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Solar players worried over Tamil Nadu purchase pact

According to reports, four days before the last date for submitting bids for securing rights to sell solar power to Tamil Nadu’s electricity distribution utility, Tangedco, several niggling issues in the power purchase agreement are worrying prospective bidders.

Tangedco’s tender calls upon developers to put up solar power projects in the State, at locations of their choice, and sell power to the utility at tariffs that would be arrived at through the competitive bidding process. The tender wants to buy power from up to 1,000 MW of solar projects.

It has been pointed out that Tangedco’s clarification note says that the State-owned utility company in-charge of transmission, Tantransco, will set up and maintain the transmission infrastructure. “Tantransco is not a party to the contract and if it fails to maintain the sub-station and the grid fails, it is attributable to “force majeure”. “A good escape route for Tangedco,” comments S. Padmanabhan, a Chennai-based energy consultant.

He further points out that the PPA says that “both the parties shall comply with the policies and guidelines issued by the Government of India and the Government of Tamil Nadu from time to time.” Padmanabhan says this “negates the contractual obligations under the PPA.” He fears that any successive government could unilaterally change the terms of PPA. “All PPAs worldwide have the protection under “change of law”, but not this draft. TNEB is a massive defaulter to its suppliers and this clause will help them escape their commitments,” Padmanabhan says.

Another solar company official, who did not want to be named, said that there was confusion over whether or not the special purpose vehicle (SPV) formed for the purpose of bidding, should satisfy the ‘Rs 1 crore per MW’ networth condition. Tangedco’s note says the SPV should satisfy the networth condition “on its own.” If that is the case, very few developers would participate in the bids, he said.

Developers see timely payment of dues as a risk, even with a LC mechanism in place. Again, Padmanabhan points out that “the draft L/C has not been attached. How can one trust an organisation that has such payment record?”

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