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Daily News Wrap-Up: APTEL Criticizes MERC for Denying Petitioner Relief

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					</table>The Central Electricity Regulatory Commission (<a href="https://cercind.gov.in/index.html" target="_blank" rel="noopener">CERC</a>) has allowed a renewable energy developer to claim compensation to offset the financial and commercial impact of change in law events on account of an increase in the rates of goods and service tax (GST).
It said the developer is also eligible for carrying costs calculated at the lowest of the actual interest rate, the renewable energy tariff regulations rate, or the late payment surcharge rate in the power purchase agreement (PPA).
Background 
Ostro Energy, a subsidiary of <a href="https://renewpower.in/contact-us/" target="_blank" rel="noopener">ReNew Power Services</a>, develops, operates, and maintains utility-scale grid-connected wind power projects.
The PPA for the 50 MW wind energy project was signed with Solar Energy Corporation of India (<a href="https://www.seci.co.in/" target="_blank" rel="noopener">SECI</a>) on October 25, 2019. The Scheduled Commercial Operation Date was April 18, 2021. The 2021 GST Notification changed rates from October 1, 2021.
The company filed a petition on June 12, 2022, for compensation to mitigate the financial impact of changes in law events due to the GST rate increase from 5% to 12%.
The petitioner requested the respondent to provide compensation, either as a one-time lump sum payment or through tariff increment, for the rise in the GST tax rate.
It also sought interest or carrying costs from the date of incurring the expense until the Commission&#8217;s order.
The respondents in this case are SECI and Uttar Pradesh Power Corporation (<a href="https://uppcl.org/uppcl/hi/" target="_blank" rel="noopener">UPPCL</a>).
Commission Analysis 
The Commission observed that Article 12 of the PPAs specifies that any statutory change in tax structure affecting the wind power project constitutes a change in law.
It acknowledged that the GST rates changed after the scheduled commercial operation date.
Given that the notifications were issued after the petitioner&#8217;s bid submission on April 12, 2019, and considering the principle that change in law compensation should not result in profit, the Commission decided that the discount rate and annuity period would be the appropriate methodology for change in law compensation.
The Commission determined that the respondents’ liability for monthly annuity payment begins from the 60th day from the date of the order or the date of claim submission by the petitioner, whichever is later. In case of delayed monthly annuity payments beyond the 60th day, a late payment surcharge is applicable.
It also ruled that Ostro Energy was eligible for carrying costs at the lowest of the actual interest rate paid or the rate of interest on working capital as per applicable renewable energy tariff regulations or the late payment surcharge rate per the PPA.
Recently, CERC <a href="https://www.mercomindia.com/cerc-upholds-wind-million-bank-guarantee-release" target="_blank" rel="noopener">ruled</a> that the delay in adopting the tariff order by the Uttar Pradesh Power Corporation is a valid reason to claim an extension in the commissioning date for a wind energy project.
Subscribe to Mercom’s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates </a>to ensure you don’t miss any critical updates from the renewable industry.

