CERC Declines to Stop SECI From Encashing Bank Guarantees of Inox Green Energy

Highlights :

  • The order, while going by the letter of the law, does indicate, the issues still being felt in the renewable pipeline of projects.
  • Many such developers are still fighting to exit projects or extend them further with new terms, something that the PPAs simply do not allow.

In an order dated June 29th that was published yesterday, the Central Electricity Regulatory Commission (CERC) declined to prevent the Solar Energy Corporation of India (SECI) from encashing bank guarantees submitted by Inox Green Energy and its various subsidiaries.

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The Case Details

The case involved Inox Green Energy Services setting up 250 MW Wind Power Project in District – Kutch, Gujarat. On 31.05.2017, Solar Energy Corporation of India (SECI) had invited proposals vide Request for Selection (RfS) for setting up grid connected wind power projects in India on “Build Own Operate” basis for an aggregate capacity of 1000 MW. Inox Wind  was issued Letter of Award (LOA) for setting up 250 MW Wind Power Project on 03.11.2017.  It set up multiple 100% subsidiary firms to execute 50 MW each accordingly On 21.07.2017, Power Purchase Agreements (PPAs) were entered into between the firms and SECI.

On 24.11.2017, Haryana Electricity Regulatory Commission (HERC) adopted tariff too. SECI entered into a Power Sale Agreement with Haryana Power Purchase Centre (HPPC) and Uttar Pradesh Power Corporation Limited (UPPCL) for sale of the power to be generated from the projects. On 03.12.2019, CERC adopted tariffs as filed by SECI.

The Petition From Inox

In the main Petition, Inox sought a declaration that the execution of the Project awarded to it has become commercially and physically impossible on account of various force majeure events and, therefore, ought to be terminated. It sought  interim relief in the nature of directions restraining SECI from taking coercive actions against the it.

Inox pleaded that a combination of force majeure events had made the 250 MW project viable. It specified (i) Non availability of Requisite Infrastructure (Connectivity, Common Infrastructure, Land); (ii) Non availability of Requisite Funds; (iii) Non availability of WTGS and allied equipment on account of Covid 19 Pandemic. Saying that since SECI has extended SCoD up to 28.06.2021 (which is 12 months beyond that of the original SCoD i.e. 03.05.2019) due to force majeure events. Articles 4.5 and 13.5 of the PPAs provide for an exit option to the parties in the event of extended force majeure.

Final Order

The CERC bench declared that the plea was not valid, as the performance bank guarantee is a separate contract between the bank and SECI, and in this case, conditions did not warrant any stay.

To quote, “We find that as per Article 4.6.1 of the PPAs for delay upto six months SECI is entitled to encash total PBG on per day basis and proportionate to the balance Capacity not commissioned. In the instant case, the Letter of Award for setting up 250 MW Wind Power Project was issued by SECI on 03.11.2017. As per Article 4.6.1 of the PPAs, the project was to be commissioned within 18 months from date of issuance of Letter of Award i.e. by 03.05.2019 (initial SCoD). However, the SCoD was extended by 787 days i.e. upto 28.06.2021 by SECI which has become the revised SCoD for the purpose of execution of the project. As per Article 4.6.1 of the PPAs SECI is entitled to encash the PBG (on per day basis) in case of delay in commissioning of the project by six (6) months w.e.f. 28.06.2021 (the revised SCoD). Further, none of grounds for interference in the invocation of bank guarantee as laid down by the various judgements of the Hon’ble Supreme Court i.e. fraud of egregious nature or special equity in favour of injunction exist in this case. In view of the above, we are of the view that no case has been made out for issue of direction to restrain SECI from encashing the PBG Bank Guarantees furnished by the Applicant/Petitioner, till the final adjudication of the main petition”. 

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