- The Supreme Court of India upholds High Court decision asking MPPMCL to enter into PPA with ReNew Power for 51 MW PV project
- The court has slapped 119 million INR ($1.82 million) penalty on ReNew for delay in project commissioning
- The Indian project developer had suffered project delays due to encroachment issues on allotted land
- The Supreme Court noted that the delay was owed to unavoidable circumstances and that the termination of the contract would not be fair
Goldman Sachs backed Indian renewable energy power company ReNew Power Ventures has been slapped with a penalty of 119 million INR ($1.82 million) for delays in project commissioning. India’s highest court, the Supreme Court has penalized ReNew for commissioning delays by more than 210 days of a 51 MW solar power project in Madhya Pradesh.
Indian business paper Business Standard reported that the court has not agreed to the cancellation of a PPA signed between ReNew and the Madhya Pradesh Power Management Company Limited (MPPMCL).
Both SkyPower Global of Canada and ReNew Power had won 300 MW of PV projects auctioned in 2015. While SkyPower won 249 MW, ReNew had won 51 MW for a tariff of 5.45 INR ($0.083) per kWh. In 2016, SkyPower had contracted EPC company Sterling and Wilson to build 150 MW in Madhya Pradesh and 200 MW in Telangana (see SkyPower India Projects). According to Business Standard, the PPA with SkyPower is already canceled.
MPPMCL had allotted 41.811 hectares of land for the 51 MW project. However, encroachment issues wouldn’t let the work commence. As per Mercom India Research, ReNew arranged for a new plot of land and informed MPPMCL on March 22, 2017, but in August 2017, the government agency terminated the PPA, ‘citing a delay of 16 days’ in completing the purchase of the alternate site.
A stay order was issued by the Supreme Court on a Jabalpur High Court ruling that asked MPPMCL to enter into a PPA with ReNew, while allowing it to retain the bank guarantee of 153 million INR ($2.33 million) that had been cashed out.
The Supreme Court upheld the High Court judgement and acknowledges that the delay was owed to encroachment and that the additional time to change of location and allied work was unavoidable. For that reason, termination of the project would not be fair.
This judgement gives hope to developers in India. While investing huge sums on project development, land procurement often delays their projects and they end up facing the wrath of offtakers.