ReNew Power slapped with Rs 110-million fine for delay in MP solar project

The Supreme Court has slapped a penalty of Rs 110 million on Gurgaon-headquartered renewable energy company ReNew Power for delaying the commissioning of a 51-Mw solar power project in Madhya Pradesh by more than 210 days. The court, however, set aside the cancellation of the power purchase agreement (PPA) which the MP government had initiated.

The case pertains to the 51 Mw project which ReNew won in a competitive bidding process in 2015 at a tariff of Rs 5.45/unit. The bidding was for a total of 300 Mw of power projects. The balance was won by Canadian solar company SkyPower Global. The MP government has already cancelled its PPA with SkyPower.

“Both SkyPower & ReNew failed to procure land within the period stipulated in the PPA for two 50 Mw units, out of their three projects. Thus, the two companies could not achieve the conditions subsequent for their respective projects within the maximum permissible period of almost 16 months. MPPMCL’s board issued the termination notice on 11 August 2017,” said the termination letter issued by Madhya Pradesh Power Management Company Ltd (MPPMCL).

ReNew contested the decision to cancel the PPA in the Jabalpur High Court, which disallowed the termination but maintained the invocation of a bank guarantee amounting to Rs 153 million. The state government moved SC to contest the same.

After the HC set aside the termination, the new date of commissioning of the project was in September 2017. Meanwhile, ReNew also sought a change in the location, citing encroachment on the existing land. In its submission, the company said there were delays due to a change in location and allied work.

The SC observed the delay in the commissioning of the project was due to unavoidable circumstances but they did not come under force majeure.

“In our view, interest of justice would be met by directing respondent No.1 (ReNew Power) to pay a penalty amount of Rs 119,554,200 imposed upon respondent No.1 by the appellant,” said the judgment. It further said, having invested a huge amount in purchasing the land and development of the project at Ashok Nagar district, and when the project was in the final stage of commissioning, the termination of the contract would not be fair.