Reliance Power today announced Tuesday it's wholly owned subsidiary, Jharkhand Integrated Power (JIPL) has terminated the Power Purchase Agreement (PPA) of its 3,960 MW Tilaiya Ultra Mega Power Project (UMPP) in District Hazaribagh, in the State of Jharkhand.

Based on tariff-based bidding managed by Power Finance Corporation (PFC), Reliance Power was awarded the Tilaiya UMPP in February 2009. JIPL, the Special Purpose Vehicle (SPV) for implementing the project, was handed over to Reliance Power by PFC in August 2009. JIPL has signed a Power Purchase Agreement (PPA) with 18 power off-takers in 10 states for 25 years. For fuel security, the project was allocated Kerendari BC captive coal mine block.

The PPA requires Procurers to perform the following development period obligations by February 2010:
i. Handing over the possession of the land for the Power Station and water intake pipeline.
ii. Issuance of notice under Section 9 of Land Acquisition Act in respect of land for coal mines and fuel transportation system.
iii. Site clearance from Ministry of Environment and Forests (MOEF) for the coal mines.

However, the required land is yet to be made available, the company said. Even the Forest land in the Power Station area, for which the Stage-II Forest Clearance was accorded by the Central Government way back in November 2010, has not been handed over to JIPL till now. As regards the coal block, the land acquisition process is yet to get initiated, for which the application was submitted way back in February 2009, it added.

JIPL, on its part, has undertaken comprehensive and concurrent efforts on a number of parallel tracks for development of the Project and completed all development period obligations under the PPA, which were not dependent on the inputs from the Procurers.

However, in-spite of more than 25 review meetings and extensive and continuous follow-ups with the State Government of Jharkhand over last 5½ years, the required land is yet to be made available. Even after relentlessly pursuing the Project development for nearly 5½ years, due to Procurers' failure to provide land for the Project, execution time-frame continues to remain uncertain.

Based on the present estimates of the land handover process, it is estimated that the project cannot be completed before 2023-24, Reliance Power said. 'Considering all these facts, JIPL has decided to terminate the PPA with the Procurers. This decision will reduce the future capex pipeline of Reliance Power by nearly Rs. 360 billion.'

Shares of the company gained Rs 0.4, or 0.72%, to trade at Rs 56.20. The total volume of shares traded was 513,377 at the BSE (12.13 p.m., Tuesday).