Swan Energy may exit Gujarat project

Swan Energy may exit Gujarat project

Ahmedabad: The controversy over the stake sale in GSPC Pipavav Power Co. Ltd (GPPL) to Mumbai-based Swan Energy Ltd, earlier known as Swan Mills Ltd, may come to an end with the latter deciding to exit the project.

“We have decided to withdraw from the project and have informed the state government the same. So far we have paid 125 crore, which we hope will be soon repaid to us," said Navin Dave, chairman of Swan Energy, adding that it made sense to exit as the project had been held up for a long time.

Swan was set to emerge as the single largest stakeholder in the company once the transaction was completed, with GSPC and GPCL holding 34% and 17%, respectively.

GPPL, a state government company, had decided to sell a 49% stake to Swan Energy for 381 crore, and this had raised doubts about the manner in which Swan was chosen as a strategic partner. It had got shareholders to agree to the deal in January 2010. The company, at the time of the transaction, had achieved financial closure for its 702 megawatts (MW) gas-based power plant at Pipavav and had ordered machinery. The deal also led to a controversy as Swan acquired the right to sell as much as 70% of the carbon credits earned from the project for a period of 10 years.

A state government official familiar with the development said the first phase of the project was complete.

“GPPL has not been able to commission (the project) due to problems of gas allocation from the Centre. The high spot price of liquefied natural gas (LNG) has put the project in a fix," he added.

Meanwhile, Dave said he would also inform the Gujarat high court about Swan Energy’s decision to exit the project, since the leader of the state opposition party—Shaktisinh Gohil—had filed a petition challenging the deal. The matter is pending with the court.

Gohil, in his petition, had questioned the decision to sell the shares of GPPL and surrender the carbon credits to Swan Energy.

The petition had alleged that the state government had breached rules by selling the 49% stake to Swan Energy for a paltry sum without inviting other companies and obtaining the maximum price, thereby, avoiding fair competition.

The decision to sell the equity of GPPL and to surrender the carbon credits to Swan Energy was taken in total disregard of all established norms and purely to pass on the assets of the state and its revenue to the sole benefit of Swan Energy, Gohil had said in the petition.

The deal valued GPPL at 778 crore while it was commissioning the 702MW gas-based power plant. The company has plans to ramp up capacity to 1,050MW subsequently.

Questioning the valuation criteria, Gohil had said that the actual market value of GPPL would be much more.

Close