Solar power developers in legal tangle with Gujarat Govt

              Three solar power companies are in a legal tangle with the Gujarat Government over the issue of ownership of the companies that are putting up the projects. All the three – Azure Power (Gujarat), Millennium Synergy and ESP Urja – are wholly owned by American solar power developer SunEdison.

               The point under dispute is whether or not these three companies are in breach of a covenant of the power purchase agreement which stipulates that the “power producer shall continue to hold at least 51 per cent of equity from the date of signing of this agreement”.

                  Azure Power (Gujarat) and ESP Urja have a 5 MW plant each, while Millennium runs a 10 MW plant.

                  Gujarat’s nodal agency Gujarat Urja Vikas Nigam Ltd had issued notices terminating the power purchase agreement for Azure Power (Gujarat) and had stopped making payments for the purchased power for the other two companies.

                  Azure Power (Gujarat) was initially promoted by Azure Power India, a company whose various projects have been funded by the German development finance agency, DEG, the US Exim Bank and IFC (Washington).

                  The three companies have petitioned the Gujarat Electricity Regulatory Commission. The Commission, in its orders passed recently, has stayed the operation of the termination notice served on Azure Power and has directed GUVNL to make the due payments to Millennium and ESP Urja.

“It is unfair and unjust that the generator is not paid for the power supplied by him to the distribution licensees,” the order says.

                  In the case of Millennium and ESP Urja, GUVNL had raised the issue of compensation to be paid by the project developers for any violation of the PPA covenants. But the Commission dismissed it saying that was “not a subject matter of the present petition.

                 ”The IFC-funded SunEdison’s contention, as spelt out in the order relating to the Azure Power case, is that it signed the shareholder agreement – for taking over the ownership of the developer – prior to the signing of the PPA.

                  The question as to whether or not there is a breach of the PPA with respect to the covenant relating to the shareholding pattern is yet to be decided by the Commission.
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