERC shall consider and pass orders on merits, in respect of the issues raised in Ext.P8 petition filed under Section 86(1)(b) of the Electricity Act, 2003,within a period of three months from the date of receipt of a copy of this judgment. Both the parties before the KSERC shall be at liberty to produce additional material before the said Forum, to substantiate their contentions on merits. The KSERC shall take note that this Court has not pronounced on the merits of any of the issues in the petition before it, and all issues are left open to be decided by the Commission. The only other point on which the Commission would have to take a decision, while passing orders as directed above, is the rate/tariff that would govern the quantum of electricity supplied by the petitioner company to KSEBL, pursuant to the interim order dated 04.04.2017 of this court. While this issue is not raised in the petition before the Commission, being a subsequent event, the petitioner does have a case that, in as much as the Naphtha, that was used for the generation of the said electricity, was part of the consignment that was stored to meet the requirements of KSEBL under the PPA that held the field till 31.10.2015, the rates under the said PPA should govern the supply. The Commission shall therefore adjudicate on the said issue, as regards the rate applicable in respect of the above supply of electricity, also, untrammelled by any of the findings in its order dated 27.04.2017 (produced as Ext.P46 in W.P.(C).No.540/2017 and as Ext.P27 in W.P.(C).No.22464/2017) granting approval to the KSEBL to purchase the electricity on unscheduled interchange basis.”

Summary of the deliberations and documents placed before this Commission consequent to the judgment of the Hon’ble High Court dated 31.10.2017 in WP(c) 540/2017

20. M/s BKPL vide the letter dated 20.11.2017 produced a copy of the judgment of the Hon’ble High Court dated 31.10.2017 before the Commission. The Commission has forwarded a copy of the judgment to the respondent KSEB Ltd for their comments.

21. In the meanwhile, the BKPL vide the letter dated 18.12.2017 has prayed before the Commission to, (a) Declare that the respondent Board is liable to pay the petitioner the price

of energy generated and the fixed charges and other reimbursements as per the provisions of the PPA, as modified by the points of difference adjudicated in relief No. (ba) in the main petition.

(b) Direct the respondent Board to pay an amount of Rs 157.34 crore, with interest, as stipulated in the PPA (being base rate declared by State Bank of India from time to time plus two percent), from the date on which the arrears fell due till the date of realization.

The summary of the amount claimed by the BKPL is given below.

314

12

Sl No

Claim Unit First tariff period after 31-10-2015 (from 01.11.2015 to 31.10.2016)

Second tariff period after 31-10-2016 (from 01.11.2016 to 31.10.2017)

Total claim

1 Annual Fixed charges Rs Cr 37.67 ( 1st tariff

period) 39.07 ( second tariff period)

2 Land lease charges Rs Cr 5.42 0

3 Tax on RoE Rs Cr 2.79 2.79

Subtotal Rs Cr 45.88 41.86 87.74 4 Variable charges for

scheduling power from BKPL for exhausting the Naphtha

Rs Cr 69.60

5 Total Rs Cr 157.34

22. The subject matter was heard on 23.01.2018. The Commission has alsoissued notices to the following parties who participated in the proceedings ofthe original petition.

(i) The Kerala High Tension and Extra High Tension Industrial Electricity Consumers Association, Productivity House, Jawaharlal Nehru Road, Kalamassery.

(ii) Kerala State Productivity Council, Productivity House, Jawaharlal Nehru Road, Kalamassery.

(iii) KSEB Officers Association, TC 25/2969, Mallor Road, Vanchiyoor, Thiruvananthapuram.

(iv) Sri. A. N. Rajan, Ambattumelil House, Kolazhi P.O, Thrissur.

(v) BSES employee unions

(vi) Shri. Dejo Kappen, Managing Trustee, Centre for consumer education, Pala, Kottayam.

23. Sr.Adv Joseph Kodianthara presented the matter on behalf of the petitionerM/s BKPL and the main issues raised by him are mentioned below:

(i) Extension of the PPA between the BKPL and KSEB Ltd dated 03.05.1999 beyond 30.10.2015.

As per the clause 7.4 of the original PPA dated 3.5.1999, KSEB Ltd on 13.7.2015, has communicated in principle approval to extend the original PPA for 2 more years from date of expiry on 31.10.2015. The only difference of opinion at that point of time was regarding fixed charges applicable during the extended periods. The fixed charges proposed by KSEB Ltd was Rs 0.29/unit whereas BKPL proposed Rs 0.35/unit. There was no dispute on variable charge payable for scheduling energy from the plant. BKPL filed the petition for approval of extension of PPA before the Commission based on the direction of KSEB Ltd.

315

13

There is a case of promissory estoppels and BKPL is fully eligible for the fixed charges for the extended period of two years.

(ii) Variable charge payable for the energy scheduled from BKPL during the period from 25.05.2017 to 24.06.2017 The schedule of power from BKPL during the period from 25.05.2017 to 24.06.2017 is for exhausting the fuel stocked at the premise of BKPL and nearby premises of IOCL, which was stocked during the PPA period for the intended use of KSEB Ltd. There is no dispute on variable charges payable for the energy generated from the plant using Naphtha. Hence KSEB Ltd is liable to pay the variable charges based on the actual cost of the Naphtha stocked.

24. Sr.Adv. Raju Joseph, representing KSEB Ltd admitted that negotiations started

for extending the term of PPA before expiry of PPA. However, no consensus was reached and no formal agreement was signed. A contract will be valid only if the parties to the contract make an unconditional acceptance of the contract. But, no agreement could be reached on the terms of PPA and hence there was no concluded PPA. There is also no question of any promissory estoppels in the present case. Further, the draft PPA is to be approved by the Commission. Therefore, KSEB Ltd is not liable to pay any fixed charges. As per the PPA dated 3.5.1999, there was no provision to deal with the balance stock of Naphtha if any, available with the generator BKPL at the end of the period of the PPA. However, as per the provisions of the PPA, BKPL is bound to stock sufficient quantity of Naphtha to schedule power from the plant as and when KSEB Ltd issues dispatch instructions. KSEB Ltd has no liability on the stock of Naphtha available with BKPL after the period of the PPA, with effect from 01.11.2015.

However, there was threat on safety to the public at large regarding the Naphtha stocked at the premises of the BKPL without necessary security staff and safety arrangements. Based on the report of the District Collector Ernakulam, Hon’ble High Court of Kerala vide the interim order dated 04.04.2017 ordered to exhaust the balance stock of Naphtha available at the premises of BKPL. Hon’ble High Court recommended three options to BKPL for the disposal of balance stock of Naphtha. The third option was to schedule power under UI basis. The other two options were either to generate power utilizing Naphtha and sell through open access to third party or to transfer Naphtha to other Naphtha consuming industries. BKPL has not explored the possibility of other options to dispose the Naphtha available with them. Hence, KSEB Ltd scheduled power from BKPL during the period from 25.05.2017 to 24.06.2017, as per the third options based on the interim order of the Hon’ble High Court, i.e., to schedule power from BKPL to exhaust the Naphtha on UI basis, and subsequent order of this Commission dated 27.4.2017.

25. Sri. Ratheesh, representing HT & EHT association stated that there was no requirement of power from BKPL considering availability of power from other cheaper sources. He requested the Commission to reject the proposal to

316

14

extend the PPA and thus relieve the consumers of Kerala from this additional burden.

26. Sri. Jayathilakan, representing Kerala State Productivity Counsel stated that the scheduling of BKPL was done for exhausting Naphtha due to safety reasons and not as per requirement of KSEB Ltd, and therefore cannot attract variable charges. He prayed that tariff of common people may not be affected due to the scheduling of power generated from Naphtha stored at BKPL. He expressed concern on the employees of the plant and stated that the plant should be taken over by Government and kept as a stand by for emergency operation. He had also mentioned that public did not participate in the earlier hearing since it was mentioned in the order of High Court that it should be scheduled at UI rates.

27. Sri Jacob Laser, representing Kerala Electricity Workers Federation (AITUC) stated that Sri A. N. Rajan was party to the original petition filed by BKPL at the Hon’ble High Court. The present order dated 31.10.2017 was issued by the Hon. High Court without hearing him. Hence, he filed a petition before the Hon. Court and the Court admitted the same. He requested that the issue may be settled such a way that the consumers of the State may not be adversely affected by the generation of power from BKPL.

28. Sri Dijo Kappen stated that at the time of establishing the project there was power deficit and now India is having surplus power. Since there was no valid agreement, Commission shall not approve the claim of the BKPL.

29. Sri B Pradeep, representing KSEB Ltd, asserted the arguments submitted by their Counsel. He added that KSEB Ltd, has honoured all the legitimate claims of BKPL during the period of PPA, including the fixed cost for the deemed generation.

30. Based on the deliberations of the subject matter, the Commission vide the daily order dated 08.02.2018 had issued the following directions to the petitioner M/s BKPL, the respondent KSEB Ltd and other stake holders and interested parties: (1) BKPL shall submit the following documents before the Commission

latest by 19th February 2018; (i) The audited accounts for the year 2015-16, 2016-17 and

provisional accounts for the FY 2017-18.

(ii) Month wise details of the average stock of Naphtha stocked by BKPL for the past 15 years.

(iii) A copy of the PPA between BKPL and KSEB Ltd with amendments, if any.

(iv) The original fuel supply agreement between BKPL and IOC. Also copy of the approval of the same given by erstwhile KSEB as per the provisions of the PPA.

317

15

(v) Documentary evidence on BKPL’s efforts to materialize the alternate options suggested in the Court order dated 4.4.2017, i.e.,

(i) third party sale of power

(ii) transfer of Naphtha to other Naphtha consuming industries

(vi) Month wise employee strength retained with BKPL from 01.11.2015 to till 31.10.2017, with supporting documents.

(vii) Argument note and additional information, if any.

A copy of the above details may be provided to KSEB Ltd also for their comments

(2) The respondent KSEB Ltd, may also submit argument note and any additional details, if required, on or before 19th of February 2018 with copy to BKPL

(3) All the stakeholders are also free to submit their views on or before 19th of February 2018.

(4) BKPL and KSEB Ltd, may submit further comments if any, on or before 26th of February 2018.

31. In compliance of the directions issued by the Commission, the petitioner M/sBKPL had submitted the argument notes on 04.02.2018 and the additionaldetails sought by the Commission on 17.02.2018. KSEB Ltd has submitted theargument note on 09.02.2018. The petitioner M/s BKPL submitted the reply tothe argument note filed by KSEB Ltd on 26.02.2018.

32. In the meanwhile, Hon. High Court of Kerala vide the judgment dated29.1.2018 in a petition filed by Sri A N Rajan against the final order dated31.10.2017, has issued the following directions:

“3. The only grievance of the petitioner is the purported finding of the learnedsingle judge with respect to the existence of an agreement.………..4. It is the common case that the existence of an agreement also can beconsidered by the KSERC. It is pointed out by all parties that the KSERC had already heard the matter and appellant was also heard and now orders have been reserved. In view of the common case of all the parties that the existence of an agreement is also left to be adjudicated before the KSERC, we are of opinion that the writ appeal can be disposed of, making it clear that the said issue would also be adjudicated by the KSERC. It would be open for the KSERC to reopen arguments, if found necessary, on the question as to whether there is an agreement in existence. This would not be necessary, if the issue has already been addressed before the KSERC.”

Since Mr. A. N. Rajan was a party before the Commission during the deliberation of the original order dated 26.10.2016, the Commission has issued notice for the hearing scheduled on 23.01.2018 in compliance of the directions

318

16

of the Hon’ble High Court dated 31.10.2017 in WP(c) 540 of 2017. However, there was no formal representation from Mr.A.N Rajan during the hearing held on 23.01.2018. The issue raised by Sri. A. N. Rajan before the Hon’ble High Court is on existence of an agreement between M/s BKPL and KSEB Ltd beyond 31.10.2015, i.e, the validity of the original agreement dated 03.05.1999 beyond 31.10.2015. This is one of the two issues referred by the Hon’ble High Court in the judgment dated 31.10.2017 in WP(C)No. 540 of 2017 and the matter was deliberated in detail by the petitioner M/s BKPL, the respondent KSEB Ltd and other stakeholders presented during the hearing held on 23.01.2018. Hence it is decided that, no further hearing is required based on the decision of the Hon’ble High Court dated 29.01.2018 in WA No. 237 of 2018.

