CERC Allows Fortum Subsidiary To Retain Connectivity For 300 MW Karnataka Project

In an interesting order earlier this week, the Central Electricity Regulatory Commission allowed SolarOne Energy Private Limited, a subsidiary of Finnish major Fortum, to retain 300 MW connectivity it had been allotted from the Central Transmission Utility of India Limited (CTUIL).

The issue arose after CTUIL moved to cancel connectivity citing failure to sign PPA between SolarOne and SECI, following which SECI had withdrawn the LOA to SolarOne for the project in Karnataka.

The CERC therefore delved into the issue of whose fault it was to sign the PPA, the intent of the developer in this case and the investments already made into the project, and their right to move to the new , more liberal GNA (General network Access) regime with a fresh project of their own.

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CERC noted that SECI failed to sign PPA within 90 days of the issuance of the LOA in terms of clause 20.1 of the RfS dated 14.07.2021. SECI approached the Petitioner after 1.5 years of issuance of LOA to sign PPA, which the Petitioner refused to sign. Considering the contention of the Petitioners, SECI vide letter dated 10.08.2023 permitted the Petition to exit from the LoA process without any penalty and annulled the LoA.

CTUIL had accordingly submitted that since SECI had annulled the LoAs and since the LoAs, which were the basis of the grant of connectivity, have been annulled, CTUIL revoked the Stage-II Connectivity of 300MW granted to the Petitioner in terms of the provision of Regulation 24.6 of the GNA Regulations. CTUIL also contended that whether Petitioner (SolarOne) was allowed to exit or was made to exit is immaterial and the consequences specified in the extant laws would have to apply.

SolarOne on the other submitted that the term ‘termination’ is mostly used when a party in any contractual arrangement fails to comply with its obligation envisaged under such arrangement, and consequently, there are some penalties with respect to such failure; however, that is completely missing in the present case, as SECI has allowed the Petitioners to exit the process without any liability and penalty since there was no default on the part of the Petitioner. Thus SolarOne  submitted that they are willing to retain the connectivity by submitting upfront the required Bank Guarantee and can be put to terms to demonstrate their seriousness and commitment in the implementation of the Project by providing land ownership/lease proof within 180 days of submission of Bank Guarantee.

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Noting that SolarOne had made progress in the implementation of the project  with investment to the tune of INR 6,46,32,178 and has committed to investing around INR 10,64,28,78,452. It has already secured registered lease rights of 205 acres of land for a period of 29 years and 11 months. The Petitioner has also signed an agreement to lease around 300 acres with the landowners for further formalizing the registered lease rights agreements.

It did note that engaging with Suzlon Energy for delivery and supply of Wind Turbine Generators for a 100 MW capacity of value INR 598,83,64,000/- was a surprise, as it was not made clear when the project shifted to a hybrid project from a solar project. A  PV module manufacturer for delivery and supply of 200 MW AC solar modules of value INR 433,45,76,064/-, and engaged with Ipower Renewable Energy Private Limited and Energy Systems Private Limited for procurement of land on lease, vide agreements dated 14.08.2023 and 28.03.2023 respectively has also been done.

Further, it has already executed Agreement to Lease deeds of about 346 acres of land by expending INR 70,80,000 in favour of various landowners and land aggregators.

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Noting that even though SolarOne had  been holding on to the Connectivity since June 2022, which is approximately two years. CERC decreed that in exercise of its powers under Regulation 41 and Regulation 42 of the GNA Regulations, it was hereby relaxing the provisions of Regulation 24.6 and allow SolarOne to convert each of their Connectivity granted under LOA route to any other route as provided for in Regulation 5.8(xi) of the GNA Regulations, subject to fulfilling key conditions including submitting the Land documents or Land BG in terms of Regulation 5.8(xi) of the GNA Regulations for full 300 MW Connectivity each .

After the annulment of the LoAs, the SCODs of the projects mentioned under LoA do not hold under both the Petitions. Considering that nearly two years have elapsed since the granting of connectivity and the Petitioners have shown that considerable progress has already been made in the projects, CERC gave nine (9) months from the issuance of this order to commission the project. The milestones for achieving Financial closure and the release of 10% of the project cost under equity as required under Regulations 11(A) and 11(B) of the GNA Regulations shall have to be achieved within six months of the issue of this Order.  Any misses would give CTUIL the right to terminate the connectivity.