CERC Refuses to Intervene in SB Energy’s PPA/PSA with NTPC & PSPCL

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In a recent order, the Central Electricity Regulatory Commission (CERC) turned down SB Energy’s plea to direct NTPC Ltd. and Punjab State Power Corporation Limited (PSPCL) to neither terminate the PPA and PSA signed between the parties nor undertake any coercive action, such as invocation of the performance bank guarantee, and to extend timelines for Condition Precedent pertaining to a solar project situated in Rajasthan.

The petitioner, SB Energy Six Private Ltd., is setting up a solar power project based on PV technology for 300 MW capacity in Jodhpur, Rajasthan, and the power from this project is to be supplied to distribution companies (discoms) of the State of Punjab.

SB Energy along with NTPC executed a Power Purchase Agreement (PPA) in April 2019, and NTPC along with PSPCL executed a Power Sale Agreement (PSA) in March 2019. As per relevant provisions of the PPA/PSA, NTPC and PSPCL were to obtain the order of the Punjab State Electricity Regulatory Commission (PSERC) adopting the tariff and trading margin of NTPC and approving the procurement of the contracted capacity within 3 months from the effective date of the PPA.

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The said Condition Precedent (i.e. an event which must occur, unless its non-occurrence is excused, before performance under a contract becomes due) could not be complied within stipulated time. The contracting parties executed supplementary agreements extending timelines for the same till March 2021. Recently, SB Energy petitioned CERC, seeking directions for the extension of timelines for the fulfilment of condition precedent (CP) along with interim relief from any coercive action by the two respondents, i.e. NTPC and PSPCL.

CERC’s response stated that the CP are to be satisfied in a time bound manner by the contracting parties, noting that the contracting parties had agreed that in the event, the order of adoption of tariff, trading margin and agreements for procurement of power are not approved by PSERC within the specified time, the agreements would stand cancelled and terminated with no liability on either party, unless the parties mutually agree to extend the time for fulfilling the CP. “Hence, the aforementioned provisions of the PPA/PSA clearly necessitate Respondents to obtain necessary approval from the SERC,” clarified CERC.

The commission also observed that the PPA and PSA were amended with mutual consent to extend the timelines for the fulfilment of the CP till 31.10.2021. However, during the hearing held on 29.10.2021, SB Energy submitted that it had still not completed the CP. NTPC then stated that the PPA entered into with the petitioner and the PSA entered into by NTPC with PSPCL were on a back-to-back basis.

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NTPC argued before the commission that it was already pursing the matter with PSPCL and unless PSPCL signed the supplementary PSA with NTPC extending the timeline for completion of condition precedent, NTPC would not be able to sign the corresponding supplementary PPA with SB Energy. NTPC further added that in the absence of any clarity on the extension of the PSA, it cannot give no-objection to extension of timelines for fulfilment of condition precedent.

Upon considering all the facts of the matter, in its verdict, CERC stated, “Any extension of time for fulfilling the condition precedent has to be by way of mutual agreement between the parties only. In the past there has been extension of time with mutual consent. As on the date of hearing of 29.10.2021, however, there appeared to be no such mutual agreement arrived at between the parties. Nonetheless, as on the said date of the hearing of 29.10.2021, the PPA remained valid since the timeline for fulfilling the condition precedent had not lapsed. As such, the Commission does not find any cause for intervention as prayed for by the Petitioner,” disposing off SB Energy’s petition.