The Supreme Court has slapped a penalty of Rs 119 million on Gurugram-headquartered renewable energy company ReNew Power for delaying the commissioning of a 51-megawatt (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 Rs 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 Rs 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 power-purchase 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 Rs 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.