Companies Industries Legal North India

Force Majeure clause evoked in 600MW solar project

ACME to cancel India’s cheapest solar project citing Covid-19 impact Files petition with CERC to prevent SECI and Power Grid Corp from encashing bank guarantee and letter of comfort submitted for project   
Indian based ACME Solar, which had bid India’s lowest solar tariff has decided to cancel the project. The company webpage says it has so far Commissioned 2900 MWp and under construction further 2600 MWp
 
The grid-connected solar power project was awarded to ACME Solar in December 2018 by SECI. ACME has won 600 MW capacity at a tariff of Rs 2.44 per unit to construct the plant at Fatehgarh district, Rajasthan.
 
A year before, ACME had quoted Rs 2.44/unit tariff for 500 MW capacity in Bhadla solar power park as well. This was the lowest ever solar tariff in India and was hailed globally as it was cheaper than every other energy source.
 
The company in its petition to the Central Electricity Regulatory Commission (CERC) has cited Corona pandemic as one of the reasons for the cancelling the power purchase agreement (PPA) for the project with the government agencies.
 
The company has filed its petition with CERC to prevent Solar Energy Corporation of India (SECI) and Power Grid Corporation of India (PGCIL) from encashing the bank guarantee and letter of comfort submitted for the project. ACME had signed the PPA with SECI and power supply agreement (PSA) with PGCIL.
 
In its petition, ACME Solar has mentioned that it has terminated the PPAs dated December 2018 executed with SECI “on account of the force majeure events”. Among the several reasons cited by the company, one is the latest Corona pandemic.
 
Force Majeure clause (FMC) in an agreement pertains to the events and circumstances that are beyond the control of humans. The clause however does not excuse a party’s non-performance entirely, but only suspends it for the duration of the FMC.
 
Due to the delay in getting transmission and land for sub-station, ACME has said, “the projects have already been delayed by 15 months and further delay will continue on account of uncertainty due to Covid-19.”
 
The petition follows an earlier request filed by ACME Solar to SECI seeking a force majeure of 327 days owing to delay in getting transmission connectivity.
 
“Power evacuation from our solar power project was not certain which is completely beyond our control and as such amounts to Force Majeure under provisions of the PPA and PSA,” it said.
 
ACME has contested the terms of the PPA saying the extension allowed under the agreement is not enough for them. “Due to delay on account of force majeure events, the Petitioner is not able to execute the Projects within the time period.
 
Accordingly, performance of obligations under the PPAs has become impossible and thus become void. Therefore, the parties are absolved from their obligations,” it said in the petition.
 
SECI and PGCIL in reply to the petition have contested the grounds on which ACME has decided to “unilaterally terminate the PPA.”
While SECI has asked for more time from CERC to respond to the petition, it said, “The issue relates to the unilateral termination of the contract by the Petitioners (ACME) on alleged grounds of force majeure. However, termination has not been accepted by SECI.”
 
It has also disputed that there has been an event of force majeure or that even if there is such an event, its effect is continuing for a period of more than three months. SECI also said in its reply that it is “considering giving an extension to ACME and has no intent to encash the bank guarantee.”
 
PGCIL said as the matter of deadline extension due to delay in getting in sub-station for the project is already sub-judice in High Court of Rajasthan, the same cannot be contested in this petition by ACME.
 
“The Petitioners cannot be allowed to escape the liabilities under the contracts entered into it and the Regulations of this Commission with regard to abandonment/exit from the project under the guise of force majeure,” said PGCIL in its reply to the petition by ACME.

 
Splco Reporter
Special Correspondent Group of right thinking writers who eulogise self expression in quest of truth in news making jointly contribute under the platform of splco.me a novel social media channel.

Leave a Reply

Your email address will not be published.