The Karnataka Electricity Regulatory Commission (KERC) has denied Adani Green Energy (UP) Limited’s requests for relief under the force majeure clause of its power purchase agreement (PPA) with the Bangalore Electricity Supply Company Limited (BESCOM). The clause was invoked for delays in the completion of 60 MW of solar projects in the state.

Background: 

Adani Green had filed three petitions with the Commission asking it to declare that the company was prevented from carrying out its contractual obligations as per its PPAs with BESCOM due to force majeure events.

The company said that it was selected to develop 20 MW of solar projects each in the Tiptur taluk of Tumakuru district, the KR Pet taluk of Mandya district, and the Gubbi taluk of Tumakuru district. The tariff for the Tiptur and Pet projects was set at ₹4.84 (~$0.0658)/kWh, while the tariff discovered for the Gubbi project was ₹4.82 (~$0.0656)/kWh.

Adani Green won these projects in BESCOM’s tender from February 2016 for 290 MW of solar projects in Karnataka. These projects were to be implemented across 17 taluks in the state through private sector participation. PPAs were signed for the projects, and the tariffs were approved by the KERC.

The approval of the PPAs was, however, 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.

According to the PPAs, the timeline for commissioning these projects was eight months. However, the company said that the Karnataka Power Transmission Corporation Limited (KPTCL) delayed the connectivity approval, which left it unable to make progress with the land acquisition process.

It also 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 at the Chennai and Nahva Sheva ports as force majeure events. Adani said that all of these factors led to delays in completing its project and sought an extension of time on account of these issues.

It further sought the Commission to set the effective date of the PPA as the date of approval of the supplemental PPA, the date of its execution, or the date on which it received the PPA approval letter from the Commission.

Additionally, Adani sought for the Commission to direct the respondents not to 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 tariffs of ₹4.84 (~$0.0658)/kWh for the Tiptur and Pet projects and ₹4.82 (~$0.0656)/kWh for the Gubbi project.

Commission’s Stand:

Upon analysis, the Commission said that the company did not satisfactorily prove that the projects were adversely affected by the implementation of demonetization, GST, and the incident involving imported solar modules being classified incorrectly by the port authorities in Chennai and Nahva Sheva.

Regarding Adani’s appeal about the effective date of the PPA, the Commission explained that the company’s contention that supplemental PPA requires the approval of the Commission could not be accepted. It said that there was no such instruction given to the parties involved necessitating them to acquire the Commission’s approval for the SPPA.

Final Order: 

Considering all these facts, the KERC, in its final order, said that Adani Green was not entitled to any of the reliefs claimed in its petition. It also rejected the company’s tariff requests and noted that it was only entitled to a tariff of ₹4.36 (~$0.0593)/kWh for power supplied from its projects due to the delays.

The Commission also ruled that Adani was liable to pay damages as per the provisions of its power purchase agreements with BESCOM. The KERC passed these orders for all three petitions Adani had filed with it for the solar projects.

In a similar case back in July, the KERC had issued an order denying Adani Green Energy (UP) Limited’s requests for relief under the force majeure clause of its PPA with the Chamundeswari Electricity Supply Company Limited.

Previously, the state regulator issued an order directing the Mangalore Electricity Supply Company Limited to refund a penalty of ₹1.2 million (~$15,950) to Adani Green Energy. The penalty was levied on AGEL by MESCOM for not producing the documentary evidence for land possession for setting up a 20 MW solar project in Malur taluk of Kolar district in the state.

 

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