CERC Allows Compensation for Renewable Energy Developer Due to GST Rate Change

<a href="https://www.suzlon.com/" target="_blank" rel="noopener noreferrer">Suzlon Group</a>, a renewable energy solutions provider, announced its financial results for the first quarter (Q1) of the financial year (FY) 2020-21. The company registered revenues of ₹5.13 billion (~$70.1 million) in Q1 of FY 20201, a 39% decline compared to ₹8.33 billion (~$113.7 million) during the same period last year.
As per the data released by the company, the company reported a net loss of ₹3.99 billion (~$54.5 million) in Q1 of FY 2021, an increase of 19% as compared to ₹3.37 billion (~$46.03 million) during the same period last year.
Further, its earnings before interest, taxes, depreciation, and amortization (EBIDTA) for the quarter ended June 30, 2020, were ₹910 million (~$12.43 million), and the EBIDTA margin improved to 17.7% for the same period.
Speaking on the results, VR Tanti, the chief operating officer of Suzlon, said, “The COVID-19 pandemic and the implementation of the debt restructuring which was completed on June 30, 2020, impacted our wind turbine business in Q1. We have started securing new orders in Q1 and have a healthy order book of 867 MW. Despite the challenges of the COVID-19 lockdown, our operations and maintenance service (OMS) business continues to deliver good performance, and SEForge, our forging and foundry business, has also performed well. At an industry level, there have been several positive developments with a slew of policy announcements. The Power Ministry announced the extension of the waiver of interstate transmission system (ISTS) charges and losses on the supply of power generated from wind and solar sources until June 30, 2023. No ISTS charges would be levied for 25 years, and the same is also applicable to captive power projects, which will open up a new market segment.&#8221;
&#8220;In the Q1 results, we see a clear improvement in EBITDA over last year, which is a testimony of the success achieved in controlling our fixed costs. As the debt resolution plan was implemented at the end of Q1 FY21, the impact of the reduction in interest cost will be seen in the coming quarters. However, part of the interest cost on securities issued to the lenders would keep getting charged to the statement of profit and loss in future years, which is notional. The company is now strongly positioned to resume the wind turbine business and execute our order book,” added chief financial officer Swapnil Jain.
The company’s portfolio says it has a cumulative global installation of 18.8 GW wind energy capacity, out of which over 12.8 GW of wind assets are in India, making it the second-largest operation and maintenance company with over 8,900 wind turbines in the Indian power sector.  
Recently, Suzlon, in its annual earnings report for FY 2020, <a href="https://mercomindia.com/suzlons-losses-rose-historically-low-installations/">reported</a> that its losses during the year had widened due to falling revenues and lower sales volumes amidst the COVID-19 crisis. Net losses during the year widened to ₹26.92 billion (~$362.3 million) during FY 2020 from ₹15.37 billion (~$206.8 million) a year earlier, according to the company’s previous release.
Earlier, Suzlon <a href="https://mercomindia.com/suzlon-completes-restructuring-debt/" target="_blank" rel="noopener noreferrer">announced</a> that it had completed restructuring its debt with the unanimous approval from its secured lenders. The company had been in a financially challenging position for the past year. According to the statement issued by the company, the term debt reduced substantially, with an interest rate of 9% per year, repayable over ten years, starting July 01, 2020.
Previously, Mercom had <a href="https://mercomindia.com/suzlon-sells-solar-subsidiaries-renew/" target="_blank" rel="noopener noreferrer">reported</a> that Suzlon had announced that it would sell two of its solar subsidiaries to Ostro Energy, a wholly-owned subsidiary of independent power producer, ReNew Power.

Suzlon Net Loss Widens to Nearly ₹4 Billion in Q1 of FY 2021

Indian renewable energy project developer <a href="https://renewpower.in/" target="_blank" rel="noopener">ReNew Power</a> has announced the acquisition of Ostro Energy Private Limited. The acquisition is valued close to ₹10,600 crores (~$1.63 billion), according to Mercom’s channel checks.
ReNew Power currently has green energy assets of more than 4.5 GW, which include a commissioned capacity of approximately 2.8 GW.
<a href="http://www.ostro.in/" target="_blank" rel="noopener">Ostro Energy</a> has a total capacity of more than 1.1 GW, out of which nearly 850 MW is already commissioned. Ostro Energy’s assets are spread across the states of Andhra Pradesh, Karnataka, Telangana, Rajasthan, Madhya Pradesh, and Gujarat.
With the acquisition of these assets, ReNew Power’s capacity will now exceed 5.6 GW, the company said in its media statement. Over 65 percent of the combined portfolio capacity of ReNew and Ostro is already operational.
In <a href="https://mercomindia.com/renew-power-raises-352-million/" target="_blank" rel="noopener">January 2018</a>, ReNew Power raised ₹22.35 billion (~$352 million) to be used for its expansion and loan-payment plans. ReNew raised the amount through Non-Convertible Debentures (NCD).
According to Mercom’s <a href="https://mercomindia.com/product/india-solar-project-tracker/" target="_blank" rel="noopener">India Solar Project Tracker</a>, ReNew Power was ranked as the fifth largest solar project developer with installed capacity of 1,149 MW at the end of 2017.  ReNew is also the largest wind power developer in the country.
In the acquisition, ReNew Power also acquired wind assets aggregating 990 MW. After this acquisition, ReNew Power has become the largest renewable energy project developer in India across the wind and solar energy sectors combined.
Concurrent with this transaction, Canada Pension Plan Investment Board (CPPIB) is investing an additional $247 million to support ReNew Power’s financing for this acquisition. As <a href="https://mercomindia.com/cppib-invests-144-million-renew-power/" target="_blank" rel="noopener">reported</a> previously by Mercom, the <a href="http://www.cppib.com/en/" target="_blank" rel="noopener">CPPIB</a> recently acquired a 6.3 percent stake in Indian renewable energy project developer ReNew Power from the Asian Development Bank (<a href="https://www.adb.org/" target="_blank" rel="noopener">ADB</a>) for $144 million. CPPIB first revealed its <a href="https://mercomindia.com/canada-pension-plan-investment-board-invest-renew-power/">plans to acquire</a> ADB’s equity stake in ReNew Power in November. ADB first purchased its stake in Renew Power by making a $50 million (~₹3.4 billion) equity investment in the company in 2014.
In November 2016, Mercom <a href="https://mercomindia.com/greenko-completes-sunedison-india-acquisition/" target="_blank" rel="noopener">reported</a> on another big acquisition of the domestic solar sector. Greenko Energy Holdings (Greenko) completed the acquisition of SunEdison’s 587 MW Indian wind and solar projects for a cash payment of $42 million and assumption of project-level debt of $350 million (at an average interest rate of 11.3 percent). The enterprise value of the transaction was approximately $392 million.
In September 2016, Tata Power Renewable Energy acquired 100 percent shareholding in Welspun Renewables Energy (WREPL) and its subsidiaries for $1.4 billion (~Rs.93.8 billion) which was one of the largest acquisition in the Indian renewable energy sector at that time, but this acquisition by ReNew is valued at ~$1.6 billion. This is the largest transaction in terms of the enterprise value in the Indian renewable energy sector.

