Regulator Allows Old PPA to Continue After Change in Solar Project Ownership
The procurement at a tariff of ₹7/kWh will allow the state to meet its RPO
The Odisha Electricity Regulatory Commission (OERC) has said that a ten-year-old power purchase agreement (PPA) can remain in force even after the ownership of the solar project changed as a result of the insolvency of the previous owner.
The approval will allow the state to procure 5 MW of solar power for 25 years at a tariff of ₹7 (~$0.085)/kWh for fulfilling the renewable purchase obligation (RPO) target of GRIDCO.
GRIDCO had filed a petition seeking approval of the PPA signed with Alex Green Energy to procure 5 MW of solar power from the project located in the Bolangir district of Odisha toward fulfilling its RPO target.
The state’s renewable energy development agency (OREDA) had floated a tender for 25 MW of solar projects in 2011. In the reverse auction, Alex Green emerged as one of the successful bidders, and the lowest tariff discovered was ₹7 (~$0.085)/kWh.
GRIDCO executed the PPA with Alex Green Energy on May 26, 2012, to set up one unit of 5 MW in the Bolangir district of Odisha.
The amended PPA was signed on November 25, 2013.
The project got commissioned on August 19, 2014, and has been supplying power to GRIDCO since then.
Later, Alex Green Energy was referred to the National Company Law Tribunal (NCLT), Kolkata, to initiate the corporate insolvency resolution process. Subsequently, Fortis Chemicals stepped in as the new owner and has been managing the project since August 29, 2020.
Alex Green Energy submitted that since the tariff of ₹7 (~$0.085)/kWh was discovered through a competitive bidding process and as per the order of NCLT, the PPA should continue, and the question of price variation did not arise.
OREDA, in its reply, said that the tariff discovered in the bidding process was the lowest at the time, and the benchmark tariff in 2011 was ₹15.39 (~$0.186)/kWh.
GRIDCO, in its reply, stated that the Tata Power Western Odisha Distribution had proposed renegotiating the tariff of ₹7 (~$0.085)/kWh with the solar developer at par with the market trend prevalent at the time. The said tariff was discovered through competitive bidding during FY 2011-12 when the solar tariff was relatively high.
The Commission observed that the tariff discovered through a competitive bidding process was ₹7 (~$0.085)/kWh, which was one of the lowest at the time.
The Commission added that the project was out of service for almost two years and could not supply guaranteed generation to GRIDCO due to severe damage caused during a heavy storm. The commercial operation could not be resumed within 100 days, and NCLAT rejected the PPA termination notice of GRIDCO.
Later, Fortis Chemicals was approved by the committee of creditors and was given control over the management of Alex Green Energy to resume the project’s operation in August 2020.
The state regulator noted that the project’s operation was resumed on August 29, 2020, and the power from the project has been supplied to GRIDCO under the new management of Fortis Chemicals.
Considering the facts, OERC granted approval to GRIDCO for the procurement of power from the 5 MW solar project at a rate of ₹7 (~$0.085)/kWh on the same terms and conditions as laid down in the original PPA under the new management of Fortis Chemicals.
Last September, OERC had approved the power sale agreement to be executed between GRIDCO and NTPC for 200 MW of inter-state transmission system (ISTS) connected solar projects to fulfill its RPO targets.
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