The Karnataka Electricity Regulatory Commission (KERC) has issued an order denying Adani Green Energy (UP) Limited’s requests for relief under the ‘Force Majeure’ clause of its power purchase agreement (PPA) with the Chamundeswari Electricity Supply Company Limited (CESCL).
A ‘force majeure’ is declared in the event of unforeseeable circumstances that prevent parties from fulfilling a contract. The phrase is French for “a superior force.”
Adani Green had won 20 MW of solar projects floated by the Karnataka Renewable Energy Development Limited (KREDL). The projects were to be set up in the Madadi taluk of Ramanagara district. A tariff of ₹4.92 (~$0.066)/kWh was discovered through competitive bidding. Adani had also signed a PPA with CESCL on June 28, 2016, and this was approved by the KERC and communicated to them on September 29, 2016.
The approval of the PPA was subject to additional corrections and modifications which were to be incorporated into the PPA through a supplemental PPA (SPPA) between both companies. The SPPA was executed on November 26, 2016.
Adani, in its petition, asked for the Commission to declare that it was prevented from performing its obligations under the PPA due to force majeure events. It cited the imposition of the Goods and Services Tax (GST), the demonetization event in November 2016, and an incident involving imported modules being wrongly classified by port authorities in Mumbai and Chennai as the force majeure events.
It also asked for the Commission to set the effective date of the PPA as the date of approval of the SPPA, the date of execution of the SPPA, or the date on which it received the PPA approval letter from the Commission.
Additionally, Adani sought for the Commission to direct the respondents to not levy any liquidated damages or take any coercive action against it due to the delay in project commissioning as a result of ambiguity surrounding the effective date. It further sought for the Commission to impose the discovered tariff of ₹4.92 (~$0.066)/kWh on the respondents.
The company attributed the delay in the execution of the project to delays in PPA approval by the Commission and in granting evacuation program approval by the Karnataka Power Transmission Corporation Limited KTPCL. It sought an extension of time on account of these delays and force majeure events.
Upon analysis of the case, the Commission denied all of the appeals for relief made by Adani in its petition.
With regard to the effective date, the Commission said Adani did not provide sufficient proof to establish that the effective date of the PPA could be set based on the date of approval of the SPPA, or the date of execution of the SPPA, or the date on which it received the PPA approval letter.
It also said that Adani did not provide sufficient documentary evidence to establish that the “force majeure” events it cited prevented it from performing its obligations under the PPA. It subsequently rejected its appeal seeking an extension of time.
The Commission approved the CESCL’s claim for imposing liquidated damages on Adani as a result of losses due to the delayed commissioning of the project.
“In the case of non-supply of energy by a generator to the distribution licensee, it is not possible to prove the actual damage or loss. Therefore, if the contract provides a genuine pre-estimate of damage or loss, the defaulting party is liable to pay the liquidated damages without proof of actuals loss or damage,” the Commission explained.
It also noted that Adani had not provided any acceptable evidence to refute CESCL’s claim for damages either. Regarding the tariff requested by Adani, the Commission said that only a reduced tariff of ₹4.36 (~$0.058)/kWh would be applicable in the place of ₹4.92 (~$0.066)/kWh because it has been established that there was a delay in the commissioning of the project.
KERC dismissed the petition stating that the petitioner was not entitled to any of the relief it has claimed. It added that it was entitled to only a reduced tariff of ₹4.36 (~$0.058)/kWh and that it was liable to pay liquidated damages as specified in the PPA.
Recently, the Central Electricity Regulatory Commission passed an order asking Solar Energy Corporation of India (SECI) and NTPC to pay the requested compensation under Change in Law to Wardha Solar (Maharashtra) on a back-to-back basis. Wardha Solar is a project company of Parampujya Solar Energy, which is a wholly-owned subsidiary of Adani Green Energy.
Previously, the CERC also approved Parampujya Solar’s plea that the introduction of GST laws should be covered under the Change in Law clause. But for the compensation amount, the company has to prove the correlation between the projects and the supply of goods and services backed by invoices raised by the supplier with auditor’s certificate, the order said.
In April last year, the developer had filed a petition requesting the Commission to declare the imposition of GST as an event under Change in Law, and direct NTPC and SECI to pay the petitioners the amount claimed under Change in Law.
Nithin is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai.