SC fines Re­New Power ~119 mn for project de­lay

It has set aside the ter­mi­na­tion of con­tract by the Mad­hya Pradesh govt

Business Standard - - COMPANIES - SHREYA JAI

The Supreme Court has slapped a penalty of ~119 mil­lion on Gu­ru­gram-head-quar­tered re­new­able en­ergy com­pany Re­New Power for de­lay­ing the com­mis­sion­ing of a 51megawatt (Mw) so­lar power project in Mad­hya Pradesh by more than 210 days. The court, how­ever, set aside the can­cel­la­tion of the power pur­chase agree­ment (PPA), which the state gov­ern­ment had ini­ti­ated.

The case per­tains to the 51-Mw project, which the Gold­man Sachs-backed green en­ergy pro­ducer had won in a com­pet­i­tive bid­ding process in 2015 at a tar­iff of ~5.45 per unit. The bid­ding was for power projects of 300 Mw. The re­main­ing 249 Mw was won by a Cana­dian so­lar com­pany SkyPower Global, whose PPA the MP gov­ern­ment has al­ready can­celled.

“Both SkyPower & Re­New failed to pro­cure land within the pe­riod stip­u­lated in the PPA for two 50 Mw units, out of their three projects. Thus, the two com­pa­nies could not achieve the con­di­tions sub­se­quent for their re­spec­tive projects within the max­i­mum per­mis­si­ble pe­riod of al­most 16 months. Mad­hya Pradesh Power Man­age­ment Com­pany’s (MPPMCL) board is­sued the ter­mi­na­tion no­tice on 11 Au­gust 2017,” said the ter­mi­na­tion let­ter is­sued by MPPMCL.

Re­New con­tested the de­ci­sion to can­cel the PPA in the Ja­balpur High Court, which dis­al­lowed the ter­mi­na­tion but main­tained the in­vo­ca­tion of a bank guar­an­tee amount­ing to ~153 mil­lion. The state gov­ern­ment also moved the Supreme Court to con­test the same.

Af­ter the High Court set aside the ter­mi­na­tion, the new date of com­mis­sion­ing of the project was in Septem­ber 2017.

“We are happy that the Supreme Court has up­held the judge­ment of the Mad­hya Pradesh High Court whereby it had held the ter­mi­na­tion of our pow­er­pur­chase agree­ment (PPA) by MPPMCL to be in­valid. The PPA was ter­mi­nated by MPPMCL for de­lay of 16 days in com­plet­ing the pur­chase of al­ter­nate site. We wel­come the restora­tion of our PPA and look for­ward to sup­ply­ing power to MPPMCL from our 51 Mw project, said the spokesper­son of the com­pany,” Re­New Power said.

Mean­while, Re­New also sought a change in the lo­ca­tion of the project, cit­ing en­croach­ment on the ex­ist­ing land. In its sub­mis­sion, the firm said there were de­lays due to a change in lo­ca­tion and al­lied work.

The Supreme Court ob­served the de­lay in com­mis­sion­ing the project was due to un­avoid­able cir­cum­stances but they did not come under force ma­jeure.

“In our view, in­ter­est of jus­tice would be met by di­rect­ing re­spon­dent No1 (Re­New Power) to pay a penalty amount of ~119,554,200 im­posed upon re­spon­dent No.1 by the ap­pel­lant,” said the judg­ment. It fur­ther said, hav­ing in­vested a huge amount in pur­chas­ing the land and de­vel­op­ing the project in Ashok Na­gar district, and when the project was in the fi­nal stage of com­mis­sion­ing, the ter­mi­na­tion of the con­tract would not be fair.

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