600MW project no longer feasible: Acme solar to NTPC

BENGALURU: Acme Solar, the largest solar developer in the country, has told NTPC that a 600 MW project it won in an auction is no longer feasible as the power purchase agreement (PPA) stands terminated in the absence of necessary regulatory approvals, and has asked the state-run power major to return its bank guarantee.Acme had won the project in an auction conducted by NTPC last August where it quoted a tariff of Rs 2.59 per unit. Other winners in the auction for 2,000 MW of projects were Azure Power, Softbank-backed SB Energy and Shapoorji Pallonji whose tariffs were also in the range of Rs 2.59-2.60 per unit. According to the terms of the power purchase agreement (PPA) it signed with NTPC, the output was meant for Telangana, and the tariff, trading margin and contracted capacity had to be approved by the Telangana State Regulatory Commission (TSERC) within two months of signing the PPA, failing which it would stand terminated. Telangana was expected to procure the power from NTPC.The two-month deadline has lapsed and Acme has not received confirmation from NTPC about the approval of such tariff. "The PPA stands cancelled and terminated with no liability of Acme to NTPC. Further as the PPA stands cancelled and terminated, we request you to return our BG (Bank Guarantee) immediately in no later than 3 days," Acme said in a letter addressed to NTPC. ET has seen a copy of it.In response, NTPC asked for an extension, which Acme has refused. It reiterated on May 27 that the BG be returned immediately. “Investment made in the project now shall be completely at risk since non-approval of tariff by TSERC would also render the agreement terminated/cancelled without any liability to NTPC,” the letter said. “It is clear that the project has gone in a stage of uncertainty and is not commercially feasible for us to continue with and incur financial liability henceforth,” it continued. ET has seen a copy of Acme's response as well.NTPC did not respond to ET’s queries, while Acme said: “As a policy, we do not comment on specific transactional matters.” The Directorate General of Trade Remedies had imposed a safeguard duty of 25% in July last year. It was announced in the period between the bid submission for the NTPC auction and the holding of the actual reverse auction.NTPC had said it would deduct 31 paise from the final tariff of Rs 2.59 per unit if Acme were to decide it would not bear the impact of safeguard duty.In such a scenario, the tariff payable would be Rs 2.28, the LOI said. In its petition, Acme had disagreed. “Introducing new conditions once the bidding process has been completed is not permissible in law,” it said, in a response to the LOI. Other winners of NTPC’s 2000 MW auction, who quoted similar tariffs, have not opposed NTPC’s condition, and are expected to duly commission their projects sources said.

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