Despite MERC Relief in Wind Energy Case, Project Execution A Challenge for Hero Wind

In a case it brought against MSEDCL (Maharashtra State Electricity Distribution Company Limited) at the state power regulator MERC, Hero Wind Energy, through its subsidiary (Clean Wind Power (Bhavnagar) Private Limited) handling the project in question managed to get some relief. But that hardly indicates an end to the problems facing the project.

The issue here was an extension of the Scheduled Commissioning Date of project from 23.06.2020 to a year later, owing to the Covid -19 crisis, among other factors. The project PPA for the 75.6 MW wind project had been signed on 17.07.2018. The key worry for the developer was the encashment of the performance bank guarantees (PBG) by the discom in this case, MSEDCL. Last week’s decision had provided temporary relief from that threat.

The MERC, in its wisdom, appears to have given an extension till November 23, 2020 for now, with a final date to be possibly given after due consideration of the Covid impact on work and supply chains.

For the Hero wind Energy subsidiary, to counter MSEDCL’s contention that it had not approached the issue of financial closure seriously enough, it had to produce records showing an interest cost of RS 29 crores that it had already incurred  on the project, besides payment of  over Rs 99 crores to its equipment vendor, Suzlon Energy Limited, The firm says it has already incurred a cost of Rs  181.79 crores on the project, in fact.  The delays in Financial closure had been blamed on getting connectivity agreements (through MSEDCL), besides ownership rights on project land. A key cause for delays was the now predictable issue of transfer of rights between the primary project developer, (Hero, in this case) and the project developer it appointed for the project, (Suyog). This continues to cause delays across not just this project, but many projects, as we have reported earlier.

With the threat of performance bank guarantees (Rs 10 lacs per MW) not hanging on its head for now, Hero has an opportunity to try and complete the project by the new deadline in November now.

However, when we spoke to EPC contractors in the region, they assert that a November deadline is quite simply impossible, and Hero will need to count on a further extension of at least 6 months, considering the ground situation in the region. Maharashtra, which has easily been the most affected state due to Covid in sheer weight of number, has seen repeated disruptions, and with the pandemic spreading to more districts, local lockdowns and disruptions have been very common.