Analysis and Decision 33. The issues now deliberated before this Commission are the matters remanded

back to this Commission by the Hon’ble High Court of Kerala vide its judgment dated 31.10.2017 in WP(C)No. 540/2017. The relevant portion of the judgment is extracted below. “ I, therefore, quash Ext.P18 order of the KSERC, as also Ext.P51 consequential order passed by the KSEBL, which is based entirely on Ext.P18 order. The KSERC shall consider and pass orders on merits, in respect of the issues raised in Ext.P8 petition filed under Section 86(1)(b) of the Electricity Act, 2003,within a period of three months from the date of receipt of a copy of this judgment. Both the parties before the KSERC shall be at liberty to produce additional material before the said Forum, to substantiate their contentions on merits. The KSERC shall take note that this Court has not pronounced on the merits of any of the issues in the petition before it, and all issues are left open to be decided by the Commission. The only other point on which the Commission would have to take a decision, while passing orders as directed above, is the rate/tariff that would govern the quantum of electricity supplied by the petitioner company to KSEBL, pursuant to the interim order dated 04.04.2017 of this court. While this issue is not raised in the petition before the Commission, being a subsequent event, the petitioner does have a case that, in as much as the Naphtha, that was used for the generation of the said electricity, was part of the consignment that was stored to meet the requirements of KSEBL under the PPA that held the field till 31.10.2015, the rates under the said PPA should govern the supply. The Commission shall therefore adjudicate on the said issue, as regards the rate applicable in respect of the above supply of electricity, also, untrammelled by any of the findings in its order dated 27.04.2017 (produced as Ext.P46 in W.P.(C).No.540/2017 and as Ext.P27 in W.P.(C).No.22464/2017) granting approval to the KSEBL to purchase the electricity on unscheduled interchange basis.”

34. Accordingly, as per the judgment of the Hon’ble High Court of Kerala, dated

31.10.2017, this Commission has to decide on the following issues. Issue No.1 Consider the Exhibit P8 petition filed by the petitioner BKPL under

Section 86(1)(b) of the Electricity Act, 2003 and pass orders on

319

17

merit on the issues raised therein, within a period of three months from the date of receipt of a copy of the judgment.

Issue No.2 Adjudicate on the rate/tariff that would govern the quantum of

electricity supplied by the petitioner company to KSEB Ltd, pursuant to the interim order dated 04.04.2017.

As per the directions of the Hon’ble High Court of Kerala in the judgment dated 31.10.2017, the Commission has appraised the above two issues in details and the findings of this Commission is given below.

35. Issue No.1.

The prayer of the petitioner in the Exhibit P8 petition, filed by M/s BKPL on 05.10.2015 is given below. (i) Admit the petition.

(ii) Approve the agreement for extension of PPA between KSEB Ltd and BKPL including tariff for two years as prayed with effect from the first November 2015, pending finalization of the proposal submitted to KSEB Ltd for gas conversion of the plant and extension of PPA term.

(iii) Grant interim approval for continuing purchase of power from BKPL by KSEB Ltd during the intervening period beyond 31.10.2015 till the time extension of PPA is approved and signed, at the tariff proposed in the draft agreement for extension of PPA, subject to adjustment with respect to tariff approved by the Hon’ble Commission.

(iv) Condone any inadvertent omissions / errors / rounding of differences / short comings in the petition.

(v) Allow additions / alterations / changes / modifications / amendments to the petition at a future date.

(vi) Dispose of the petition expeditiously.

(vii) Pass any such orders as deemed fit.”

36. The Commission has examined each of the prayer raised by the petitioner in

the Exhibit P8 petition as per the direction of the Hon’ble High Court.

37. First prayer of Exhibit P8: The Commission on 14.10.2015 had admitted the petition as OP No. 34/2015. Hence there is no relevance on the first prayer of the Exhibit P8 petition referred in the judgment dated 31.10.2015.

38. Second prayer of Exhibit P8: The second prayer in the Exhibit P8 petition is to approve the agreement for extension of PPA for two more years with effect from the 1st November 2015, pending finalization of the proposal submitted to KSEB Ltd for gas conversion of the plant and extension of PPA term.

320

18

The findings and decision of the Commission on this issue is given below.

(1) The Commission is a statutory authority and a quasi judicial body, functioning as per the provisions of the Electricity Act, 2003. The statutory powers, authority and functions of the Commissions are specified in the Electricity Act, 2003.

(2) KSEB Ltd is the deemed distribution licensee in the State of Kerala, and its predecessor in interest, KSEB, was established in the year 1957. The Electricity Act, 2003 came into force in June 2003. After the enactment of the Electricity Act 2003, all the activities including power purchase of KSEB and subsequently its successor entity in interest, KSEB Ltd, has been regulated by this Commission.

(3) As per Section 86 (1) (b) of the Electricity Act, 2003, regulating the power purchase and procurement process of the KSEB Ltd, including the price at which electricity shall be procured from Generating Companies is one of the statutory function of this Commission. Section 86(1)(b) of the EA-2003 is extracted below for ready reference.

“86. (1) The State Commission shall discharge the following functions, namely: ……..

(b)regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State;”

(4) Regulation-78 of the KSERC (Terms and Conditions for determination of Tariff) Regulation, 2014 (hereafter referred to as Tariff Regulation, 2014) deals with the procedures for approval of the power purchase agreement/ arrangement between the distribution licensee from the generating company/ from other sources. The relevant provisions in the Tariff Regulation, 2014 is extracted below.

78. Approval of power purchase agreement/arrangement. – (1) Every agreement orarrangement for procurement of power by the distribution business/licensee from the generating business/company or licensee or from other source of supply entered into after the date of coming into effect of these Regulations shall come into effect only with the approval of the Commission:

Provided that the approval of the Commission shall be required in accordance with this regulation in respect of any agreement or arrangement for power procurement by the distribution business/licensee from the generating business/company or licensee or from any other source of supply on a standby basis:

Provided further that the approval of the Commission shall also be required in accordance with this regulation for any change to an existing agreement or arrangement for power procurement, whether or not such existing agreement or arrangement was approved by the Commission.

(2) The Commission shall examine an application for approval of power purchase agreement/arrangement having regard to the approved power procurement plan of the distribution business/licensee and the following factors:-

321

19

(a) requirement of power under the approved power procurement plan;

(b) adherence to a transparent process of bidding in accordance with guidelines issued by the Central Government under Section 63 of the Act;

(c) adherence to the terms and conditions for determination of tariff specified under chapter VI of these Regulations where the process specified in clause (b) above has not been adopted;

(d) availability (or expected availability) of capacity in the intra-State transmission system for evacuation and supply of power procured under the agreement/arrangement; and

(e) need to promote co-generation and generation of electricity from renewable sources of energy.

(3) Where the terms and conditions specified under chapter VI of these Regulations are proposed to be adopted, the approval of the power purchase agreement/arrangement between the generating business/company and the distribution business/licensee for supply of electricity from a new generating station may comprise of the following two steps, at the discretion of the applicant:-

(a) approval of a provisional tariff, on the basis of an application made to the Commission at any time prior to the application made under clause (b) below; and

(b) approval of the final tariff, on the basis of an application made not later than three months from the cut-off date.

(5) Regulation 78 of the Tariff Regulations, 2014 mandate that, every agreement or arrangement for procurement of power by the distribution business/ licensee entered into after coming into force of these Regulations shall come into force only with the approval of the Commission. The sub regulation (2) of Regulation 78 specifies the procedures to be followed by the Commission while examining the applications for approval for power purchase, this include the assessment of requirement of such power under the approved power procurement plan.

(6) BSES Kerala Power Limited (herein after referred as BKPL), is a private Independent Power Producer, established in the land of Travancore Cochin Chemicals (TCC) at Eloor Ernakulam during the year 1999. Naphtha is the prime fuel used for power generation. The original power purchase agreement with supplying electricity from the plant was entered into between KSEB on 03.05.1999. All the conditions governing the supply of electricity from the plant, including the scheduling of electricity from the plant, payment of fixed charges, variable charge etc were as per the provisions of the said PPA.

(7) Considering the excessive variable cost of power generation from the plant, the Commission in its tariff order dated 30.04.2013 in OP No. 02/2013 has issued direction to KSEB that, on expiry of the PPA with BKPL, the power should not be scheduled from these stations under any circumstances, unless the developers convert the stations to LNG or

322

20

pool sufficient quantum of cheaper power from other sources. The relevant portion of the order of the Commission dated 30.04.2013 in OP No. 02/2013 is extracted below.

“Chapter-10. Para 10.3 : On expiry of the prevailing PPA with liquid fuel based IPPs such as BSES, KPCL etc., power should not be drawn from these stations under any circumstances, unless the developers convert the stations to LNG or pool sufficient quantum of cheaper power from other sources, so that the pooled tariff is well within the merit order for dispatch. Appropriate advance notice may be issued to such developers within 3 months from the date of issue of this order.”

(8) Cclause 15.1 of the PPA dated 03.05.1999 provides for extension of the term of PPA as stipulated hereunder,-

“The agreement can further be extended for a period of 10 tariff periods beyond the 15th tariff period on a mutually agreed tariff as per clause 7.4 taking into account the fuel charges, operation and maintenance charges and a nominal net residual value of the project which the company would have normally expected on dismantling and selling the same at its cost”

As extracted above, there is a provision in the PPA for extension of the PPA beyond the expiry of the original PPA period on 31.10.2015, at mutually agreed tariff, upto a maximum period of 10 years.

(9) Before the expiry of the original PPA dated 03.09.1999, the KSEB Ltd vide its letter dated 13.07.2015 communicated their willingness to extend the PPA for a period of two more years from the date of expiry of existing PPA, subject to the following conditions,- (i) Terms of existing PPA have to be suitably modified. (ii) Re-ascertain the fixed charges applicable for the extended period,

as the existing plant is a fully depreciated one. (iii) Obtaining approval from KSERC for the above.

(10) Subsequently, KSEB Ltd vide the letter dated 29.09.2015 has informed the BKPL to file a petition before the KSERC for the approval of the tariff and PPA for the period of two years from the expiry of PPA on 31.10.2015, subject to the following conditions.

(i) The components in the Annual Fixed Charges shall be a. Operation & Maintenance expensesb. Interest on Working Capitalc. Return on Equity

(ii) Since KSERC has not specified any norms to calculate the O&M expenses for Small gas turbine power generating stations, average of the previous five year O&M expenses (from 2009-10 to 2013-14) is to be taken for calculation of AFC. O&M expenses for 2014-15 shall not be considered as it is found exorbitant compared to previous years’ and realistic average could not be worked out.

323

21

(iii) While arriving at the Interest on Working Capital, cost of fuel is to be taken as the average of last 3 months just prior to the date of PPA renewal. The same may be reviewed and modified after one year from the date of renewal of PPA, if necessary. It may be noted that actual PLF of the plant for the last three years is less than 30% and the tank capacity is 11375MT only. As storage of 11375 MT fuel is only possible and actual PLF is less than 30%, cost of fuel shall be calculated based on the above.

(iv) Also while calculating Interest on Working Capital, receivables for 15 days shall be taken, since KSEBL is making weekly payment and considering the processing time for settlement of bills.

(v) Regarding RoE, as detailed in Clause 7.4 of the PPA, a nominal net residual value of the Project which the Company would have normally expected on dismantling and selling the same at its cost shall be taken, As per Companies Act, depreciation is 95% of the original cost and hence nominal net residual value is only 5% of the original cost.

(vi) M/s BKPL’s claim on correction in heat rate cannot be agreed.

(vii) Major overhauling of the machines after 4000hr running, may be considered when such a situation arises, with the concurrence of the Commission.

(viii) Non tariff income, if any, shall be deducted from the Fixed Cost.

(ix) For calculation of monthly fixed charges, plant availability of the particular month limited to 80% maximum shall only be considered. In other words the payment of fixed charge based on PLF would be strictly restricted to the PLF of each month.

(x) The proposal of the company that in case of the two years cumulative PLF exceeds 40%, then the tariff applicable for the entire tariff period will be the tariff for PLF of more than 40% cannot be agreed to.

(11) However, till the time of filing the petition Exhibit P8 before the Commission on 03.10.2015 and/or till the time of the hearing of the said petition on 27.10.2015, the petitioner BKPL and the respondent KSEB Ltd could not reach a consensus on the tariff for the extended period. Considering these aspects in detail, the Commission vide the daily order dated 28.10.2015 had issued the following directions to both the petitioner BKPL and the respondent KSEB Ltd.

“ (i) KSEB Ltd shall submit a detailed appraisal on the demand and supply position

of power during 2016 and 2017 duly considering the availability of power from its hydel stations, Central Generating Stations, power purchase agreements with traders / generators, KSEBL’s own diesel stations, other liquid fuel stations including RGCCPP-Kayamkulam and from short-term market, the average cost of power purchase for a period of two years from November 2015 and such other details to substantiate the necessity for extending the PPA with BKPL for a further period of two years from November 2015 for which in principle sanction has been accorded by the Board of Directors of KSEB Ltd.

324

22

(ii) KSEB Ltd may, if found necessary, file petition under clause (b) of sub-section (1) of Section 86 of the Electricity Act, 2003, for the extension of the original PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein, with mutually agreed tariff and terms and conditions incorporated in the draft PPA initialed by both the parties to the agreement.

(iii) Time up to 27.11.2015 is granted to the petitioner BKPL and the respondent KSEB Ltd for complying with the directives (i) & (ii) above.

(iv) KSEB Ltd and BKPL may, till 30.11.2015, extend the PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein subject to the condition that the payment for the period of one month from 01.11.2015 to 30.11.2015 shall be as decided by the Commission in the final order.”

(12) However, both the parties could not comply with the directions issued by

the Commission as above within the time specified therein. The original PPA dated 03.05.1999 expired on 31.10.2015. There was no valid PPA between the petitioner BKPL and KSEB Ltd with effect from 01.11.2015. KSEB Ltd vide the letter dated 02.12.2015 submitted that, despite repeated discussions with the petitioner, they could not reach consensus on the tariff for extending the PPA beyond 31.10.2015.

