According to the agreement the Kerala State Electricity Board (KSEB) will pay a flat Rs 2.70 per unit to the two IPPs in their first year of operation.

The lower cost for the power supplied by the private sector IPPs assumes significance as the public sector National Thermal Power Corporation had earlier asked a cost of Rs four per unit for the power supplied from its 350 MW Kayamkulam thermal power station. The SEB has turned down the demand and since then is on a collision course with the power giant over the tariff for the power drawn from the Kayamkulam station.

Top sources in KSEB told The Indian Express that the state cabinet has cleared the combined cycle PPAs of the two private sector power producers in its recent meeting. According to the agreement, the state electricity board will pay Rs 2.7 per unit for the power purchased from the two IPPs in thefirst year of full-fledged operation. The current tariff is based on the fuel cost prevailing this year. The 15 year PPA allows the IPPs to pass the fuel cost in case of variation in naphtha prices.

Both BSES Kerala Power Ltd and the EDL-OC were awarded the projects through a global bid floated by the Kerala State Industrial Development Corporation (KSIDC). The government has also given fuel sanction to both the projects.

BKPL is a joint venture power company promoted by the Mumbai power major BSES and Kerala State Industrial Development Corporation (KSIDC). The Rs 452-crore power plant is structured on a debt equity ratio of 2:1.

BSES, the original promoter of the venture holds 60 per cent of equity while KSIDC picked up the 20 per cent stake in the venture. The remaining 20 per cent is earmarked for the financial institutions and public. The first 46 MW unit of the 160-MW, naphtha-fired, combined cycle power plant is expected to go on stream next month. BKPL is the first and only IPP to bag escrowcover from the Kerala State Electricity Board.

EDL-OC, originally promoted by the Australian power major Energy Development Ltd (EDL) is setting up a 60 MW, naphtha fired combined cycle power station at Kazargode. The power project has been hanging fire for the past few years as EDL has backed out from the project. The project is currently promoted by the Banglore-based Deccan Power Ltd.