Project commissioning delays in India are handled strictly by government agencies often resulting in the encashment of performance bank guarantees. The Telangana State Electricity Regulatory Commission (TSERC) however has provided relief to the developers of four grid-connected solar projects in the state, totaling 55 MW. In all the four cases, TSERC accepted the reasons given by the project developers for the delay in the scheduled commissioning dates, scoring a win for developers.
Here are the details of the four cases:
The Southern Power Distribution Company (DISCOM) of Telangana Limited (TSSPDCL) had tendered 2,000 MW of solar PV capacity. Thukkapur Solar won the bid to develop 15 MW near Thukkapur, in Medak district of Telangana to sell the generated power to the DISCOM. A power purchase agreement (PPA) was executed on February 29, 2016 between the petitioner and TSSPDCL at a tariff of ₹5.7249 (~$0.077)/kWh. According to the PPA, the scheduled commissioning date was slated for 12 months from the date of the PPA’s execution. However, after a delay in the project commissioning, TSSPDCL encashed the performance bank guarantee of the developer.
The developer then petitioned TSERC seeking to extend the scheduled commissioning date by 241 days, citing a delay in land acquisition for the project due to the reorganization of districts, demonetization, and excessive rainfall.
In its order, TSERC accepted the petition and responded that the performance bank guarantees will be refunded to the petitioner.
Padmajiwadi Solar had won the bid to develop a solar project of 10 MW capacity near 132/33 KV Padmajiwadi SS, Nizamabad for sale to the DISCOM. A PPA was executed between the petitioner and TSSPDCL at a tariff of ₹5.7249 (~$0.077)/kWh, with the SCOD set at 12 months from the date of the PPA execution. However, after a 176 day delay in project commissioning, TSSPDCL encashed the performance bank guarantee of the developer.
In this case, the petitioner claimed that the commissioning delay was on account of holdup in land acquisition due to the districts’ reorganization. Citing this delay of 176 days, the respondent had encashed one performance bank guarantee with a threat to do the same with the remaining bank guarantee.
The developer then petitioned TSERC, pleading that the reasons provided for the delay in achieving the project commissioning due to excessive rainfall and reorganization of districts should be accepted. In its order, TSERC accepted the petitioners rationale, and agreed that invoking the performance bank guarantees by the respondent should also be set aside, with the amount to be refunded to the petitioner.
Cases 3 and 4
Mytrah Abhinav Power Private Limited won the bid to set up a 15 MW solar PV project in the Nagarkurnool, Mahaboobnagar district of Telangana. The developer entered a PPA with TSSPDCL at a tariff of ₹5.6667 (~$0.076)/kWh. Per the PPA, the scheduled commissioning date was 12 months from the date of PPA. Due to the delay in project commissioning, TSSPDCL once again encashed the performance bank guarantee of the developer.
According to the petition, due to force majeure (unforeseeable) conditions, the project commissioning was delayed by 371 days, and thus the developer was seeking relief from the TSERC. The commission agreed, and the developer was then granted an extension without penalty.
Mytrah had also won a bid to develop a 15 MW solar PV project in Domakonda, Nizamabad district of Telangana. The developer had entered a PPA with Northern Power Distribution Company of Telangana Limited (TSNPDCL) at a tariff of ₹5.7249 (~$0.0766)/kWh, with a 12 month scheduled commissioning date.
The project commissioning was slated for March 7, 2017, but the project was interconnected to the grid far behind schedule (on December 5, 2017), resulting in a delay of 274 days. Mytrah sited several reasons for delay (same reasons for both the projects) and went details. The developer said that in 2016 the Government of Telangana initiated re-organization of the districts and formation of new districts due to which there was uncertainty in the offices of the revenue authorities regarding jurisdiction of villages and Mandals. The developer cited that this slowed down the pace of site mobilization. The developer also cited that there was change of circle rates, causing land owners to re-negotiate an or renege on land sale agreements. Shifting of revenue records, non-availability of contiguous land parcels because the land owners were unwilling to sell their lands for development of projects also caused delay.
The developer went on to say that new projects of the government like Mission Bhagiratha, Mission Kakatiya and Project Kaleshwaram impacted land acquisition. It also said that the policy of the government not to allot government land for power projects also contributed to the delay relating to acquisition of land.
Mytrah also mentioned that due to demonetization, vendors and sub-contractors could not pay rents for machinery and labor charges and faced severe setbacks due to limited resources which had an adverse impact in the progress of the work. Land owners were unwilling to accept demand drafts for payment and wanted cash, encumbrances could not be cleared by the land owners for want of cash to settle the loans.
Mytrah stated unprecedented and incessant rains and massive storms from June 2017 to October 2017 as another reason for stoppage of work.
The fifth major cause for delay according to Mytrah was the introduction of GST resulting in uncertainty in the tax regime which slowed down manufacturing as well as the service industry across the country from July 2017 to September 2017 which further delayed supply of key equipment.
During its ruling and examination, the TSERC found that the delay under penalty should be 35 days, not 274 days. The commission noted that even the state government had intervened to provide an additional four months to complete the project.
The TSERC orders in these cases is in contrast to a recent order passed by the Karnataka Electricity Regulatory Commission (KERC), which dismissed the petition filed by Marakka Solar Power Project LL.P. KERC responded that the petitioner is not entitled to any of the reliefs due to force majeure events.
These contradictory rulings from the two state commissions highlight how various states view commissioning delay issues through a different lens. Telangana cases also show that developers may win their cases if there are very specific legitimate reasons for delay in commissioning.
Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.