(13) KSEB Ltd vide letter dated 8.12.2015 has communicated to the petitioner as follows:

“ Please refer to the above. You are aware that a mutually agreed tariff and terms and conditions as ordered by the Hon’ble KSERC could not be arrived at inspite of discussions between KSEB Ltd and BKPL. Hence, I am directed to inform you that KSEB Ltd will not be liable for payment of Fixed charge or any other charges with effect from 01.12.2015 and will not entertain any claim in this regard as terms and conditions for extension of PPA could not be agreed upon among the parties”.

(14) In the meantime the Government of Kerala vide the order dated 24-2-2016 accorded ‘in principle sanction for extending the PPA between KSEB

Ltd and M/s. BKPL for the combined cycle power plant at Kochi for two more years from the date of expiry of the existing PPA, subject to the condition that no Government Guarantee will be allowed for any payment obligations of KSEBL and the final tariff shall be decided by KSERC and be brought back to Government and approval of Government obtained. The KSEBL is also permitted to study and firm up its decision on the option of fuel conversion of the plant from Naphtha to LNG in consultation with KSERC and obtain Government approval at appropriate stage’.

(15) In compliance of the directions given in the daily order dated 28.10.2015, KSEB Ltd vide its letter dated 25.04.2016 submitted that, it had contracted sufficient quantum of power from outside the State through competitive tenders on long term and medium term to meet the power requirement of the State. With the commissioning of the Mysore-Areekode 400 kV line, commissioning of Narendra-Kolhapur 765 kV line and the resolution of disputes with CTU with the intervention of the CERC, the power contracted from sources is expected to flow in to the State as scheduled. The month wise details of the demand and supply

325

23

position submitted by the KSEB Ltd also reveals that, probability of any power shortages within the next few years is very remote.

KSEB Ltd also placed a draft PPA for the proposed extended period before the Commission with points of disagreement on the following:

(i) The effective date of the PPA, which according to the KSEB Ltd is only from the date of approval by KSERC.

According to BKPL, the effective date of the PPA is from 01.11.2015.

(ii) Fixed charges or any other charges from 01.12.2015 till the date of the agreement.

According to KSEB Ltd, they shall not be liable to pay fixed charge or any other charges with effect from 01.12.2015 till the date of signing the agreement with the approval of KSERC. Further, KSEB Ltd vide the letter dated 08.12.2015 has communicated that, KSEB Ltd shall not be liable to pay fixed charge or any other charges from 01.12.2015.

But, BKPL demanded the fixed charges and other charges from 01.11.2015 onwards, irrespective of the date of approval of the Commission.

(iii) Lease rent: There is neither a tripartite agreement nor KSEB Ltd is a lessee. Lease rent is a payment to be made by a lessee to a lesser. KSEB Ltd cannot agree suomotu to pay the land lease. BKPL claimed that, while proposing the tariff, the lease rent payable to the TCC is considered separately.

(iv) Reimbursement of Tax on returns: KSEB Ltd cannot agree to pay tax on returns.

BKPL claimed that, as per Tariff Regulations, 2014, the generator is eligible for reimbursement of tax on returns.

(v) Tariff component: RoE. Residual value of the project shall be 5% of the GFA of Rs 561.00 crore. BKPL claimed the same at 10% of the capital cost.

(vi) O&M charges According to KSEB Ltd, the O&M charges shall be the average for the period from 2009-10 to 2013-14 without any escalation. Since there is abnormal O&M charges for the year 2014-15, the same may be disregarded to arrive the realistic average. Further as the plant is kept as stand by and the regular operation is very limited, escalation in O&M charges cannot be considered. Further the trend of actual O&M expenses from 2009-10 is showing a declining trend.

326

24

According to BKPL, the average O&M cost for the period 2010-11 to 2014-15 has been taken as the median value for the period and escalated three time @5.85% as per the KSERC Tariff Regulations, 2014 to arrive the O&M cost for 2015-16 and further escalated to arrive the O&M cost for subsequent periods.

(vii) Historical cost used for calculation of spares

According to KSEB Ltd, the cost of spares shall be 1% of the residual value calculated as per the Companies Act. Cost of spares for the purpose of inclusion in fixed cost shall be 1% of the residual value calculated as per Companies Act. Since 95% of the original cost (Rs 561 crore) has been written down, only 1% of the 5% of the original cost can be considered as cost of spares. This aspect is clearly mentioned in the Article 7.4 of the expired PPA. According to BKPL, cost of spares should be 1% of the historical cost (original project cost) of Rs 561 crore as per KSERC Tariff Regulations, 2014. Hence the cost of spares used for IWC calculation should be 1% of Rs 561.00 crore, i.e., Rs 5.61 crore. Also BKPL currently holds inventory worth more than Rs 9.00 crore. With ageing of the plant O&M expenses will increase.

(viii) Fuel stock for IWC According to KSEB, since they are making weekly payment, only 14 days stock of operation at 80% PLF shall be considered for calculating the cost of fuel used in IWC. Review of the actual purchase of fuel made by BKPL was revealed that fuel can be purchased and stored at frequent intervals and with varied quantities. According to BKPL, fuel cost for calculating the IWC shall be taken as per BKPL naphtha storage capacity as agreed during previous discussions. Also sourcing of fuel on short notices is not possible and will adversely affect the cost of fuel.

As above, the draft PPA placed before the Commission is without consensus on almost all the issues including the effective date of PPA, the tariff payable till the date of signing the PPA, lease rent, reimbursement of income tax, RoE, O&M expenses, fuel stocks etc.

(16) As detailed in the sub paragraphs 9 and 10 above, there was a conditional offer from the respondent KSEB Ltd to extend the PPA for two more years from 01.11.2015, as per the clause 15.1 of the expired PPA. However, both the petitioner and the respondent could not reach consensus on the mutually agreed tariff for the extended period as per clause 15.1 of the expired PPA. Hence the Commission vide the daily order dated 28.10.2015, had granted time extension till 27.11.2015, to the petitioner and respondent to approach the Commission with mutually agreed tariff and initialed PPA, along with proper appraisal on demand

327

25

supply position of power during 2016 and 2017, for extension of PPA beyond 31.10.2015. However, during the said period also, both the parties could not reach a consensus on the tariff for the proposed extension period from 01.11.2015.

(17) It is the duty and responsibility of the KSEB Ltd as the distribution licensee to appraise before the Commission the necessity of the extension of the PPA, with proper appraisal on the electricity demand and supply position of the State. Before granting approval for any power purchase by KSEB Ltd, the Commission has to examine the following:

(i) Whether the proposed power purchase is essential for meeting the electricity demand of the State?.

(ii) What is the cost of electricity generated from the project, including the fixed cost and variable cost (the cost of fuel required for producing one unit of electricity from the plant).

(iii) Impact of such power purchase on the ultimate consumers of the State.

(iv) What are the alternate sources of power available and its cost.

After appraising the above, if the power purchase proposed by KSEB Ltd is not viable/ required for the State and the consumers based on the analysis of existing market conditions, demand supply gap and the trend of market price of power, the Commission has all the statutory authority to reject the proposal of such power purchase by the licensee.

(18) However, in the present case, the petitioner BKPL and the respondent KSEB Ltd could not reaches a consensus for the extension of the PPA. Without the consensus or mutual agreement of the extension of the PPA, the Commission cannot approve term of the PPA. Further, the Commission also cannot direct the KSEB Ltd to extend the expired PPA, without the mutual consensus of the parties. Even if the parties decided to extend the PPA, it is up to the Commission to approve it or not, as per the provisions of the Electricity Act, 2003 and Regulations notified by the Commission.

(19) The Commission vide the daily order dated 28.10.2018, ordered that “KSEB Ltd and BKPL may, till 30.11.2015, extend the PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein subject to the condition that the payment for the period of one month from 01.11.2015 to 30.11.2015 shall be as decided by the Commission in the final order”. However no agreement could be reached between the petitioner and the respondent licensee regarding the terms and conditions for extension of the PPA beyond 31.10.2015.

(20) Considering these facts, and the conditional approval granted by the Commission for the extension of PPA for one month from the date of expiry of the PPA dated 03.05.1999 for continuing the negations, but no agreement was reached between the parties of the extension of PPA even during the said period also, the Commission cannot approve the

328

26

agreement for extension of PPA from 01.12.2015, merely based on the conditional offer given by the respondent KSEB Ltd.

39. Third prayer of the Exhibit P8 petition:

The third prayer of the Exhibit P8 petition is to ‘grant interim approval for continuing purchase of power during the interim period beyond 31.10.2015 till the time the extension of PPA is approved and signed at the tariff proposed in the draft agreement for extension of the PPA, subject to the adjustment with respect to the tariff approved by the Commission. The Commission has examined the matter in detail, and the observation and findings of the Commission is given below.

(1) Due to the excessive variable cost, the power was not scheduled even during the validity of the expired PPA dated 03.05.1999 for meeting the power requirement of the State. Further, aer the details placed before the Commission, the respondent KSEB Ltd has not given any schedule from the plant after the expiry of the original PPA.

(2) The Commission vide the daily order dated 28.10.2015, directed the respondent to submit the following:

‘ (i)KSEB Ltd shall submit a detailed appraisal on the demand and supply position of power during 2016 and 2017 duly considering the availability of power from its hydel stations, Central Generating Stations, power purchase agreements with traders / generators, KSEBL’s own diesel stations, other liquid fuel stations including RGCCPP-Kayamkulam and from short-term market, the average cost of power purchase for a period of two years from November 2015 and such other details to substantiate the necessity for extending the PPA with BKPL for a further period of two years from November 2015 for which in principle sanction has been accorded by the Board of Directors of KSEB Ltd.’

(3) In compliance of the directions given in the daily order dated 28.10.2015, KSEB Ltd vide its letter dated 25.04.2016 submitted that, it had contracted sufficient quantum of power from outside the State through competitive tenders on long term and medium term to meet the power requirement of the State. With the commissioning of the Mysore-Areekode 400 kV line, commissioning of Narendra-Kolhapur 765 kV line and the resolution of disputes with CTU with the intervention of the CERC, the power contracted from sources is expected to flow into the State as scheduled. The month wise details of the demand and supply position submitted by the KSEB Ltd also reveals that, probability of any power shortages within the next few years is very remote

(4) Further, considering the excessive variable cost of generation from the plant, the Commission in its tariff order dated 30.04.2013 in OP No. 02/2013 has issued direction to KSEB that, on expiry of the PPA with BKPL, the power should not be drawn from these stations under any circumstances, unless the developers convert the stations to LNG or pool sufficient quantum of cheaper power from other sources. The relevant portion of the order of the Commission dated 30.04.2013 in OP No. 02/2013 is extracted below.

329

27

“Chapter-10.

Para 10.3 : On expiry of the prevailing PPA with liquid fuel based IPPs such as BSES, KPCL etc., power should not be drawn from these stations under any circumstances, unless the developers convert the stations to LNG or pool sufficient quantum of cheaper power from other sources, so that the pooled tariff is well within the merit order for dispatch. Appropriate advance notice may be issued to such developers within 3 months from the date of issue of this order.”

(5) The respondent KSEB Ltd, has not raised any absolute essentiality for continuing the power purchase from BKPL, till the time of extension of the PPA is approved and signed for meeting the power requirement of the State.

(6) Considering due consideration of the facts mentioned above and the Commission’s order dated 28.10.2018, wherein it is ordered that “KSEB Ltd and BKPL may, till 30.11.2015, extend the PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein subject to the condition that the payment for the period of one month from 01.11.2015 to 30.11.2015 shall be as decided by the Commission in the final order” and further considering the fact that no agreement could be reached between the petitioner and the respondent licensee regarding the terms and conditions for extension of the PPA beyond 31.10.2015, the Commission does not grant approval for continuing the power purchase agreement from BKPL beyond 30.11.2015.

40. Fourth prayer of the Exhibit P8 petition:

The fourth prayer of the Exhibit P8 petition is to condone any inadvertent omissions/ errors/ rounding of differences/ short comings in the petitions. This matter has been addressed during the course of the deliberations in the Commission’s hearing of the subject matter.

41. Fifth prayer of the Exhibit P8 petition:

The fifth prayer of the petitioner is to ‘allow additions/ alterations/ changes / modifications/ amendments to the petition at a future date. The details of the amendments / alterations proposed by the petitioner and the decision of the Commission is discussed below.

(i) The petitioner BKPL on 27.07.2016 filed an amendment to the Exhibit P8 petition, the details are given below.

(A) In the cause title, modified as ‘In the matter of: Petition under Section 86 of the Electricity Act, 2003, filed by the above named petitioner under Regulation 22 of the KSERC (Conduct of Business) Regulations, 2003, for approval of agreement for extension of PPA submitted by the parties, and for adjudicating the point of difference raised by the parties.

(B) In Chapter-3 of the original petition on ‘Statutory and Regulatory Framework for Filing the instant petition, the petitioner had submitted

330

28

that, as per the Regulation 22 of the KSERC (Conduct of Business) Regulations, 2003, any affected party can approach this Commission and can initiate proceedings. The petitioner herein, being a generating company, from whom electricity has to be purchased by the respondent, is an affected party, and hence, the petitioner is entitled to initiate proceedings before this Commission.

