APTEL Ruling: Solar Developer Can’t Benefit From PPA Delay

The Appellate Tribunal for Electricity (APTEL) has reaffirmed that renewable energy developers cannot take advantage of delays caused by their own failure to meet contractual obligations, particularly in signing power purchase agreements on time.

APTEL Ruling on Delays in Renewable Energy Projects

A renewable energy project developer cannot profit from its own delay in signing the Power Purchase Agreement (PPA), according to a ruling by the Appellate Tribunal for Electricity (APTEL).

When a renewable energy firm approached APTEL to request its participation in a similar issue, the ruling from the top regulator gained attention. The company, Krishna Windfarms Developers Private Limited, attempted to identify delays as the cause of the Maharashtra solar project’s delay in commissioning.

Appeal Filed by Krishna Windfarms

Krishna Windfarms Developers Private Limited filed an appeal, but APTEL rejected it, confirming a previous Central Electricity Regulatory Commission (CERC) ruling that permitted the encashment of bank guarantees and a tariff decrease for a postponed solar project.

The controversy concerns a 10 MW solar photovoltaic project in Maharashtra that Solar Energy Corporation of India (SECI) granted under the Jawaharlal Nehru National Solar Mission (JNNSM). Whether the project was commissioned within the contractually specified timeline and whether SECI was justified in using performance bank guarantees worth Rs 3 crore and changing the relevant rate were the main questions on the Tribunal’s agenda.

PPA Execution Timeline Dispute

On March 10, 2016, SECI sent the developer a Letter of Intent (LoI) mandating that the Power Purchase Agreement (PPA) be executed by April 10, 2016. On August 3, 2016, the PPA was, nevertheless, finally signed.

Krishna Windfarms contended that the project’s commissioning on August 11, 2017 would be compliant if the 13-month commissioning time were determined from the PPA’s actual signing date. However, SECI insisted that the contract clearly specified April 10, 2016 as the “Effective Date,” setting May 10, 2017 as the Scheduled Commercial Operation Date (SCOD).

APTEL’s Interpretation of Contractual Obligations

APTEL concurred with SECI, holding that the developer could not profit from its own postponement of carrying out the contract. According to the Tribunal, some contractual provisions that specified the effective date took precedence over general provisions and were obligatory for both parties.

“We concur with SECI’s arguments that the appellant cannot exploit its own wrongdoing by delaying the signing of the PPA by failing to fulfill the requirements for signing the PPA. Consequently, the appellant cannot be allowed to argue that the deadlines must be calculated starting on the date the PPA was signed, the court stated.

Force Majeure Claims Rejected

Using Force Majeure, the developer requested an excuse for a ninety-three-day delay, citing:

Disruptions brought on by the 2016 demonetization, the late implementation of the Power Sale Agreement (PSA) between SECI and Maharashtra State Electricity Distribution Company Limited (MSEDCL), and the delays in getting government licenses for the purchase of agricultural land.

The Tribunal dismissed all of the claims, citing Krishna Windfarms’ failure to give the seven days’ notice necessary by the PPA in order to claim force majeure. It additionally concluded that land purchase and statutory permissions were predictable developer obligations, and demonetization did not automatically justify an extension of commissioning timetables.

Enforcement of Liquidated Damages

Because the delay surpassed the three-month grace period permitted by the PPA, APTEL maintained SECI’s entitlement to: cut the project tariff by 1.5 paise per unit; and cash performance bank guarantees of Rs 3 crore.

The Tribunal noted that SECI was not required to prove actual financial damage in order to enforce the liquidated damages provided in the contract, which constituted a true pre-estimate of loss.

In its recent ruling, APTEL reaffirmed the legality of contractual deadlines and penalties in renewable energy projects by calling the appeal “devoid of merit” and dismissing it in its entirety.

Frequently asked questions

1. What decision did APTEL make in this instance?

A solar project developer cannot profit from delays brought on by its own tardiness in signing the Power Purchase Agreement (PPA), according to an APTEL ruling.

2. What project was at issue?

Under the Jawaharlal Nehru National Solar Mission (JNNSM), SECI awarded a 10 MW solar photovoltaic plant in Maharashtra.

3. For what reason did APTEL dismiss the developer’s commissioning timeline argument?

According to APTEL, the contract made April 10, 2016, the effective date for timeline calculations, and the developer was unable to change this date because of its own delay in signing the PPA.

4. Did APTEL agree with the developer’s assertions of force majeure?

No, the Tribunal dismissed the force majeure arguments, pointing out that demonetization, land purchase, and approvals were predictable risks and that the developer had not to provide the necessary warning.

5. Which fines did APTEL uphold?

Due to delayed commissioning, APTEL maintained SECI’s right to encash Rs 3 crore in performance bank guarantees and lower the tariff by 1.5 paise per unit.

Conclusion

The APTEL decision upholds the necessity of closely adhering to schedules and contractual requirements in renewable energy projects. The Tribunal has made it clear that developers cannot profit from their own non-compliance by rejecting attempts to assign blame for delays.

The ruling emphasizes the enforcement of fines for project execution delays and improves contractual certainty in the renewable energy industry.

Disclaimer: This article is for informational purposes only and does not constitute legal or professional advice. Readers should seek expert guidance before acting on the information provided.