Avaada Gets Decision From MERC for 250 MW Solar Project with MSEDCL

MERC had directed both parties i.e. Avaada and MSEDCL to complete the formalities under the RfS and execute the PPA by March 2, 2021.

Avaada Energy (AEPL) had filed a case in January 2021 against Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) with the Maharashtra Electricity Regulatory Commission (MERC) seeking issuance of appropriate order(s)/ directions(s) to MSEDCL to execute the Power Purchase Agreement (PPA) with the petitioner pursuant to the adoption of tariff order by the MERC in May 2020 and the subsequent Letter of Award (LoA) that was issued in June 2020.

Further, AEPL also desired orders/directions restraining MSEDCL from taking any coercive action like forfeiting the Earnest Bank Deposit (EMD) or encashment of Bank Guarantee towards EMD.

In its order, the MERC has partly allowed the pleas made by Avaada, directing both parties to parties to complete the formalities under the RfS and execute the PPA by March 2, 2021, for which the tariff has been approved by the commission and the LOA was issued by MSEDCL to Avaada. And that MSEDCL was to not take any coercive action including encashment of Bank Guarantee towards EMD for two weeks from the date of this order i.e March 2, 2021.

Background:

The main prayer of Avaada was to direct the respondent (MSEDCL) to execute Power Purchase Agreement(s) for the supply of 250 MW with the petitioner’s SPV namely, Avaada Green Sustainable Energy and allow in favour of the Petitioner or its SPV, any consequential relief(s), arising out of the delay in execution of the said Power Purchase Agreement(s).

In support of which the developer submitted the following:

• MSEDCL issued Request for Selection (RfS), on December 27, 2019, for procurement of power on long term basis through competitive bidding process followed by reverse e-auction from 500 MW intra state grid-connected solar PV power projects. Out of the 500 MW capacity tendered, the 350 MW capacity was subscribed and allotted to Avaada Energy (250 MW) and Tata Power Renewable Energy (100 MW) at the discovered tariff of Rs 2.90/kWh. 
• It claims that as per the RFS provisions, it had submitted bank guarantee dated March 7, 2020, amounting Rs 10 crore issued by State Bank India as EMD against above bid.
• Subsequent to which, MSEDCL had approached MERC for approval of the discovered tariff. The Commission vide order dated May 15, 2020, had adopted the tariff at the rate of Rs 2.90 per unit. Which saw MSECL issue LOA dated June 17, 2020, for procurement of power from 250 MW (150 +100 MW) Solar PV projects of Avaada.
• AEPL accepted the LOA, informed that the PPA will be executed by its 100% SPV Avaada MH. In July, the firm requested time up to 31 October 2020 to submit Performance Bank Guarantee (PBG) for the signing of PPA, citing COVID implications. The said request was granted by MSECL.
• In the meantime, AEPL vide their letter dated 15 July 2020 submitted the documents for execution of PPA in the name of their SPV company, Avaada MH.
• On November 18, 2020, after “creating chaos” – as per MERC – by attempting to involve two SPVs for signing the PPA and then reversing its decision and going with Avaada Green instead of Avaada MH, the firm submitted the PBG in the name of Avaada Green to MSEDCL for Rs 35 Crore.
• Citing further financial difficulties and operational difficulties due to the pandemic, AEPL had requested for extension of time for the signing of PPA till December 31, 2020, and in terms of the PBG dated November 9, 2020, having been submitted, requested the Respondents to release EMD BG of Rs 10 crore.

Here, MSEDCL (December 30, 2020) alleged that Avaada had failed to submit the PBG and EMD will be forfeited. 

• In response, AEPL clarified its position including requesting MSEDCL not to encash the EMD Bank Guarantee and requested for further extension of time up to January 31, 2021, for the signing of PPA with the ‘Effective Date’ of PPA remaining July 17, 2020.
• On January 4, 2021, again went back on its decision and stated that if MSEDCL has any reservation against the signing of PPA in the SPV Company i.e., Avaada Green, AEPL is willing to sign the PPA in its SPV Company i.e., Avaada MH.

Interestingly enough, while all this has been brewing between Avaada and MSEDCL. Tata Power Renewable Energy, the other winner, has already executed its PPA. 

After hearing from both parties, the commission observed the following:

1. The awarded capacity and the tariff obtained are fair and must be respected. 
2. It is also pertinent to note that initially AEPL has informed MSEDCL that PPA will be signed by Avaada MH, however subsequently requested MSEDCL to allow signing of two separate PPAs with Avaada Green and Avaada MH, both of which are 100% subsidiary of AEPL, which was rejected by MSEDCL in terms of provisions of RfS (during the hearing, AEPL also agreed that such request of theirs was not strictly in accordance with RfS). Thereafter, AEPL has submitted documents and PBG in the name of Avaada Green for signing of PPA. MSEDCL has not accepted such request as Avaada MH is the entity that was communicated by AEPL for signing of PPA. Thereafter, AEPL has informed MSEDCL that it is ready for signing of PPA in the name of the any entity i.e. Avaada Green or Avaada MH.
3. With this background, the Commission notes that MSEDCL had suggested that as signing of PPA (which originally should have signed before July 17, 2020) has been delayed and as AEPL is still requesting additional time for signing of PPA, LOA issued to AEPL needs to be cancelled after invoking Bank Guarantee towards EMD. In this regard, the Commission noted that although RfS provides for signing of PPA within 30 days from date of issuance of LoA, both parties have agreed to extend such date upto October 31, 2020, in view of the COVID-19 pandemic. While extending such date, MSEDCL has rightfully protected its interest by keeping milestone dates i.e. Financial Closure and Scheduled COD with reference to July 17, 2020, and not to date of signing of PPA. Hence, in the opinion of the Commission, MSEDCL would not have any adverse impact due to such delayed signing of PPA.
4. The commission also swiftly rejected the pleas made by MSEDCL that solar tariffs since have dropped to record low amounts, citing that each tender is different and should be treated as such. Especially after the commission itself had approved the tariff.
5. Highlighting the fault of Avaada, the commission ruled that the firm – now an experienced entity of the sector – should not have tried to involve two SPVs in the PPA process. And strongly advised the firm from doing so in the future.

Finally, the commission ordered both parties to complete the formalities under the RfS including submission of PBG from the proper entity and sign PPA of 250 MW at a tariff rate adopted by the Commission in Order dated 15 May 2020 within 2 weeks i.e. by March 2, 2021.

In these two weeks, AEPL shall comply with all its obligations within one week of this order and MSEDCL shall thereafter in one-week scrutinise and sign the PPA as per the provisions of the RfS. During these two weeks, MSEDCL shall not take any coercive action including encashment of Bank Guarantee towards EMD. 

We reached out to Avaada to check if a settlement has indeed been reached as per MERC orders with MSEDCL, but the representative did not confirm the news till the time of filing.

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