(C)The paragraphs in the chaper-3 may be permitted to be suitably amended.

(D)By invoking the powers of the Commission under the provisions of section 86(1)(b) and (f) of the Electricity Act-2003, praying for the approval of the draft initialed draft PPA submitted by the respondent before this Commission by its letter dated 25.04.2016, and for approving the tariff after adjudicating the points of difference raised by the parties.

(E)The prayer in 7.1.1(b) may be permitted to be substituted with the following.

Approve the agreement submitted before this Hon’ble Commission by the Respondent after adjudicating the points of difference.

(F)The following relief may be permitted to be incorporated after relief No.(b) and before (c):

(ba) Adjudicate and take a decision on the points of difference raised by the Respondent in relation to the initialed draft PPA submitted before this Commission by the respondent.

(ii) As discussed under paragraph 35 above, the prayer of the original exhibit P8 petition dated 05.10,2015 was to (i) approve the agreement for extension of PPA between the KSEB Ltd and BKPL including the tariff for two more years with effect from November-2015 and (ii) to grant interim approval for continuing purchase of power from BKPL by KSEB Ltd during the interim period from 01.11.2015 till the time extension of PPA is approved and signed, at the tariff proposed in the draft agreement for extension of PPA, subject to the adjustment in tariff approved by the Commission.

However, in the amendment petition dated 27.07.2016, the prayer of the petitioner is to adjudicate the points of difference between the petitioner BKPL and respondent KSEB Ltd, in the draft PPA placed before this Commission by the respondent KSEB Ltd for the extension of expired PPA from 01.11.2015 for two more years.

(iii) The amendment petition filed by the petitioner BKPL on 27.07.2016, is for adjudicating the points of difference in the draft for extension of the PPA beyond 31.10.2015. It is true that, negotiation were conducted between the parties for extension of the PPA, but during the negotiation stage itself, there were points of difference on many issues including, effective date of PPA, the tariff payable till the date of signing the PPA,

331

29

lease rent, reimbursement of income tax, RoE etc. As per the provision of the original agreement signed on 03.05.1999, the extension of the same should be on mutually agreed tariff. However there is no mutual agreement between the parties despite the negotiations.

(iv) It is also a fact that the respondent licensee had as early as in 08.12.2015, communicated to the petitioner BKPL as extracted below

“you are aware that a mutually made tariff and terms and conditions as ordered by the Hon’ble Kerala State Electricity Regulatory Commission could not arrived inspite of discussions between KSEB Ltd. and BKPL. Hence I am directed to inform you that KSEB Ltd. will not be liable for the payment of fixed charges or any other charges with effect from 01.12.2015 and will not enter any claim in this regard as the terms and conditions for extension of PPA cannot be mentioned to participants”.

Hence from this correspondence it is clear that inspite of the window of one month provided by the Commission from 01.11.2015 to 30.11.2015, the parties could not arrive at a mutually acceptable PPA. No further extension of time was granted by the Commission, hence it can be concluded that there was no mutual agreement between the petitioner ie., BKPL and the Licensee ie., KSEB Ltd for extension of the PPA.

(v) As per the Section 86(1)(f) of the Electricity Act, 2003, adjudication of the disputes between the licensees and generating companies and to refer any dispute for arbitration is one of the functions of this Commission. The relevant Section of the Electricity Act, 2003 is extracted below.

“86. (1) The State Commission shall discharge the following functions, namely: -(f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration;”

Section 86 (1) of the Electricity Act, 2003 defines the functions of the State Commission and Section 86 (1) (f) mentioned above confers the power upon the State Commission to adjudicate upon disputes between licensee and the generating companies and to refer any disputes for arbitration. A reading of the above sub-section clearly indicates that the adjudication process can take place between the parties provided, there is a valid agreement between the parties. The Commission notes that the parties to the dispute could not arrive at any mutually acceptable resolution and the respondent licensee, as early as in December, 2015, communicated to the petitioner that they are not liable for the payment of fixed charges or any other charges with effect from 01.12.2015 nor shall they entertain any claim in this regard. Further there has been no valid Power Purchase Agreement explicitly between the licensee and generator, after 31.10.2015.

It is also a fact that the draft PPA was placed by the respondent before the Commission only in compliance of its order dated 28.10.2015. However, as discussed in para 38(15) above the draft PPA placed by

332

30

the Licensee before the Commission was without consensus on almost all the issues including the effective date of PPA, the tariff payable till the date of signing the PPA, lease rent, reimbursement of income tax, RoE, O&M expenses, fuel stocks etc. The Commission being a quasi judicial body cannot adjudicate the terms of the draft PPA which is under discussion between the parties. Hence, this plea of the amendment petition is declined.

42. Additional submissions of the petitioner and respondent subsequent to the final judgment of the Hon’ble High Court dated 31.10.2017.

The Commission has also examined the additional submission of the petitioner BKPL and the respondent KSEB Ltd, subsequent to the final judgment of the Hon’ble High Court dated 31.10.2017. The details are given below.

(i) The petitioner BKPL vide the letter dated 18.12.2017, prayed before the Commission the following.

(a) Declare that the respondent Board is liable to pay the petitioner the /price of energy generated and the fixed charges and other reimbursements as per the provisions of the PPA, as modified by the points of difference adjudicated in relief No. (ba) in the main petition.

(b) Direct the respondent Board to pay an amount of Rs 157.34 crore, with interest, as stipulated in the PPA (being base rate declared by State Bank of India from time to time plus two percent), from the date on which the arrears fell due till the date of realization.

The summary of the amount claimed by the BKPL is given below.

Sl No

Claim Unit First tariff period after 31-10-2015 (from 01.11.2015 to 31.10.2016)

Second tariff period after 31-10-2016 (from 01.11.2016 to 31.10.2017)

Total claim

1 Annual Fixed charges Rs Cr 37.67 ( 1st tariff

period) 39.07 ( second tariff period) 76.74

2 Land lease charges Rs Cr 5.42 0 5.42 3 Tax on RoE Rs Cr 2.79 2.79 5.58 Subtotal Rs Cr 45.88 41.86 87.74 4 Variable charges for

scheduling power from BKPL for exhausting the Naphtha

Rs Cr

69.60

5 Total Rs Cr 157.34

The petitioner BKPL further submitted that, KSEB Ltd vide the letter dated 13.07.2015 has accorded in principle sanction to extend the PPA of the BKPL plant to run on Naphtha for two more years. Further, the State Government also vide the order dated 24.02.2016 granted ‘in principle sanction’ extension of the PPA for two more years from the date expiry of the original PPA. The petitioner was in an ‘operational condition’ maintaining the plant due to the legitimate expectation based

333

31

on the assurance and expectation made by KSEB Ltd and State Government. There is a case of promissory estoppel and BKPL is fully eligible for the fixed charges for the expected period of two years.

Accordingly, the petitioner claimed Rs 76.74 crore as fixed charges for the period from 01.11.2015 to 31.10.2017. Further, during the said period, the petitioner had claimed Rs 5.42 crore as land lease charges and Rs 5.58 crore towards tax on RoE.

(ii) In their response, KSEB Ltd submitted that, negotiations started for extending the term of PPA even before expiry of PPA dated 03.05.1999, but no consensus was reached in spite of the one month period given by the Commission beyond 31.10.2015 and no formal agreement was signed. On the other hand KSEB Ltd had on 08.12.2015 informed the petitioner that since no agreement was arrived at, they are not liable for the payment of fixed charges or any other charges beyond 30.11.2015. A contract will be valid only if the parties to the contract make an unconditional agreement of the terms and conditions of the contract. But, no agreement could be reached on the terms of PPA and hence there was no PPA concluded. Hence the question of any promissory estoppels beyond 31.11.2015 does not arise in the present case.

(iii) The Commission has examined the submissions of the petitioner BKPL and respondent KSEB Ltd on this issue. As discussed under sub paragraph 38(9) and 38(10) above, there was a conditional offer from the respondent KSEB Ltd to extend the PPA for two more years, but subject to fulfillment of specified conditions. The conditions stipulated therein include a mutually agreed tariff and also subject to the approval of this Commission. However, the conditions stipulated for arriving at an agreement could not be reached and accordingly no fresh PPA was neither signed nor approved by the Commission.

Further, the in principle sanction granted by the State Government vide order dated 24.02.2016 for extending the PPA between the KSEB Ltd and BKPL was also conditional, and unequivocally stated therein that, no Government guarantee will be allowed for any payment obligation of KSEB Ltd. It means that the entire liability for extending the PPA shall be borne by KSEB Ltd to be ultimately passed on to the consumers of the State. Further the preamble of the Electricity Act, 2003 vide para 3 mentioned that “ one of the objective of the Electricity Act, 2003 is to distancing the regulatory responsibilities from the Government to the Regulatory Commissions”. Hence it was the intend of the Act to separate the functions of the respondent KSEB Ltd, from the direct intervention of the State Government and therefore even this order is not tenable as per the intent of the Act. It is also a fact that KSEB Ltd, is a body corporate functioning under its own seal and fully responsible for the contractual obligations on the strength of the Companies Act as well as the Contract Act. As made clear in the above order, the Government did not intend to assume any responsibilities that may arise due to the extension of the PPA. Hence the above Government Order cannot be relied upon as a

334

32

basis to justify the extension of the Power Purchase Agreement beyond 31.10.2015.

(iv) In this matter, the Commission has also examined the provisions of the Indian Contract Act, 1872, particularly Sections 7,8 and 9 of the said Act, which is extracted below.

“7. Acceptance must be absolute .

In order to convert a proposal into a promise, the acceptance must — (1) be absolute and unqualified; (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.

8. Acceptance by performing conditions, or receiving consideration.— Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

9. Promises, express and implied.— In so far as the proposal or acceptance of

any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.”

In the present case, though there is a proposal between the parties, there was no acceptance of the conditions of the proposal.

(v) The term of “Contract” has been defined under Sec.2 (h) of Indian Contract Act, 1872, as an agreement enforceable by law. Therefore, the two ingredients of a valid contract are “agreement” as well as “enforceability”. The term “Agreement” has been defined under Sec.2 (e) of the Indian Contract Act as “every promise and every set of promises, forming the consideration for each other”.

(vi) Agreement is essential to any contract. Before a contract, there must be a consensus ad idem. Therefore, there must be a meeting of the minds between the parties to enter into a legally binding contract. If negotiation is going on, it cannot be termed as an agreement. To form a contract, there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made. Without both an offer and an acceptance, there can be no consensus ad idem or a meeting of the minds which is essential to form a contract. “Meeting of minds” implies that understanding the same thing; in same sense. The acceptance must be clear and absolute and without conditions attached. No conditions can be attached to the acceptance and the terms of the offer cannot be changed. If conditions are attached, such agreement cannot be a conclusive one.

335

33

(vii) In the present case, the negotiations for extension of the original PPA dated 03.05.1999, started much before the expiry of the said PPA on 31.10.2015. KSEB Ltd communicated its in principal acceptance of extension of the PPA for two more years, subject to certain conditions, including re-ascertaining of the fixed charges for the extended period and obtaining approval of the Commission. However, the petitioner BKPL and the respondent KSEB Ltd could not reach a consensus on the various terms of the agreement for the extended period. The purported "agreement" placed before the Commission is a document with points of differences on many issues, as detailed under paragraph 38(15) above and therefore cannot be treated as an agreement.

(viii) The willingness of KSEB Ltd to extend the PPA was conditional and subject to disagreement on many terms. It cannot be held to be an agreement, unless and the points of disagreement were resolved and an unconditional and mutually agreed PPA agreed at. Since there was no consensus ad idem between the parties for extending the PPA; there is no valid agreement between the parties after 31.10.2015.

(ix) As per the provisions of the Electricity Act, 2003, only this Commission can grant final approval for extending the PPA beyond 31.10.2015. While doing so, this Commission shall consider the factors that specified under paragraph 38(17) above, and the approval shall be strictly as per the Regulation-78 of the Tariff Regulations, 2014 notified by this Commission, which is extracted under paragraph 38(4) above. While doing so, this Commission has to ascertain whether such an approval shall ultimately results in reduction in the cost of electricity to the consumers of the State. In this matter, Hon’ble High Court in the final judgment dated 31.10.2017 has observed as under.

‘This would mean that the Kerala State Electricity Regulatory Commission, in the instant case, had to look into the agreement between the petitioner and the Kerala State Electricity Board Limited to ascertain whether the general terms of the agreement and the trading margins envisaged therein could be fixed in such a way that it would reduce the cost of electricity to the consumers’.

(x) The petitioner is pleading on the principle of legitimate expectation on the basis of promissory estoppels. The principle of promissory estoppels and consequent legitimate expectation is well settled one. In this matter, paragraph 25 of the Hon’ble Supreme Court in judgment dated 08.01.2010, in Civil Appeal No. 5182/2002 (2010 KHC 2010) is extracted as under:

25. The doctrine of promissory estoppel as developed in the administrative lawof this country has been eloquently explained in Kasinka Trading v. Union of India (1995) 1 SCC 274 by Dr. A.S. Anand, J, in the following words:-

"11. The doctrine of promissory estoppel or equitable estoppel is well established in the administrative law of the country. To put it simply, the doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the

336

34

other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arise in the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties.

