APTEL Asks DISCOM to Return Bank Guarantee of a Delayed Solar Project

The Appellate Tribunal for Electricity (APTEL), in a recent order, has ruled in favor of a solar developer, allowing a 15-month extension for a delayed solar project. Of the total extension given, the Tribunal granted ten months of additional time frame on account of the ‘force majeure’ event due to the unavailability of the transmission system. Further five months’ extension has been allowed due to the Covid-19 pandemic and the subsequent lockdown last year.

The Tribunal has specified that the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) should not encash the performance bank guarantee or ask the developer to pay liquidated damages. It directed TANGEDCO to return the performance bank guarantee of ₹200 million (~$2.68 million) and an additional bank guarantee of ₹76 million (~$1.02 million) to the developer without delay.

Also, the Tribunal has directed TANGEDCO to pay at ₹3.47 (~$0.047)/kWh for the balance of 50 MW (out of the total capacity of 100 MW) from February 8, 2021, onwards (the date on which the capacity was synchronized with the grid) as well as the carrying cost.

The Tribunal directed the respondents to take the necessary steps to expedite the completion of pending works. The move would facilitate the evacuation of the total output from the project, noted the Tribunal.


Solitaire BTN Solar had filed an application with APTEL, seeking the return of the performance bank guarantee of ₹200 million (~$2.68 million) and an additional bank guarantee of ₹76 million (~$1.02 million) without any delay, along with the cost of renewing such bank guarantees.

In December last year, the Tamil Nadu Electricity Regulatory Commission (TNERC) had rejected Solitaire BTN Solar’s petition to extend the project’s commissioning date. The TNERC had approved the commissioning of only 50 MW out of the total capacity of 100 MW. For the remaining 50 MW, the Commission had said that the parties could renegotiate the applicable tariff and enter into a new power purchase agreement (PPA).

Background

On May 15, 2017, TANGEDCO had invited bids to procure 1,500 MW of power from developers establishing solar projects in Tamil Nadu through a competitive bidding process. TANGEDCO and the Tamil Nadu Transmission Corporation Limited (TANTRANSCO) were made responsible for providing the transmission system to evacuate the power from the project. TANGEDCO has set the upper tariff limit at ₹4 (~$0.062)/kWh.

In the e-reverse auction, Solitaire BTN Solar was declared one of the winners, with a quoted capacity of 150 MW.

Later the developer accepted the negotiated tariff of ₹3.47 (~$0.047)/kWh, which was the lowest tariff (L1) discovered during the bidding process for the supply of 100 MW of solar power.

The developer signed a PPA with TANGEDCO on September 28, 2017. As per the agreed terms of the PPA, the developer was made responsible for obtaining the transmission connectivity and access to the transmission system owned by the TANGEDCO and TANTRANSCO.

As per the PPA, the project was to be completed on or before 24 months from the signing of the agreement, i.e., by September 27, 2019.

The developer requested TANGEDCO to expedite the connectivity works to evacuate the power. However, no response was received from the distribution companies (DISCOMs) and extend the scheduled commissioning date citing a delay in the grant of part evacuation approval of 50 MW.

Solitaire BTN Solar submitted a performance bank guarantee of ₹200 million (~$2.68 million) and subsequently an additional performance guarantee of ₹76 million (~$1.02 million).

Solitaire BTN, in its submission, said that the delay caused in the implementation of the project was due to the unavailability of the transmission system. Accordingly, it was entitled to receive an extension corresponding to the period affected by such a delay.

The developer further noted that it could not execute the balance of 50 MW of the project because of the Covid-19 pandemic.

Solitaire BTN Solar added that MNRE had granted a blanket extension of five months to all renewable generators for achieving various timelines under the PPA because of the Covid-19 pandemic. It applied to the project under consideration.

TANGEDCO, in its submission, said that the developer had failed to commission 100 MW capacity before the commissioning date of September 27, 2019. Therefore, the ‘force majeure’ clause cannot be invoked by the developer post the scheduled commissioning date.

Also, DISCOM added that the developer had only commissioned the solar project partially, i.e., 50 MW capacity, on February 20, 2020, with a delay of 145 days. Therefore, it was entitled to forfeit the performance bank guarantee proportionate to the capacity not commissioned and the capacity commissioned by delaying the project completion by 145 days.

Thus, on account of failure to furnish the bank guarantee before 29 months were over, the contract automatically stood terminated on February 27, 2020, the DISCOM added.

The state DISCOM argued that after the termination of the PPA, it had become imperative to renegotiate the tariff rate for the remainder of 50 MW power generated, adding that there was a huge discrepancy in the prevalent tariff of ₹3.47 (~$0.047)/kWh in the terminated PPA.

Tribunal’s analysis

The Tribunal observed that the respondents had failed to fulfill their obligation to provide an adequate transmission system to evacuate the entire capacity of 100 MW.

Also, as per the PPA, the delay in granting the connectivity approval by TANGEDCO and TANTRANSCO was a ‘force majeure’ event. The developer was entitled to the extension of the scheduled commissioning date.

Considering all the facts, the Tribunal noted that the developer could be allowed an extension of ten months on account of ‘force majeure’ and a further five months extension on account of ‘force majeure’ event of the lockdown owing to the Covid-19 pandemic.

Accordingly, the Tribunal extended the commissioning date from September 27, 2019, to December 27, 2020, and asked TANGEDCO to return the bank guarantee without delay.

The Tribunal directed the DISCOM to pay the developer at ₹3.47 (~$0.047)/kWh for the balance of 50 MW from February 8, 2021, onward (the date on which this capacity was synchronized with the grid) along with the carrying cost.

In February this year, TNERC had rejected a developer’s plea to extend the commissioning date of a 100 MW solar project in the state. It had also allowed the state DISCOM to encash its performance bank guarantee towards damages.

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