(Adds analyst comment)
By Sudarshan Varadhan and Suchitra Mohanty
NEW DELHI, April 11 India's top court ruled on
Tuesday that Adani Power Ltd cannot charge its
customers more to cover a surge in the cost of imported coal,
overturning a decision by a power regulator in December.
The ruling sent Adani Power's shares down as much as 20
percent on Tuesday, its biggest intra-day loss since it went
public in 2009.
The court did, however, allow the utility to claim relief
for the higher costs, which resulted from a shortage in domestic
supplies at state-run Coal India Ltd.
Both Adani Power and competitor Tata Power - which
was also party to the ruling although it was not mentioned
directly in it - struck long-term deals in the middle of the
last decade with distribution companies to supply power from
plants they each operate in Prime Minister Narendra Modi's home
state of Gujarat.
The companies also struck deals with domestic and foreign
miners in the latter part of the last decade to fuel their
plants in Gujarat, which each have over 4,000 megawatt (MW) of
LENGTHY LEGAL BATTLE
In 2010, Indonesia adopted new benchmark coal prices leading
to an increase in the price of coal imported from the country.
Adani and Tata appealed for relief, arguing that they had to
be compensated for an unforeseen change in economic conditions
which made the terms of the deal with distribution companies
Following a legal battle that stretched over half a decade,
the Central Electricity Regulatory Commission (CERC) ruled in
December last year that the companies could charge their
customers more to compensate for higher costs.
The case, which was argued by former Indian minister and
lawyer Kapil Sibal and renowned anti-corruption lawyer Prashant
Bhushan among others, was then escalated to the country's top
court by the state distribution companies.
The top court ruled in favour of the distribution companies,
saying the agreements did not state that "coal is to be procured
only from Indonesia at a particular price".
"The price payable for the supply of coal is entirely for
the person who sets up the power plant to bear," the top court's
judges said in Tuesday's ruling.
CERC will now look at the matter afresh and determine what
relief should be granted to the companies to make up for the
shortage in domestic coal supplies.
Companies will now be more cautious when entering into
long-term power purchase agreements, a Mumbai-based analyst told
Adani Power's shares recovered some losses on the day to
close about 16 percent lower at 37.20 rupees. Shares in Tata
Power closed down 1.8 percent at 85.45 rupees.
(Additional reporting By Darshana Sankararaman in Bengaluru;
Editing by Subhranshu Sahu and Susan Fenton)