12. It has been settled by this Court that the doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the public authority "to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make". There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. In our opinion, the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present to the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation."

(xi) Herein, the offer made by the respondent KSEB Ltd vide the communication dated 13.07.2015 and 29.09.2015, was conditional and the conditions stipulated therein could not fulfilled and therefore no agreement was reached between them. Further, KSEB Ltd had already made alternate arrangements to meet the electricity demand of the State.

(xii) From the document and records available before this Commission, the petitioner has not done any thing based on the communication of the respondent dated 13.07.2015 of the in principle sanction for extension of the PPA and the conditions specified under the in principle sanction of the State Government dated 24.02.2015. Moreover, BKPL being a generator in the power sector is well aware of the provisions of the Electricity Act, that it is Commission which has to give the final approval of power purchase and the Commission had earlier made an assessment of the cost structure of this plant and finding it unviable had specifically ordered that power should not be drawn from this source after the expiry of the earlier contract. The principle of estoppel, cannot override a provision of statute. Thus the promissory estoppel is not applicable here in this situation. There was no binding contract except a

337

35

proposal for extension which was not eventually approved by this Commission.

(xiii) It is also true that, the respondent KSEB Ltd vide its communication dated 08.12.2015, communicated to the petitioner BKPL that, the respondent is not liable for payment of fixed charges or any other charges with effect from 01.12.2015, and will not entertain any claim in this regard as the terms and conditions for extension of PPA could not be agreed upon among the parties. Considering these facts, it is concluded that, there is no promissory estoppels based on the conditional offer of KSEB Ltd dated 13.07.2015 and 29.09.2015.

(xiv) This Commission also vide the daily order dated 28.10.2015, had ordered as follows.

“ KSEB Ltd and BKPL may, till 30.11.2015, extend the PPA dated 03.05.1999 as per the Article 15.1 and Article 7.4 therein subject to the condition that the payment for the period of one month from 01.11.2015 to 30.11.2015 shall be as decided by the Commission in the final order.’

Though, the petitioner BKPL and the respondent did not extend the PPA till 30.11.2015, as directed above, as per the provisions under Article 15.1 and Article 7.4 of the PPA dated 03.05.1999, however, this Commission is of the view that, the petitioner is eligible for fixed charges for the month of November-2015, since this Commission vide the daily order dated 28.10.2015 granted permission for extension of the PPA from 01.11.2015 to 30.11.2015, and the KSEB Ltd vide the letter dated 08.12.2015 raised dispute of payment of fixed charges and other charges only from 01.12.2015 onwards. KSEB Ltd may therefore make the fixed cost payments for the month of November 2015, at the rate agreed by them.

(xv) Based on the deliberations of the subject matter and on examining the documents, evidences and other materials placed before the Commission, it is concluded that, there was no consensus on extending the PPA dated 03.05.1999, beyond 31.10.2015, as provided under Article 15.1 of the original PPA. It is a fact that there was also no power purchase agreement (PPA) between the petitioner BKPL and the respondent KSEB Ltd for purchasing the electricity generated from the Naphtha based power plant established by the petitioner, with effect from the date of expiry of the original PPA on 31.10.2015. This Commission also has not granted approval for the extension of PPA beyond 30.11.2015. Taking into consideration the prohibitively high cost of fuel, the Commission had given very clear direction not to schedule power from these stations under any circumstances, unless the developers convert the stations to LNG or pool sufficient quantum of cheaper power from other sources, so that the pooled tariff is well within the merit order for dispatch.

(xvi) As per the information filed before the Commission, the licensee had made alternative arrangement for procuring cheaper power and the supply position existing in the state was sufficient to cater to the

338

36

demand. Considering the above facts, the petitioner BKPL is not eligible to claim fixed cost, lease rent, income tax or any other charges during the period from 01.12.2015 to 31.10.2017. The KSEB Ltd also is not bound to pay fixed charges, lease rent income tax and other charges to the petitioner during the said period from 01.12.2015 to 31.10.2017. However, KSEB Ltd has to make payment of fixed charges to the petitioner at the rate agreed by them and submitted before the Commission for the month of November-2015, in view of the order of the Commission dated 28.10.2015 and letter of the KSEB Ltd dated 08.12.2015.

43. Issue No.2: Adjudicate with regard to the rate applicable to the quantum of electricity supplied by M/s BKPL to KSEB Ltd, pursuant to the interim order of the Hon’ble High Court dated 04.04.2017 in W.P.(C) No. 22464/2017

The observation and findings of the Commission on this issue is given below. (1) Hon’ble High Court vide the judgment dated 31.10.2017 in WP(C)

540/2017 has remanded back the issue before this Commission with the following directions.

“ The only other point on which the Commission would have to take a decision, while passing orders as directed above, is the rate/tariff that would govern the quantum of electricity supplied by the petitioner company to KSEBL, pursuant to the interim order dated 04.04.2017 of this court. While this issue is not raised in the petition before the Commission, being a subsequent event, the petitioner does have a case that, in as much as the Naphtha, that was used for the generation of the said electricity, was part of the consignment that was stored to meet the requirements of KSEBL under the PPA that held the field till 31.10.2015, the rates under the said PPA should govern the supply. The Commission shall therefore adjudicate on the said issue, as regards the rate applicable in respect of the above supply of electricity, also, untrammelled by any of the findings in its order dated 27.04.2017 (produced as Ext.P46 in W.P.(C).No.540/2017 and as Ext.P27 in W.P.(C).No.22464/2017) granting approval to the KSEBL to purchase the electricity on unscheduled interchange basis.”

Accordingly, this issue was also heard along with the other issue remanded back by the Hon’ble High Court vide the final order dated 31.10.2017.

(2) During the deliberations of the subject matter on 23.01.2018, the learned

counsel of the petitioner, Adv. Joseph Kodianthara, argued that, ‘ the schedule of power from BKPL during the period from 25.05.2017 to 24.06.2017 was for exhausting the fuel stocked at the premise of BKPL and nearby premises of IOCL, which was stocked during the PPA period for the intended use of KSEB Ltd. There is no dispute on variable charges payable for the energy scheduled from the plant using Naphtha. Hence KSEB Ltd is liable to pay the variable charges based on the actual cost of the Naphtha stocked’.

339

37

(3) On the very same issue, the learned counsel of the respondent KSEB

Ltd submitted the following: ‘ As per the PPA dated 3.5.1999, there was no provision to deal with the balance stock of Naphtha if any, available with the generator BKPL at the end of the validity period of the PPA. However, as per the provisions of the PPA, BKPL is bound to stock sufficient quantity of Naphtha to schedule power from the plant as and when KSEB Ltd issues dispatch instructions. KSEB Ltd has no liability on the stock of Naphtha available with BKPL after the period of the PPA, with effect from 01.11.2015.

However, there was threat to the safety of the public at large regarding the Naphtha stocked at the premises of the BKPL without necessary security staff and safety arrangements. Based on the report of the District Collector Ernakulam, Hon’ble High Court of Kerala vide the interim order dated 04.04.2017 ordered to exhaust the balance stock of Naphtha available at the premises of BKPL. Hon’ble High Court recommended three options to BKPL for the disposal of balance stock of Naphtha. One of the option was to schedule power under UI basis. The other two options were either to generate power utilizing Naphtha and sell through open access to third party or to transfer Naphtha to other Naphtha consuming industries. BKPL has not explored the possibility other than scheduling power on UI basis, to dispose the Naphtha available with them. Hence, BKPL generated electricity from BKPL plant during the period from 25.05.2017 to 24.06.2017, on UI basis based on the interim order of the Hon’ble High Court dated 27.04.2017, to exhaust the stock of Naphtha available at the premised of BKPL.

. (4) In the meanwhile, the petitioner M/s BKPL vide the additional

submission dated 18.12.2017 has claimed Rs 69.60 crore as fuel charge for the 61.90 MU of the electricity generated from BKPL and supplied to KSEB Ltd on UI basis from 25.05.2017 to 24.06.2017. As per the claim of BKPL, the average rate of power comes to Rs 11.43/unit.

(5) Subsequently, the petitioner vide the argument note dated 04.02.2018

and subsequent reply dated 26.02.2018 has raised the following. (i) The petitioners premises have four Naphtha storage tanks,

having total capacity of 11375 MT. The Naphtha was procured from the fuel supplier Indian Oil Corporation Ltd. As per the PPA dated 03.05.1999, the petitioner has to generate electricity as and when scheduled by the respondents. The scheduling of electricity is at short notices, typically at less than 24 hours. As such the generator has to take all precautions for ensuring fuel stock for generation and supply of electricity to KSEB Ltd.

(ii) The present stock of Naphtha was replenished in its tanks during November-2014, during the currency of the PPA dated 03.05.1999 and much before the expiry 31.10.2015. From November 2014 onwards, a balance stock of 7565 MT of Naphtha was available at the premise of BKPL and 4100 MT of Naphtha

340

38

was available at the premise of IOCL. The entire Naphtha was procured during the term of the PPA dated 03.05.1999 and for ensuring continuous generation of electricity to the respondent.

(iii) The electricity was generated using the balance stock of Naphtha and supplied to the respondent pursuant to the interim order of the Hon’ble High Court dated 04.04.2017 and order of this Commission dated 27.04.2017. As per the final judgment of the Hon’ble High Court dated 31.10.2017, this Commission has to decide on the tariff applicable to such power generated from the plant of BKPL from 25.05.2017 to 24.06.2017, for exhausting the Naphtha available at their premises.

(iv) Regarding the additional claim of Rs 69.60 crore as variable charges for the electricity generated, the petitioner in its reply dated 26th February 2018 has submitted that, ‘ the additional claim

is not in respect of any unspent fuel, but in respect of the energy charges relating to the generation of electricity, pursuant to the interim order dated 04.04.2017 of the Hon’ble High Court, which was binding on the petitioner as well as the respondent KSEB Ltd”.

(v) The payment of deemed generation is the fixed charges, and this is the amount liable to be paid under the PPA. The discharge of their liability under PPA is not an excuse for not paying the fuel/ energy costs (variable charges) for generation made pursuant to the interim order dated 04.04.2017 of the Hon’ble High Court.

(vi) Regarding the other options for disposal of the stock of Naphtha available at their premises, as specified by the Hon’ble Court in its order dated 04.04.2017, the petitioner clarified as follows.

‘Hon’ble High Court had, in the interim order itself, clarified that the petitioner is free to take up any of the options stated therein, and that they can even directly opt to exercise the first option of generation of electricity. The petitioner reiterated that, in view of the specific direction of the Hon’ble High Court (both in the interim order as well as in the final judgment), this issue has become redundant, and is only to be ignored.

(vii) The petitioner had again raised the issue that, once the generation of power is done as per the scheduling instructions of the SLDC, the said power cannot be termed as UI. Moreover, under the scheme of Electricity Act, 2003, no scheduling of generation and consequential sale of power can be undertaken as UI basis.

(viii) The petitioner has been declaring the availability of the plant on all days after 31.10.2015. The petitioner has been maintaining its plant in the most efficient and safe manner.

341

39

(6) The summary of the issues raised by the respondent KSEB Ltd vide the counter affidavit filed on 23.01.2018 and the argument note filed on 09.02.2018 is given below.

(i) Senior Joint Director of Factories and boiler, in his report dated 15.12.2016 reported that, the 42 workers of the plant were laid off, 11 officers were transferred to other units, and this has resulted in the risk of storing Naphtha at the premise of the petitioner.

(ii) The respondent produced a copy of the report of the District Collector regarding the safety threat of the Naphtha stored at the premise of the petitioner.

(iii) Inorder to exhaust the Naphtha stored at the premise of the petitioner, the respondent KSEB Ltd has suggested the following different options, before the Hon’ble High Court of Kerala. (1) Generating power on Unscheduled Interchange (UI) basis in co-

ordination with the Load Dispatch Centre of KSEBL subject to the approval from KSERC thereby consuming the naphtha stock.

(2) M/s BKPL could explore possibilities on generation of power and sale to any one by utilizing the grid of KSEBL as open access is being permitted now.

(3) Any other feasible option including transfer to other naphtha consuming industries like nearby FACT availing the service of oil marketers like IOCL.

(iv) Hon’ble High Court in the interim order dated 04.04.2017 placed on record the options suggested by KSEB Ltd for disposal of Naphtha. Hon’ble Court ordered that, the petitioner could definitely explore possibilities mentioned at option numbers 2 and 3, but however the same would have to be finalized, within a period of one month from the date of the order (04.04..2017) and the disposal of the naphtha as per either of the options mentioned above and same to be concluded within the time stipulated.

If the petitioner does not intent to carry out the options 2 and 3 for disposal of the Naphtha, then they shall generate power on Unscheduled Interchange basis in coordination with the load despatch center of KSEB Ltd, subject to the approval of the KSERC and subject to further orders to be passed in the Writ Petition.