ReNew Buys Ostro in One of the Largest Renewable Acquisition Deals in India

Suzlon, a wind turbine manufacturer and renewable energy project developer, <a href="http://www.suzlon.com/pressrelease/pressrelease_detail/341-suzlon-and-ostro-energy-join-hands-for-50-mw-solar-project-in-telangana/2017" target="_blank" rel="noopener noreferrer">has entered into</a> a joint venture with Ostro Energy, a wind energy project developer, for the development and construction of a 50 MW solar project at Wanaparthy, Telangana. The project is expected to be commissioned in financial year 2017, and marks Ostro Energy’s entry into the Indian solar sector.
Ostro Energy will acquire a 49 percent stake in Prathamesh Solar Farms, a special purpose vehicle (SPV) set up by Suzlon to execute this project and has the option to acquire the remaining 51 percent stake in the future.
The off-taker for this project will be Telangana Southern Power Distribution Company (TSPDCL). Suzlon will be responsible for project commissioning and operation &amp; maintenance (O&amp;M) services for a 25-year period. The project will be funded with 75 percent debt and 25 percent equity.
Ranjit Gupta, CEO of Ostro Energy, said, “With the government’s thrust on renewables and the target to build 100 GW of solar energy projects by 2022, this is the right time for us to foray into solar energy. This joint venture for our first solar project in Telangana is a significant step for the company towards a balanced energy portfolio. This is aligned to our vision to be a 1,000 MW renewable energy company in India by 2018.”
Suzlon Group CEO J.P. Chalasani, commented, “Today, the renewable energy sector is witnessing a positive momentum. The sector is committed to provide sustainable and affordable energy for all. We believe if India’s renewable potential is unlocked, it can transform the country’s energy architecture to be dominated by clean energy sources. We look forward to our continuing partnership with Ostro and thereby contributing in the country’s energy security.”
In January 2016, Suzlon <a href="http://www.suzlon.com/pressrelease/pressrelease_detail/66-suzlon-forays-into-solar-wins-210mw-projects-in-telangana/2016" target="_blank" rel="noopener noreferrer">won bids to develop 210 MW of solar projects</a> in Telangana through a competitive bidding process and signed power purchase agreements (PPAs) in February 2016. This is the fourth project that Suzlon has set up with partners in Telangana. Mercom had <a href="http://mercomcapital.com/suzlon-to-set-up-45-mw-of-solar-projects-in-telangana-with-canadian-solar-and-unisun-energy" target="_blank" rel="noopener noreferrer">recently reported</a> that Suzlon will develop 45 MW of solar projects in Telangana, in partnership with <a href="http://www.suzlon.com/pressrelease/pressrelease_detail/338-suzlon-partners-with-unisun-energy-for-15-mw-solar-project-in-telangana/2017" target="_blank" rel="noopener noreferrer">Unisun Energy (15 MW)</a> and <a href="http://www.suzlon.com/pressrelease/pressrelease_detail/339-suzlon-and-canadian-solar-partner-for-30-mw-solar-projects-in-telangana/2017" target="_blank" rel="noopener noreferrer">Canadian Solar (30 MW)</a>. The company is also developing a 100 MW project with CLP India.
<a href="http://mercomcapital.com/assets/images/Suzlon_Ostro.png"><img loading="lazy" decoding="async" class="aligncenter" src="http://mercomcapital.com/assets/images/Suzlon_Ostro.png" alt="" width="444" height="181" /></a>
According to Mercom’s India Solar Project tracker, Suzlon currently has 515 MW solar projects under development at an average tariff of Rs.5.36 (~$0.0803)/kWh. The company does not have any operating projects so far.
Image Credit: Suzlon

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