Sarda Energy’s MBPCL Powers Ahead—Ditches Old PPA, Plugs into Future Opportunities

In a surprise twist, Sarda Energy & Minerals Ltd. (SEML) announced that its subsidiary, Madhya Bharat Power Corporation Ltd. (MBPCL) has terminated its long-term Power Purchase Agreement (PPA) with Chhattisgarh State Power Distribution Company Ltd. (CSPDCL) for the 113 MW Rongnichu Hydropower Project. Cancellation is with immediate effect, due to non-compliance of PPA terms by CSPDCL.

 

Key Takeaways

 

Termination with Immediate Effect: MBPCL cancelled the PPA with CSPDCL for the 113 MW Rongnichu Hydropower Project because CSPDCL failed to perform under the contract.

 

Strategic Decision: The move is referred to as a well-thought-out, strategic step by MBPCL to protect the interests of the company and is bound to prove beneficial in the long run.

 

Hydropower Portfolio: SEML continues to be dedicated to renewable power, with running commercial hydro power projects at Sikkim (113 MW), Chhattisgarh (24 MW Gullu), and Uttarakhand (4.8 MW), and other projects under implementation, including a 24.9 MW facility at Rehar River in Chhattisgarh.

 

Growth Projects: SEML is also growing in solar and thermal power, building a 50 MW solar power plant in Chhattisgarh and recently acquiring the 600 MW SKS Power plant, further reinforcing its energy business.

 

Financial Implication: The firm enjoys a healthy financial condition, and recent power endeavors have ensured profitability and stable cash flows. The withdrawal would most likely allow MBPCL to pursue more lucrative options, including direct sale or new PPAs.

 

Market Response: SEML stocks have demonstrated resilience and upmove following recent news in the energy sector, indicating investors' faith in the direction of the company's strategy.

 

Source: Business Standard, SEML Annual Report 2023-24, Investing Stoics