(v) The tariff of the petitioner in the original PPA dated 03.05.1999 was formulated based on the guidelines issued by the Ministry of Power in 1992, for determination of tariff for sale of electricity by Generating Companies to the SEBs. A copy of the said guidelines was also placed on record. As per the said guidelines, the interest on working capital is computed based on the fuel cost of one month and fuel stock for 30 days calculated on normative plant load factor basis. The normative plant load factor as per the PPA

342

40

with the petitioner is 80%. Even if, KSEB Ltd give no schedule, the petitioner shall get full fixed cost, which include the interest on working capital also.

(vi) There is no provision in the PPA which cast a responsibility on the respondent to ensure that Naphtha tanks are exhausted with the expiry of the PPA. In view of the above, the claim of the petitioner to allow the fuel stock at PPA tariff is devoid of merit and rejected.

(vii) The petitioner is a generating company and trading company.

They could have generated electricity and utilized the transmission facilities of the respondent under open access and could sell the same to various consumers within and outside the State.

(viii) The price of electricity has decreased drastically, and it is

available in the market from Rs 1.50/unit to Rs 3.00/unit. Instead of making attempts to sell the energy through power market, the petitioner is indirectly trying to fleece the utility under the garb of a non existent PPA and raising unreasonable claims on imaginary grounds. If the petitioners claim is entertained under any circumstances, the ultimate burden has to be shouldered by the consumers of this State.

(7) The Commission has examined in detail the deliberations of the subject

matter, the additional documents, argument notes and other details placed before it by the petitioner and the respondent.. Based on the above, the Commission decided to appraise the following ‘two aspects’ in detail for deciding on the rate applicable for electricity generated from the power plant of the petitioner from 25.05.2017 to 24.06 2017 for exhausting the stock of Naphtha available at the premises of the petitioner, as per the interim order of the Hon’ble High Court dated 04.04.2017.

(i) Whether KSEB Ltd has any liability on the balance stock of fuel at

the premises of the petitioner as on the date of expiry of the PPA on 31.10.2015?

(ii) What is the rate to be paid by the respondent KSEBL for the electricity generated from the power plant of the petitioner, for exhausting the stock of Naphtha at the premise of the petitioner and in the premises of IOCL on account of the compelling concern raised by the Hon’ble High Court on the safety aspects raised in its interim order dated 04.04.2017.

The analysis and decisions of the Commission on the above issues are discussed below.

343

41

44. Whether KSEB Ltd has any liability on the balance stock of fuel at the premises of the petitioner as on the date of expiry of the PPA on 31.10.2015?. The findings of the Commission on this aspects is given below.

(1) As stated elsewhere in this order, the power purchase agreement (PPA) between the petitioner BKPL and KSEB was entered on 3-5-1999 and the validity of the PPA expired on 31.10.2015.

(2) As per Article 7 of the PPA dated 03.05.1999, the tariff for electricity generated from the plant of BKPL consists of (a) fixed charges and (b) fuel cost. The fixed charge was payable by the buyer KSEB, during the entire tariff periods of ’15 years from November 2000 to October-2015’. The generator shall get the fixed cost in full, irrespective of whether the buyer scheduled power from the plant or not, provided the annual plant load factor including deemed generation is upto and above 80%. However, if the PLF including deemed generation is less than 80%, there will be a reduction in fixed charges payable by KSEB to the generator BKPL.

The fuel cost is the actual cost of fuel used for generating electricity from the plant. As per the PPA, 176.3 gram of Naphtha is required for producing one unit of electricity from the plant.

(3) It is reported by both the petitioner BKPL and respondent KSEB Ltd that

, at the time of entering into PPA between the parties, the Tariff Notification dated 30th March 1992, notified by the Ministry of Power, Government of India was in force. As per the said notification, the annual fixed cost of a generating company shall consist of the following components. a) Interest on long term loan b) Depreciation c) O&M expenses d) Return on equity e) Income tax and f) Interest on working capital. The petitioner has submitted that, the fixed cost of the plant was arrived at duly considering the provisions of the said ‘Tariff notification’. As stated above, the fixed cost covers the cost recovery of capital used for creation of the fixed assets. Further, the cost of maintaining the current assets including the stock of fuel is recovered through interest on the working capital as explained in subsequent paragraphs.

(4) As per the Tariff notification of the GoI, the Working Capital shall cover: (i) fuel cost for one month and reasonable fuel stocks as actually

maintained but limited to fifteen days for pit head stations and

344

42

thirty days for non pit-head stations, calculated on normative plant load factor basis;

(ii) sixty days stock of secondary fuel oil, calculated on normative plant load factor basis;

(iii) operation and maintenance expenses (cash) for one month;

(iv) maintenance spares at actuals subject to a maximum of one per cent of the capital cost but not exceeding one year's requirements less value of one fifth of initial spares already capitalised; and

(v) receivables equivalent to two months' average billing for sale of electricity calculated on normative plant load factor basis"

As detailed above, the interest on the working capital, which is one of the components of fixed cost, include the stock of fuel for one month calculated on normative plant load factor basis and fuel cost for one month. The normative plant load factor of the plant is 80% and as per the PPA the fuel required to produce one unitof electricity is 176.3 gm. Based on the above, the stock of fuel included in the working capital is about 16756 MT. It means that, irrespective of the actual stock of fuel maintained by the generator, the fixed cost of the plant includes the 30 days stock of fuel calculated based on the normative PLF of 80%.

(5) As per the details submitted by the petitioner, the average stock of fuel maintained by the generator during the month of April from the financial year 2000-01 to 2015-16 is given below.

Year

Avg stock of Naphtha maintained by BKPL (MT)

Fuel stock required for 30 days generation @80% PLF(MT)

Percentage of stock of fuel maintained by BKPL, compared to the stock for 30 days

Apr-00 2074

16756

12.38%

Apr-01 3313 19.77%

Apr-02 923 5.51%

Apr-03 2124 12.68%

Apr-04 7262 43.34%

Apr-05 3826 22.83%

Apr-06 4467 26.66%

Apr-07 3108 18.55%

Apr-08 8311 49.60%

Apr-09 4155 24.80%

Apr-10 5223 31.17%

Apr-11 5802 34.63%

Apr-12 5131 30.62%

Apr-13 2699 16.11%

Apr-14 4061 24.24%

Apr-15 7864 46.93%

Average 4396 26.24%

As seen from the table above, when compared to the stock of fuel maintained by the petitioner, it had maintained only an average fuel stock of 26.24% during the previous 15 years. However as per the tariff

345

43

notification issued by Government of India, the norm for assessing the working capital includes cost of fuel for 30 days. When comparing the fuel stock maintained by the BKPL with the requirement of maintaining 30 days stock, the stock maintained never exceeded 50% of the stock to be maintained and in one financial year was as low as 5.51%. Hence the actual stock of fuel maintained by the petitioner was much less than that required to be mentioned on normative basis. However, irrespective of the actual stock maintained by the petitioner, 30 days of stock of fuel was included in the working capital requirement, and its interest is included in the fixed charges given to the petitioner.

(6) Further, one month fuel cost corresponding to the normative plant

availability factor @80% is also included in the working capital, irrespective of the actual generation from the plant. Due to the excessive cost of Naphtha and resulting fuel cost, this Commission has been not approving the schedule from the plant except during contingencies. But irrespective of the schedule from the plant, this Commission has been approving the full fixed cost of the plant, which include interest on 30 days of cost of fuel and 30 days stock of fuel, at normative PLF of 80%, irrespective of generation. Further, two months receivables at normative PLF of 80% was also included in the working capital requirements. Two months receivable @80 % PLF includes two months fixed cost and two months fuel cost at the normative PLF @80%. However the actual average PLF of the plant was only 9.70%, which is much less than the normative PLF of 80%. The details of the actual generation and the PLF during the years from 2000-01 to 2015-16 is given below.

Year

Actual energy generation

Energy that can be generated at the normative PLF of 80%

Annual PLF

Fixed Cost paid

(MU) (MU) (%) (Rs. Cr)

2002-03 264.47

1156

18.3% 83.30

2003-04 992.15 68.6% 108.78

2004-05 110.14 7.6% 108.21

2005-06 36.92 2.6% 105.39

2006-07 183.26 12.7% 97.81

2007-08 353.20 24.4% 86.43

2008-09 847.29 58.6% 90.74

2009-10 576.70 39.9% 90.14

2010-11 223.30 15.4% 88.09

2011-12 46.61 3.2% 88.70

2012-13 131.33 9.1% 95.21

2013-14 337.78 23.4% 85.79

2014-15 146.93 10.2% 71.19

2015-16 (till Oct’15) 5.15 678 0.4% 36.65

Total 4255.22 9.7% 1236.43

Though the actual average PLF of the plant during the currency of the PPA is only 9.70% as against the normative PLF of 80%, the petitioner BKPL had been getting the full fixed cost of the plant as per the

346

44

provisions of the PPA, which include the interest for the ‘ cost of maintaining 30 days stock of fuel at the normative PLF of 80% and fuel cost of month at the normative PLF @80%, and also two months fuel cost as part of two months receivables estimated at the normative PLF of 80%’.

(7) As per the provisions of the PPA dated 03.05.1999, the generator is

responsible to schedule the electricity generation from the plant as per the dispatch instructions of the KSEB, as per the procedures specified under schedule 5 of the said PPA. In order to ensure continuous generation from the plant, it is the responsibility of the petitioner generator to stock sufficient quantum of fuel at the storage facilities available at the premises of the petitioner.

(8) However, the actual schedule of power by the distribution licensee depends on many factors including the following.

(i) Electricity demand (ii) Cost of electricity from the available sources. (iii) Technical consideration.

But, irrespective of scheduling, during the currency of the PPA, the distribution licensee has to bear the full fixed cost liabilities, provided the plant availability of generator is as per the norms specified.

(9) Accordingly, the buying entity KSEB Ltd has been bearing the cost of the

stock of fuel required to be maintained at the normative plant availability of 80%, irrespective of whether the generator was stocking the fuel or not, for the entire period of the PPA.

(10) Here the petitioner has raised the issue that, if the fuel purchased is not utilized during the currency of the PPA, the buying entity is liable to bear the entire liabilities arising out of such purchase of fuel, even after the validity period of the PPA. As already explained, the fuel stocked during the currency of the PPA is part of the obligation of the generator to ensure continuous generation of the plant as per the schedule given by the buying licensee KSEB Ltd. The financing cost of the stock of fuel maintained by the generator is allowed to recover through fixed cost as interest on working capital. It is up to the distribution licensee to schedule power from the plant or not, based on the merit order principles stipulated by the Commission. Irrespective of scheduling power from the plant, the buying licensee has to bear the full fixed cost. If the buying licensee schedule power from the plant, they have to pay fuel cost for such schedule in addition to the fixed cost payable.

(11) Further, there is no provision in the impugned PPA dated 03.05.2015 that, the balance fuel stock at the time of expiry of PPA is the liability of the KSEB Ltd.

(12) The stock maintained by the petitioner BKPL is the current assets of the petitioner. After the expiry of the PPA, the petitioner BKPL has the right

347

45

as the generator to utilize the fuel stock available with them at their will and choice. The petitioner had the option to sell the electricity generated using the balance stock of fuel as on the expiry of the PPA through Power Exchanges, bi-lateral contracts with consumers/ licensees/ traders inside and outside the State etc. However, the petitioner BKPL did not explored such options available to exhaust the balance stock of Naphtha with them.

(13) As per the Article 15.1 of the PPA, the term of the PPA is 15 years from November 2000 to October 2015. After the expiry of the PPA, all the assets including plant and machinery and other assets such as inventories are left with the possession of BKPL and there is no obligation cast upon the buyer to compensate for any assets or inventories once the terms of PPA is over. As in the case of the plant and machinery, any other asset left over can be disposed of by the company to recover its costs. In such circumstances, once the term of PPA is over, the respondent cannot be asked to bear the cost of any items which is an asset of the company.

(14) Considering these aspects in detail, this Commission is of the considered view that, there is no liability on KSEB Ltd due to the outstanding fuel stocked at the premises of the petitioner as on the expiry of the original PPA dated 03.05.1999.

Hence the claim of the petitioner for payment of energy charges based on the ruling price of naphtha at the time of its purchase cannot be substantiated, considering the fact that the petitioner has already been provided with relief far in excess on their actual expenditure. Therefore the claim of the petitioner is not agreed to.

(15) It is also to be appreciated that the present situation was triggered due

to two major factors viz., (a) the excessive cost of fuel which made it unprofitable for the petitioner company to generate power and sell it to another party and (b) the inherent dangerous nature of the material, which if not properly attended to would likely cause a dangerous situation to the common public which is made evident by the report of

the District Collector. Here the plaintiff knowingly and voluntarily

assumed the risks inherent in storing this explosive material, when he chose to execute the original PPA with the licensee. Further there are no clauses in the PPA which hold the licensee responsible to bear the cost of fuel stored, other than the liability to pay the fixed cost. Hence the demand of the petitioner that they are eligible for the energy charges for the electricity generated for exhausting the naphtha from 25.05.2017 to 24.06.2017 based on the weighted average cost of Naptha also stands rejected.

