GVK's first power unit completes PPA term, ready for government buy out

India's first independent power plant, the 217 MW Phase 1 power project of GVK at Jegurupadu in Andhra Pradesh which was commissioned in 1997, has completed the 18 year power purchase agreement (PPA) with the Andhra Pradesh government.

"As per the agreement, the state government has the right to buy out the unit at the end of the term of the PPA. The PPA expires next month and the government can buy this out at a value to be determined by a financial consultant," says Issac A George, Director, Finance, GVK Group and CFO, GVK Power and Infrastructure Limited (GVKPIL).

Business Today also learns that the government has appointed a consultant in line with the terms of the PPA, and the value that has been arrived at is Rs 293 crore. But apparently, this is not the full amount and there could be other payments too, which would push the total above Rs 300 crore.

It needs to be seen what the state government does about the provision to buy out, in which GVK will has little role. The timing, however, may work well for GVK which is in the process of trying to pare down the debt on the books of its holding company. Also, BT gathers that if the state decides to buy out the unit, it will need to invest around Rs 500 crore on refurbishment of machines.