Regulator Dismisses Solar Developer’s Plea for Respite Under Force Majeure

The Karnataka Electricity Regulatory Commission (KERC) dismissed Adani Green Energy (UP) Limited’s plea for relief under the force majeure clause in its power purchase agreement (PPA) with the Gulbarga Electricity Supply Company Limited (GESCOM).

The Commission also reduced the tariff to ₹4.36 (~$0.05)/kWh and asked the petitioner to pay the damages to GESCOM.

Background

Earlier, Adani Green had filed a petition requesting the Commission to grant relief on the grounds of force majeure and approve the supplemental power purchase agreement (SPPA). It requested the Commission to declare the ‘effective date’ as the date on which the SPPA was signed on December 26, 2016. It had also requested the Commission to direct GESCOM to make the payment at ₹4.81 (~$0.06)/kWh, as per the PPA.


The Karnataka Renewable Energy Development Limited (KREDL) had invited bids for the development of 290 MW of solar projects across 17 taluks.

Adani Green was selected as the bidder for the development of 20 MW solar project in Jevargi taluk of Kalaburgi district. The tariff discovered through competitive bidding was ₹4.81 (~$0.06)/kWh. Adani Green signed the PPA with GESCOM on June 29, 2016. The approval of the PPA was subject to certain modifications to be incorporated in the PPA by entering into a suitable supplemental power purchase agreement (SPPA) between the parties.

According to the PPA, the developer was required to achieve financial closure, obtain evacuation approval, and documentary evidence of having clear title and possession of the land, within eight months from the ‘effective date’ of the PPA.

The project was commissioned on November 18, 2017. Adani Green could not achieve the timeline fixed for fulfilling one of the conditions, which was documenting a clear title and the possession of land required for the project.

GESCOM, in a letter to Adani Green, said that it had not fulfilled the conditions within eight months from the ‘effective date’ and asked it to pay damages of ₹1.2 million (~$16,077) as per the PPA within seven days from the date of receipt of the letter.

Adani Green replied requesting for time, stating that the application for obtaining land conversion order was still pending, which amounted to a ‘force majeure’ event.

The Commission said that September 29, 2016, has to be considered as the ‘effective date’ to interpret the relevant clauses in the PPA.

The Commission dismissed Adani Green’s plea that there was a delay in the approval of the PPA by KERC, which resulted in a delay in getting other required approvals.

KERC stated that the scheduled commissioning date was on September 28, 2017, as per the terms of the PPA. Therefore, Adani Green had almost ten months to construct the dedicated transmission lines and to fulfill other conditions.

Adani Green, in its submission, argued that the delay in issuance of approvals of the PPA by this Commission and the evacuation plan by the Karnataka Power Transmission Corporation Limited (KPTCL) had led to delay in identifying the lands required for establishing the project.

To this, KERC argued that before applying for issuance of evacuation approvals to any sub-station, the petitioner has to identify the lands where the project would be established. If there was a change in the location of the project site, the developer should have filed a new application, showing the location and the sub-station.

The Commission further noted that in almost all cases, there was an inordinate delay in obtaining the land conversion order. So, the petitioner should have applied to KREDL at least 60 days before the deadline. That could have been considered as the fulfillment of the conditions for the project, the Commission noted.

Adani Green had claimed that the delay was caused because of the implementation of the ‘Goods & Services Tax’ (GST) Act, 2017, and the introduction of demonetization. The Commission noted that the petitioner had not produced any documentary evidence in support of its claims to establish that it was affected due to GST induced disruptions. Similarly, the Commission said that it could not accept that demonetization adversely affected the progress of the project.

Adani Green had contended that without proof of actual damage or loss, a party could not recover liquated damages mentioned in the contract. To this, the Commission said that 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. It added that the agreed term shows that the liquidated damages mentioned in the PPA are genuine estimates.

The Commission further noted that the petitioner had failed to establish any ‘force majeure’ event to claim an extension of time for achieving the commissioning of the project. The project should have been commissioned by September 28, 2017, as per the terms of PPA. The tariff initially agreed in the PPA was of ₹4.81 (~$0.06)/kWh, but KERC revised the tariff to ₹4.36 (~$0.05)/kWh.

Recently, KERC dismissed another of Adani Green’s plea claiming relief on the grounds of force majeure for its 20 MW solar project. The company had signed that power purchase agreement with the Chamundeshwari Electricity Supply Company Limited (CESCL).

Earlier, KERC, in another similar petition, had issued an order denying Adani Green’s requests for relief under the ‘force majeure’ clause of its PPA with the CESCL.