348

46

45. The rate of electricity generated by the petitioner BKPL and supplied to the respondent KSEB Ltd during the period from 25.05.2017 to 24.06.2017

The decision of the Commission on this aspect is discussed below. (1) The background of generating electricity by the petitioner BKPL from

their plant and supplying the same to the respondent KSEB Ltd are explained in detail by the petitioner and respondent during the deliberations of the subject matter, consequent to the final judgment of the Hon’ble High Court dated 31.10.2017 in WP(C) No. 540/2017. Summary of the deliberations before this Commission is extracted below for ready reference.

(2) The Senior Joint Director of Factories and Boilers, after visiting the premises of the petitioner reported that, consequent to the ‘lay off’ of 41 workers and transfer of 11 officers from the power plant of the petitioner; there is safety threat on the stock of Naphtha available at the premises of the petitioner. Three alternatives are suggested in the report of the Senior Joint Director of Factories and Boilers for disposing the Naphtha. (a) Generating power and consume the stock of Naphtha at the earliest.

OR (b) Dispose off the existing stock of Naphtha.

OR (c) Maintain the required manpower for the safe handling of the Naphtha

storage until it is consumed/ disposed.

(3) The report submitted by the District Collector, Ernakulam before the Hon’ble High Court, reiterated the safety threat of the Naphtha stocked at the premises of the petitioner and, recommended that, the storage of Naphtha be exhausted by temporarily operating the plant for power generation without considering economical benefit.

(4) Hon’ble High Court in its interim order dated 04.04.2017 has expressed compelling concerns on the safety threat of the Naphtha stocked at the premises of the petitioner.

(5) The respondent KSEB Ltd submitted before the Hon’ble High Court that,

‘the Board is procuring power from other sources at far lesser prices and procurement of power from the petitioner would only result in public fund being frittered away.

(6) The respondent KSEB Ltd suggested before the Hon’ble High Court,

the following three alternative options for the disposal of Naphtha at the premises of the petitioner: 1. Generating power on Unscheduled Interchange (UI) basis in

co-ordination with the Load Dispatch Centre of KSEBL subject to the approval from KSERC thereby consuming the naphtha stock.

2. M/s BKPL could explore possibilities on generation of power and sale to any one by utilizing the grid of KSEBL as open access is being permitted now.

349

47

3. Any other feasible option including transfer to other naphtha consuming industries like nearby FACT availing the service of oil marketers like IOCL.

(7) Hon’ble High Court in the interim order dated 04.04.2017 in WP(C) 540/2017 has ordered as follows. 8. The compelling concern of this Court, at present, is the apprehended disaster and this Court is of the opinion that the option submitted by the KSEB has to be put into effect, subject however to further orders passed in the writ petition. The option for disposal of naphtha, as suggested by the KSEB, has been placed on record in the report of the District Collector, which are as follows:

1. Generating power on Unscheduled Interchange (UI) basis in co-ordination with the Load Dispatch Centre of KSEBL subject to the approval from KSERC thereby consuming the naphtha stock.

2. M/s BKPL could explore possibilities on generation of power and sale to any one by utilizing the grid of KSEBL as open access is being permitted now.

3. Any other feasible option including transfer to other naphtha consuming industries like nearby FACT availing the service of oil marketers like IOCL.

9. The petitioner could definitely explore possibilities at option numbers 2 and 3, but however the same would have to be finalised, within a period of one month from today and the disposal of the naphtha as per either of the options started within the said period and concluded within the time herein after stipulated. If the petitioner does not intend to carry out the said options, then they shall generate power on Unscheduled Interchange (UI) basis in co-ordination with the Load Dispatch Centre of KSEBL; subject to approval of KSERC and also subject to further orders to be passed in the writ petition. The petitioner could definitely approach the KSEB immediately for such generation of power on UI basis. It is made clear that the entire naphtha available at the petitioner Companies premises and that available at IOCL would be disposed of before 01.07.2017. If the same is not so disposed of, then definitely, the Chairman of the Disaster Management Authority, the District Collector would be entitled to take such steps for disposal of the naphtha without even reference to this Court. All issues raised by all parties are left open for consideration in the writ petition. The petitioner Company shall file periodic reports before the District Collector, i.e.; every three weeks as to the stage of disposal of naphtha as directed herein.”

(8) As per the interim order of the Hon’ble High Court as above, the

petitioner BKPL has to take the following steps to exhaust the Naphtha available at their premises.

(a) Explore the possibilities of disposal of naphtha as suggested by KSEB Ltd as option-2 and Option-3, and the same would be finalized within a period of one month from 04.04.2017. The option-2 is to explore the possibilities on generation of power and sale to any one utilizing the grid of KSEB Ltd as open access being permitted now. The option-3 is for transfer of naphtha to other naphtha consuming industries like FACT availing the service of oil marketers like IOCL. The disposal of naphtha envisaged in either of the options-2 and 3 be started and concluded as ordered by the Hon’ble High Court dated 04.04.2017.

(b) If the petitioner BKPL does not intend to carry out the said options, then BKPL shall generate power on Unscheduled Interchange (UI) basis in co-ordination with the Load Despatch Centre of KSEB Ltd; subject to the approval of the KSERC and also subject to further

350

48

orders to be passed in the writ petition. The petitioner BKPL shall approach the KSEB Ltd immediately for such generation of power on UI basis.

(c) The entire naphtha available at the premises of the BKPL and that available at IOCL shall be disposed of before 01.07.2017.

(d) If the petitioner BKPL could not dispose the naphtha within the time limit specified by the Hon’ble Court, the Chairman of the Disaster Management Authority, the District Collector should take necessary steps for disposal of Naphtha without even reference to the Court.

(9) It is noted that, the petitioner has not tried the option-2 and option-3 as ordered by the Hon’ble High Court in its order dated 04.04.2017. However, the petitioner preferred the option-1 for exhausting the Naphtha available at their premises, and approached this Commission for approval for generating electricity and supply to KSEB Ltd, in pursuance of the interim order of the Hon’ble High Court dated 04.04.2017.

(10) During the course of the deliberations of the subject issue before this Commission during April 2017, KSEB Ltd has submitted that, it does not have the requirement of 65.00 MU of BKPL, since it had already tied up its requirement of power in advance for the said period under long term and medium term contracts. They also submitted that,

a. KSEBL may not be enforced to purchase power from BKPL at a rate higher than UI rate ordered by Hon’ble High Court.

b. KSEBL may not be enforced to schedule and absorb power that would result in surrender of already tied up power.

c. KSEBL may not be enforced to purchase more power than that could be generated from reported and existing stock of BKPL.

d. BKPL may be directed to exercise other options ordered by Hon’ble High Court viz

i. Selling of power through open access and exchanges to any other party.

ii. Selling back to any party or transfer to other naphtha consuming industries, the excess naphtha fuel stock with them, and

iii. KSEBL may be enforced to buy power as last resort only.”

(11) This Commission vide its order dated 27.04.2017, granted approval under clause (b) of sub section (1) of Section 86 of the Electricity Act,2003, in accordance with the directions of the Hon’ble High Court in its interim order dated 04.04.2017, to the SLDC of KSEB Ltd for scheduling power and to Strategic Business Unit-Distribution of KSEB Ltd for purchasing the power generated on unscheduled interchange basis, from the 6500 MT of naphtha purchased and stored in the premises of BKPL and the 6000 kilo litre of naphtha at the premises of IOCL.

(12) Accordingly, as per the approval granted by this Commission to generate electricity from the power plant of the petitioner for exhausting the Naphtha available with them, and to supply such generated power to KSEB Ltd on UI basis, the petitioner in co-ordination with the SLDC of

351

49

KSEB Ltd scheduled 61.90 Million Units (MU) during the period from 25.05.2017 to 24.06.2017 and thus the entire stock of Naphtha has been exhausted.

(13) Subsequently, KSEB Ltd vide the letters dated 05.06.2017, 07.06.2017, 13.06.2017 and 23.06.2017 has communicated the energy scheduled from the plant on weekly basis, the average frequency during the week and average deviation settlement rate under UI, and requested the petitioner to raise the invoices accordingly for preferring the payments. KSEB Ltd also clarified that, they will not be liable for any interest for delayed payment, due to non-raising of invoice for the injected power by the petitioner.

(14) But the petitioner has not raised any invoices for the energy generated and supplied to KSEB Ltd during the said period from 25.5.2017 to 24.06.2017 for exhausting the Naphtha based on UI basis. According to the petitioner, they are eligible to get the actual cost of fuel used for power generation from the petitioner as per the provisions of the PPA dated 03.05.1999.

(15) According to the respondent KSEB Ltd, they are liable to bear only the UI rates, since the electricity generated and supplied to KSEB Ltd was not for meeting the power requirement of the State, but only for exhausting the stock of Naphtha available at the premises of the petitioner to avoid the safety threats as ordered by the Hon’ble High Court in its order dated 04.04.2017, wherein it is clearly stipulated to schedule power on UI basis, that too as the last option out of the three options placed before the Hon’ble High Court for exhausting the Naphtha.

(16) The Commission has examined the context of generating electricity by the petitioner BKPL from 25.05.2017 to 24.06.2017.The District Collector , Ernakulam in his report submitted before the Hon’ble High Court, reiterated the safety threat of the Naphtha stocked at the premises of the petitioner and, recommended that, the storage of Naphtha shall be exhausted by temporarily operating the plant for power generation without considering the economical benefit. The Hon’ble High Court in the interim order dated 04.04.2017 in WP(C) 540/2017 has ordered that the petitioner could explore possibilities on generation of power and sale to any one by utilizing the grid of KSEBL as open access as is being permitted now or any other feasible option including transfer to other naphtha consuming industries like nearby FACT availing the service of oil marketers like IOCL. If the petitioner does not intend to carry out the said options, then they shall generate power on Unscheduled Interchange (UI) basis in co-ordination with the Load Dispatch Centre of KSEBL; subject to approval of KSERC and also subject to further orders to be passed in the writ petition. The Hon’ble High Court also made It clear that the entire Naphtha available at the petitioner Companies premises and that available at IOCL would be disposed of before 01.07.2017. If the same is not so disposed of, then definitely, the Chairman of the Disaster Management Authority, the District Collector would be entitled to take such steps for disposal of the naphtha without even reference to this Court.

352

50

(17) The petitioner BKPL has exercised the option of generating power on

Unscheduled Interchange (UI) basis in co-ordination with the Load Dispatch Centre of KSEBL and approached this Commission for approval. The Commission, considering the submissions of the petitioner BKPL and respondent KSEBL, in its order dated 27.04.2017 granted approval in accordance with the directions of the Hon'ble High Court in its order dated 04.04.2017, to the SLDC of KSEB Ltd for scheduling power and to Strategic Business Unit-Distribution of KSEB Ltd for purchasing the power generated on unscheduled interchange basis, from the 6500 MT of naphtha purchased and stored in the premises of BKPL and the 6000 kilo liters of naphtha purchased and stored by BKPL in the premises of IOCL. From the above it is concluded that the petitioner BKPL has generated power for exhausting the naphtha stock by exercising the option of their choice.

(18) Hon’ble High Court vide the interim order dated 04.04.2017 has granted one month time from the date of the said order, exploring the options 2 and 3 for the safely disposal of the Naphtha stocked at the premises of the petitioner. The option-2 is on exploring the possibilities on generation of power and sale to any one by utilizing the grid of KSEB Ltd by availing open access. The option-3 is on exploring other options including transfer of Naphtha to Naphtha consuming industries like nearby FACT availing the service of oil marketers like IOCL.

This Commission on the basis of the deliberations of the subject matter during the hearing on 23.01.2018 in the daily order dated 08.02.2108 has directed the petitioner to submit documentary evidence on BKPL’s efforts to materialize the alternate options suggested in the Court order dated 4.4.2017 for the disposal of the Naphtha by (i) third party sale of power and (ii) transfer of Naphtha to other Naphtha consuming industries. However, BKPL did not produce any documents on the efforts taken by them for disposal of Naphtha consequent to the interim order of the Hon’ble High Court dated 04.04.2017. The documents the petitioner placed on records vide the letter dated 04.02.2017 are the correspondence of the petitioner with MRPL, BPCL etc during the period from 19.01.2017 to 03.02.2017. These correspondence are done much before the interim order of the Hon’ble High Court dated 04.04.2017. However, without exercising the options 2 and 3, the petitioner BKPL has exercised the option -1, on generating power on Unscheduled Interchange (UI) basis in co-ordination with the SLDC of KSEB Ltd.

(19) The Commission has also examined whether the electricity generated

for exhausting the Naphtha stock was required for meeting the electricity demand of this State from 25.05.2017 to 24.06.2017. KSEB Ltd, submitted that, it had made sufficient arrangements for procuring power from cheaper sources for meeting the electricity demand of the State and procurement of power from the petitioner would only results in public

353

51

funds being frittered away. Hon’ble High Court in its interim order dated 04.04.2017 has recorded the submission of KSEB Lt in this regard. This Commission in its tariff order dated 17.4.2017 has approved the energy requirement of the State for the year 2017-18, by purchase of power from Central Generating Stations, Long term PPAs, Own generation and the balance requirement from short term market at an average ceiling price of Rs 4.00/unit. This Commission, while approving the cost of power purchase for the financial year 2017-18, has not approved any power purchase from liquid fuel stations due to its prohibitively high variable cost, including the electricity generation from the power plants owned by the respondent KSEB Ltd - Brahmapuram Diesel Power Plant (BDPP) & Kozhikode Diesel Power Plant (KDPP), the Rajiv Gandhi Combined Cycle Power Plant (RGCCPP) of NTPC Ltd.

