DOUBT OVER CLAIMS U’khand power plants face insurance hurdle

Mumbai: Private hydel power projects in Uttarakhand facing a shutdown due to floods may find it difficult to recover their losses from insurance companies. According to underwriters, their liability would be limited to actual physical loss to the structure and loss of profits arising out of the physical loss.      The hydel power companies that have been affected by the Uttarakhand floods include Jaiprakash Power Ventures, Lanco Infratech and GVK. Last month, Jaiprakash Power Ventures informed BSE that it was forced to shut down barrage operations at Vishnuprayag following the Uttarakhand floods. Similarly, Lanco Infratech, which had its project on the Mandakini river, was also affected because of the floods.      Insurers say that the informal estimates provided by the company of their losses run into hundreds of crores. But the trigger for these losses has been the deposit of debris and boulders upstream without any major physical damage to the dam structure itself.      "During the onset of monsoon, Uttarakhand, including district Chamoli where Company's 400 MW Vishnuprayag Hydro-power plant is situated, has witnessed very heavy rain causing unprecedented flood of very high intensity with excessive silt, boulders and other materials in the Alaknanda river, resulting in disturbances to river protection works and leading to shutdown of the barrage operations and power generation with effect from June 16, 2013," the company had said in its statement to BSE.      "From what we have heard, the structure of the dam is intact. The loss is because of millions of tonnes of debris and boulders being deposited upstream which has made the dam non-operational. Loss of profit cover kicks in only if business is interrupted due to a physical loss to property that is covered under the main policy," said an industry official.      In its statement to the exchange, Jaiprakash Power had said while the company is taking effective steps to restore generation, assessment of damages due to the flood would be made on restoration of commutation and connectivity to barrage site. "Unprecedented floods in river Alaknanda has resulted in Force Majeure event for 400 MW Vishnuprayag Project, commercial aspects of which shall be addressed in accordance with Power Purchase Agreement between Uttar Pradesh Power Corporation and the company. As prudent practice, 400 MW Vishnuprayag project is also covered under Industrial All Risk Insurance Policy."