MERC Extends Commissioning Timeline for a Wind Project After Land Acquisition Delay
The region faced a severe drought in 2018, making land acquisition difficult
The Maharashtra Electricity Commission (MERC) has asked the Maharashtra State Electricity Distribution Company Limited (MSEDCL) to extend the financial closure and scheduled commissioning dates of a wind project.
The project was developed by Clean Wind Power (Bhavnagar) Private Limited (CWPBPL), the special purpose vehicle of independent power producer Hero Futures Energies. In October 2019, the developer had filed a petition with the Commission seeking the extension of financial closure and scheduled commercial operation date (SCOD) of its 75.6 MW wind project in the state.
Clean Wind Power cited delays in acquiring land for the project, and the approval to get grid connectivity from Maharashtra Energy Development Agency’s (MEDA) registered developer. As per the protocol in the state, it is not the duty of the bidder to obtain grid connectivity. It is obtained after the execution of the ‘right of use’ agreement for power evacuation with the state’s project developer, the petition noted. The engineering, procurement, and construction (EPC) contractor for this project are Suzlon and Suyog Urja Private Limited was Suzlon’s vendor, who is a registered developer with MEDA.
The PPA for the project was signed on July 17, 2018, and in October 2018, the state government declared drought situation in 170 talukas of Maharashtra, which includes Kannad and Phulambri talukas in Aurangabad district where the project was to be set up.
According to the request for selection documents, the financial closure was to be achieved within seven months from the date of signing of the power purchase agreement (PPA). In this case, the date for financial closure was February 17, 2019 – and the SCOD was January 17, 2020.
After the drought, the state announced compensation to farmers in the drought-affected area to assist them in their livelihood. Clean Wind Power had stated with the compensation amount expected from the government; the farmers were reluctant to part with their land. As a result, it was nearly impossible to obtain the land from the farmers.
The Commission noted that even though ‘drought’ is an eligible event under force majeure, in this case, the effect of drought on Clean Wind Power would be in the increased cost of procurement of land as the landowner may not ready to forgo the government compensation.
The Commission further added that the developer would have incurred higher expenses on acquiring the land, but it was not impossible to complete this activity. “It is settled legal position that increased cost cannot be the reason for seeking relief under Force Majeure,” it noted.
Besides this, the Commission added that there was a lack of documentary evidence stating that the drought continued well into 2019. Stating this, the Commission refused to accept the delay as force majeure.
However, the MERC ordered the MSEDCL to extend the cut-off date for the financial closure and the scheduled commercial operation date by 158 days. The new date for financial closure was set for July 24, 2019, while the revised SCOD would be June 23, 2020. The commission also accepted that the delay in obtaining grid connectivity was beyond the control of the developer.
Previously, the state body asked MSECDL to clear its outstanding dues with three wind developers in the state, including interest for delayed payment charges.
Then in September 2019, as well, the state commission directed MSEDCL to reconcile the statement of accounts with the petitioners within two weeks and pay back the dues of three wind generators.
Recently, Mercom reported that the MERC allowed Adani Electricity Mumbai Limited to renegotiate a lower tariff for 700 MW of grid-connected solar-wind hybrid power.
Nithin Thomas is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai. More articles from Nithin.