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JP Power violates capacity norms in Karcham Wangtoo proj

The company has installed four units of 300 MW each taking the total to 1200 megawatt capacity but the original approval was just for about 250 megawatts each four units.

Jaiprakash Power  stock has come under pressure as reports suggest that the company’s Karcham Wangtoo Project at Himachal Pradesh has breached rules on installed capacity. The company has set up 4 units of 300 MW each versus the approval of 250 MW.

This could mean a big blow as far as JP Power is concerned for this Karcham Wangtoo plant given the massive deal they have done with  Reliance Power .

The company has installed four units of 300 MW each taking the total to 1200 megawatt capacity but the original approval was just for about 250 megawatts each four units. The approval was for 1000 megawatt but the company installed more than that. This is something which has been known but now it has been brought up by the papers and the central electricity authority (CEA) and the central water commission (CWC) that have got involved. CEA and CWC are purely technical bodies and are involved in projects of the hydro power at the inception stage.

The analysts now fear that if the CEA revoke the techno commercial clearance that was given for the entire project or if they restrict the operations up until the approved level there could be a problem for the 200 megawatt and the merchant power that they are generating out of it.

The company had struck that deal with Reliance Power for Rs 12000 crore or so for two of their units, and Karcham Wangtoo being one of the key ones in that.

Analysts are keeping an eye on what CEA uploads on its website and their key observations. However most of the analysts believe that since this has not happened in the past it is difficult to understand what will be the kind of damage or the ramifications that come in.

It is likely that the company could have to face a severe penalty which they would have to give away from their cash flows. That could be a negative for the stock and could jeopardise the valuations that Reliance Power had given them originally.

On the back of that there could be some revision to that amount of Rs 12000 crore, which could also dent the debt reduction plans in case Reliance Power decides to trim certain details of this.

So for now it is definitely a negative as far as Jaiprakash Power is concerned.

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