Shocker! ACME Bows Out From Rajasthan Project With Record Low Tariffs

After surprising the world, and setting the stage for a period of record low tariffs in India with its bid at Rs 2.44 kWh for a SECI project in Rajasthan, the winner, ACME Solar, has opted to cancel the project.  It had won the 600-Mw project in Rajasthan at a historic low rate of Rs 2.44 per unit in December 2018. The project was to come up at Fatehgarh District in Rajasthan. ACME was simply repeating its own trend of winning bids at Rs 2.44 per unit, which it had started by winning a tender at Bhadla in May 2017. A price considered too low by most industry watchers at the time.

In a petition to the Central Electricity Regulatory Commission (CERC), ACME Solar has blamed the  Coronavirus pandemic , besides many other issues related to the project, as the reason for seeking cancellation. The firm has also pleaded to prevent the agency handling the bid, SECI, and Power Grid Corporation of India Limited (PGCIL) from encashing its  bank guarantee and letter of comfort submitted for the project. Typically, developers sign a PPA with the agency, while PGCIL signs a separate agreement for evacuation of power. Both require strict adherence to timelines with penalties for the developer for non compliance.

ACME has taken recourse to the Force Majeure clause in the  agreement.

The reasons cited by ACME in the petition include issues with its land allotment for the project, delays caused in supplies due to the Covid -19 pandemic, and finally, delays in building of the power evacuation infrastructure by PGCIL.

The project, which was already delayed by 15 months seems to have met its final end with the Covid pandemic disruption. Vishrov Mukerjee, Partner with  J Sagar Associates, the law firm handling the case for ACME, has released the following quote. “JSA is representing ACME in proceedings pertaining to termination of solar PPAs with SECI and Discoms due to delays and disruption caused by Covid. The ensuing lockdown in China and India have not only delayed construction of these projects but also made it impossible to access critical equipment including solar panels from China. With Chinese manufacturers unable to commit to a firm timeline and uncertainty over resumption of supplies, most projects will be delayed beyond the scheduled commissioning date. Covid related disruptions will also impact cost of such projects. That coupled with the decrease in power demand and financial health of discoms may have a significant impact on growth in the renewable sector”.

It was clear that the project was in danger when ACME first requested SECI, seeking an extra time of  of 327 days , again citing Force majeure, in getting transmission connectivity. Normally, SECI, or even NTPC, the other agency handling utility scale solar auctions, have not been inclined to give such long extensions, preferring instead to let regulators tackle the issue, which leads to further delays.

Predictably, both SECI and PGCIL contested the claims made by  ACME.  Both have termed it unilateral on ACME’s part and asked for more time to reply, considering the wider implications of any decision on the request.

The quagmire of this project, and many other projects in both Solar and wind is precisely the reason why many observers have declared India’s chances of reaching the 175 GW figure low. Now, with the Coronavirus making its impact felt for at least 6 months, the 35 odd GW ‘pipeline‘ that is under construction can be considered at grave risk of extending well beyond 2022 itself.

While ACME itself has largely been absent in recent bids, owing to liquidity problems  cited by many suppliers, it will be very interesting to see the fate of the remaining projects in the firm’s kitty (almost 2.0 GW at last count) that have not been commissioned yet. Last year, the firm had also told NTPC that another 600MW project it won with a bid of Rs 2.59 was no longer feasible. It has also done a deal with Actis to sell  600MW of projects in February this year.

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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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