Despite MERC Order, Will Myrah Energy Execute 100 MW Project in Time?

If you ever needed to see the long journey and pitfalls a developer has to travel between bidding and actually completing a renewable project in India, then the case of Mytra Energy subsidiary Mytrah Vayu (Vedavati) Private Limited (MVEL) versus the Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) and Maharashtra State Electricity Transmission Co. Ltd MSETCL) is instructive. The case over a 100 MW wind energy project was recently decided at the MERC on January 16 this month.

After the battle at the MERC (Maharashtra Electricity Regulatory commission), where MVEL had effectively pleaded for an extension in time allowed for commissioning by invoking the force majeure clause, besides compensation as well as a  higher rate, the final order, while trying to do a balancing act for the firm, may not actually help it go over the line as far as project profitability goes.

The issue of PBG (Performance Bank Guarantee), which MVEL had sought to prevent MSEDCL from invoking, has also been extended, not extinguished, by asking MVEL to submit a fresh guarantee, besides the primary MERC order that gives it a further extension in time till 27th June, 2020, from the earlier 16th Jan, 2020 for completion. So what will keep Mytrah worried despite the order that gave it both extra time and saved its PBG, for now?

Two things. For one, it has failed to get any compensation from the commission  for the delays caused by MSEDCL due to delay in providing grid connectivity (GC) permission, as that was not explicitly stated as an option for force majeure. By refusing its plea to be allowed to exit the project, Mytrah finds itself fighting the clock yet again to have the 100 MW project up and running by June 2020. In the new  SCOD (Scheduled commercial operation date) , the only saving grace for Mytrah might be the fact that the GC is in place for now, and it will beat the impact of the monsoons, if all goes to plan.

So how did things come to this? From winning the bid at a price of  Rs 2.86 per unit on March 6, 2018, it’s been a journey full of attempts to interpret the rules of the game for Mytrah, something it clearly tripped on this time. Keep in mind that the typical project needs to be executed within 18 months of the date of winning, ie, 7 months for FC (Financial closure), and 11 months for project implementation to SCOD.

Thus, on June 18, 2018, MSEDCL allotted the LOA (Letter of allotment ) to MVEL, with the condition that the PPA (power Purchase Agreement) needs to be signed within one month. As per MVEL, by July 10, it had submitted its PBG for Rs 20 crores (Rs 20 lakhs per MW) and signed the PPA too. But MSEDCL delayed signing, informing MVEL only on August 18, 2018 about the delay. A delay explained by MSEDCL as misunderstanding on account of MVEL waiting for hard copies of the PPA. It doesn’t end there.

The next trip up for MVEL was the GC. It claims, as per prevalent norms in Maharashtra, and despite no specific mention prohibiting the same, it signed a separate agreement with another firm registered as a developer to get the GC, to enable faster processing and save time on registering itself. MSEDCL initially refused to allow this.  It finally relented only in February 2019, causing the delays to add up. By January 2019, MVEL had made a formal request for extension of time, as MSEDCL’s condition for  GC in its name was taking time, delaying the projects FC too. All it got from the MSEDCL was a 30 day extension for FC.

By June 2019, even as the to and fro continued between the aggrieved parties on the ‘impossible’ time to comission, MVEL moved the MERC for relief, as the state discom had threatened to encash the PBG. Which brings us to the commissions order as mentioned in para 1 of the story above.

So how much of the issues here were avoidable? When we spoke to industry insiders, most had some sympathy’s for the developer, while at least one expert also blamed the rules. For instance, the ambiguity in the ‘standard’ practice of using a third party for getting GC was entirely avoidable. Bureaucrats in the MSEDCL were obviously not going to risk their reputations by allowing something not expressly allowed. Similarly, the rush to invoke PBG’s by government officials, despite being cognizant of he issues caused by their own departments was also an issue. MSEDCL’s contention on the PPA for instance, that the hard copy was not entirely critical is laughable, hen one considers just how insistent  they themselves are for hard copies of every document, and its role for financial closure.

Either way, with June 2020 not too far off, one fears that we may not have heard the last of Mytrah Energy’s travails on this particular ‘win’, where the taste of success is already considerably soured for the firm. At the time of filing this story, we could not get a confirmation from the firm in case it planned to appeal the order.  For the London headquartered group with its India operations led by Vikram Kailas,the experience will certainly be a milestone to forget in its stated drive to set up 3500 MW of renewable assets in the country.

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Prasanna Singh

Prasanna Singh

Prasanna has been a media professional for over 20 years. He is the Group Editor of Saur Energy International

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