(20) From the details placed before the Commission, it is concluded that the electricity generated for exhausting the Naphtha stock was not required for meeting the electricity demand of the State from 25.05.2017 to 24.06.2017, but generation was only to exhaust the stock of Naphtha to avoid the safety threats as ordered by the Hon’ble High Court in its order dated 04.04.2017.

(21) As per Section 32 of the Electricity Act,2003, the State Load Despatch

Centre is the apex body to ensure integrated operation of the power system in the State. The State Load Despatch Centre shall -

(a) be responsible for optimum scheduling and despatch of electricity within a State, in accordance with the contracts entered into with the licensees or the generating companies operating in that State;

(b) monitor grid operations;

(c) keep accounts of the quantity of electricity transmitted through the State grid;

(d) exercise supervision and control over the intra-State transmission system; and

(e) be responsible for carrying out real time operations for grid control and despatch of electricity within the State through secure and economic operation of the State grid in accordance with the Grid Standards and the State Grid Code.

Any generator can inject power in to the power system of this State, with the approval of the Kerala SLDC only. In the instant case the approval for injection of power was issued on specific direction in the order of this Commission dated 27.04.2017 in compliance with the order of the Hon’ble High Court dated 04.04.2017. Hence the argument of the petitioner that they are eligible for the energy charges based on the cost of Naphtha cannot be agreed to.

(22) This Commission has analysed the scenario of power system management of respondent KSEBL for accommodating the electricity generated for exhausting the stock of Naphtha from 25.05.2017 to 24.06.2017. KSEBL is scheduling power from CGSs, long term

354

52

contracts, own generation, short term purchases transactions including power exchanges and over drawal from the system under Deviation Settlement Mechanism(UI) strictly on merit order principles as instructed by this Commission. If the power from CGS and long term contracts are surrendered to absorb the energy injected by the petitioner, KSEB Ltd would be liable to pay fixed charges to them without scheduling power, which will result in increase in power purchase cost. The other alternative is to reduce own generation or avoid power purchase from the power exchanges or over drawal from the system under Deviation Settlement Mechanism(UI) or combination of all.

(23) The Commission has examined the source wise electricity generation and power purchase by KSEB Ltd during the months of April-2017, May 2017(till 24th) prior to the generation and injection of power by BKPL, and from 25.05.2017 to 24.06.2017 during the period of generation and injection of power by BKPL, the details are given below.

Source of Generation

Periods prior to injection of power from BKPL

During the period of injection of power from

BKPL

Apr-17 May-17 (up 24.05.2017)

25.05.2017 to 24.06.2017 (31 days)

(MU) for the

month

MU/ day

(MU) for 24 days

MU/ Day

(MU) total for 31 days

MU/ day

Hydro 513.84 17.13

356.90 14.87 313.54 10.11

Solar, wind etc 13.74 0.46 10.71 0.45 24.71 0.80

CGS 853.94 28.46

636.58 26.52 878.26 28.33

CGS surrender 0.00 0.00 0.00 0.00 14.58 0.58

Long term/ Medium term contracts 640.50

21.35 534.53 22.27 669.75 21.60

UI/ DSM 60.64 2.02 47.20 1.97 59.45 1.92

Power Exchanges 115.88 3.86 108.32 4.51 43.56 1.41

BSES 62.12 2.00

Total 2198.54 73.2

8 1694.24 70.59 2065.98 66.64

(24) In pursuance of the interim order of the Hon’ble High Court dated 04.04.2017 and subsequent order issued by this Commission, the petitioner was allowed to generate electricity from their plant and to inject into the State grid. BKPL had generated and injected average 2 MU/day during the period from 25.05.2017 to 24.06.2017. In order to absorb the energy generated by the petitioner without affecting the system security and grid stability, KSEB Ltd had reduced the average purchase from power exchange to 1.41MU/day from the average power purchase of 4.51 MU during the previous period. Commission also noted that, there is not much variation in the electricity availed by KSEB Ltd on UI/ DSM basis. So, if the power from the BKPL is not injected to the State Grid from 25.05.2017 to 24.06.2017, KSEB Ltd might have purchased equal quantum from power exchanges on day ahead basis.

355

53

So, the opportunity cost to KSEBL for the power injected by the BKPL during the said period is the average round the clock (RTC) price in the power exchanges during the said period.

(25) As already mentioned above the present situation was triggered due to

two major factors viz., (a) the excessive cost of fuel which made it unprofitable for the petitioner company to generate power and sell it to another party and (b) the inherent dangerous nature of the material, which if not properly attended to would likely cause a dangerous situation to the common public which is made evident by the report of the Collector. Here the plaintiff knowingly and voluntarily assumed the risks inherent of storing this explosive material, when they chose to execute the original PPA with the licensee and there are no clauses in the PPA which hold the licensee responsible to bear the cost of fuel stored, other than the liability to pay the fixed cost. Hence the demand of the petitioner that they are eligible for the full energy charges for the electricity generated for exhausting the naphtha from 25.05.2017 to 24.06.2017 based on the weighted average cost of Naphtha cannot be agreed to.

(26) Considering all the above this Commission is of the considered view that the most equitable rate that can be allowed for the energy charge is the opportunity cost of the respondent KSEB Ltd, i.e., the weighted average RTC price of the IEX during the period from 25.05.2017 to 24.06.2017. Hence, KSEB Ltd shall pay the petitioner the charges for electricity injected into the State Grid at the average RTC rate of IEX during the period from 25.05.2017 to 24.06.2017,duly certified by the SLDC of Kerala.

(27) In order to arrive the rate of the energy generated and supplied to it, the following procedures may be adopted. (i) The SLDC has to certify the quantum of electricity injected to the

State grid from the power plant of the petitioner for each day from

25.05.2017 to 24.06.2017.

(ii) The SLDC also shall certify the average RTC clearing price of IEX

in S3 region each day from 25.05.2017 to 24.06.2017.

The petitioner BKPL and the respondent KSEB Ltd shall settle the

accounts of electricity generated from the plant of the petitioner

and injected to the grid of the respondent KSEB Ltd within one

month from the date of this order.

46. Order of the Commission

The Commission having duly considered the arguments of the subject matter during the hearings on 23.01.2018, and after examining all the documents and other details placed before the Commission during the proceedings of the subject petition, and after duly considering the directions of the Hon’ble High Court in its interim order dated 04.04.2017 in WP (C) 540/2017 and the final

356

54

judgment of the Hon’ble High Court dated 31.10.2017 in WP(C) 540/2017, the Commission issues the following orders as per the provisions of the Electricity Act, 2003 and the Tariff Regulations, 2014:

(1) There is no power purchase agreement between the petitioner BKPL and the respondent KSEB Ltd with effect from 01.12.2015, i.e, after one month from the date of the expiry of the PPA dated 03.05.1999.

(2) The petitioner BKPL is not eligible to claim fixed cost, lease rent, income tax or any other charges during the period from 01.12.2015 to 31.10.2017.

(3) KSEB Ltd is not bound to pay fixed charges, lease rent, income tax and other charges to the petitioner during the period from 01.12.2015 to 31.10.2017.

(4) KSEB Ltd shall make fixed cost payments to BKPL for the month of November 2015, at the rate agreed to by KSEB Ltd.

(5) KSEB Ltd do not have any liability on the balance stock of fuel as on 31.10.2015, available at the premises of BKPL and at the nearby premises of IOCL, from the date of expiry of the PPA dated 03.05.1999.

(6) KSEB Ltd shall be liable to pay electricity charges to the petitioner BKPL for the energy generated and injected into the grid during the period from 25.05.2017 to 24.06.2017 at the average RTC clearing price of Indian Energy Exchange (IEX) in each day in S3 region in the day ahead market.

Petition disposed off. Ordered accordingly.

Sd/- Sd/- Sd/-

K.Vikraman Nair S.Venugopal Preman Dinaraj

Member Member Chairman

Approved for issue

Sd/-

Santhosh Kumar K B

Secretary

// TRUE COPY //

357

ANNEXURE-P/28 358

//True Copy//

359

360

361

362

363

364

365

366

Bill No.

To

SI.No.

BKPL/KSEB/TY-15/2018-19/02

Director (Finance) Kerala State Electricity Board Limited Vydutha Bhavanam, Pattom Post, Thiruvananthapuram

Period From 00:00 hrs

2 00:00 hrs

Particulars

From

Variable Charges 25-May-l 7

TARIFF INVOICE

Period

On 25-May-20171-Jun-2017

To

31-May-l 7

For the month May '17 & June '17

Date of billing 22-0ct-18

To On 24:00 hrs 3l-May-2017 24:00 hrs 24-Jun-2017

Value (Rs.)

52429132.96 · --· ·-·-· �·-------·-

01-Jun-17 24-Jun-17

Total Variab_le Charges

(Rupees Seventeen Crore Thirteen Lakh Twenty Seven Thousand Six Hundred and Fifty Nine Only

] 188,98,526,:15 - --- ----- -- --- - ------.-,.-

1713,27,6�9


GST

PAN : 32AABCB3724C1ZG

: AABCB3724C CIN : U40105KL1996PLC010257 E&OE

Endosure

Annexure l Annexure 2 Annexure 3

Computation of Variable Charges for the month of May '17 Computation of Variable Charges for the month of June '17 Daily export and avg RTC tariff in IEX in S3 region from 25/05/17 to 24/06/17 certified by SLDC

367

368

369

370

371

372

373

374

IN THE APPELLATE TRIBUNAL FOR ELECTRICITY (Appellate Jurisdiction)

Dated: 13.05.2022

COURT-II

APPEAL NO. 352 OF 2018 & IA NO. 1704 OF 2018

AND APPEAL NO. 240 OF 2019

Present: Hon'ble Mr. Justice R.K. Gauba, Officiating Chairperson Hon'ble Mr. Sandesh Kumar Sharma, Technical Member

APPEAL NO. 352 OF 2018 & IA NO. 1704 OF 2018

In the matter of:

BSES Kerala Power Limited Vs.

Appellant (s)

Kerala Electricity Regulatory Commission &Anr.

Counsel for the Appellant (s)

Counsel for the Respondent (s)

Mr. S. Venkatesh Mr. Rishabh Sehgal Mr. V.M. Kannan

Mr. Shashwat Singh for R-1

Mr. P.V. Dinesh

Respondent(s)

Mr. Ashwini Kumar Singh for R-2

APPEAL NO. 240 OF 2019 In the matter of:

Kerala State Electricity Board Ltd. Appellant (s) Vs.

Kerala State Electricity Regulatory Commission &Anr.

Counsel for the Appellant (s)

Counsel for the Respondent (s)

Mr. P.V. Dinesh Mr. Ashwini Kumar Singh

Mr. Shashwat Singh for R-1

Mr. S. Venkatesh Mr. Rishabh Sehgal Mr. V.M. Kannan for R-2

ORDER

Respondent(s)

These matters have been taken up by video conference mode on account of pandemic conditions, it being not advisable to hold physical

hearing. IA NO. 1704 OF 2018

[For Interim Relief]

The learned counsel for the applicant submits that this application is being withdrawn, the request being for liberty to approach the State

Page 1of2

ANNEXURE-P/29 375

//True Copy//

Commission for appropriate relief which is in the nature of prayer for enforcement of the relief already granted. The application is disposed of with liberty as granted.

APPEAL NO. 352 OF 2018 AND

APPEAL NO. 240 OF 2019 We are informed that service/pleadings are complete in these matters.

These appeals are already included in the "List of Finals" to be taken up from there, in their turn.

The written submissions in these matters must be filed well in advance.

(Sandesh Kumar Sharma) Technical Member

vt/mkj

(Justice R.K. Gauba) Officiating Chairperson

Page 2 of 2

// TRUE COPY //

376

377

13.06.2022

378

379

380

381

382

383

384

385

1

Delhi Office

From: Isnain Muzamil <[email protected]>Sent: 13 June 2022 18:57To: [email protected]; [email protected]: Shri Venkatesh; Jatin Ghuliani; V M Kannan; Rishabh Sehgal; Delhi OfficeSubject: [Service by way of email]: KSERC - Petition under Section 142 and 146 of the

Electricity Act, 2003 (BSES Kerala Power Limited v. Kerala State Electricity Board Ltd.))

Attachments: Final BSES Kerala_Section142_Petition.pdf

Dear Ma'am / Sir, We represent the Petitioner, i.e., BSES Kerala Power Limited, in the present Petition, which is being filed before the Hon'ble Kerala State Electricity Regulatory Commission ("Hon'ble Commission"). In this regard, please find attached the Petition on behalf of BSES Kerala Power Limited. Kindly treat this email as a valid service of the Petition being filed before the Hon'ble Commission. Regards, Isnain Muzamil SKV Law Offices, B-50, Defence Colony, New Delhi - 110024