MEMC Dhama Solar Plant

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In April 2010, Azure Power (Gujarat) Private Limited (APGPL) partnered with SunEdison Energy India Private Limited (SEIPL), and signed an MoU with Gujarat Energy Development Agency (GEDA) for setting up a 5-mw photovoltaic solar project at village Dhama in Surendranagar district of Gujarat, under the Gujarat Solar Policy 2010. The output from the project would be fed to the North-East-West-North-East (NEWNE) grid of India. Power evacuation was planned through a 66 KV line at Vagdam substation. The transmission system, as per the state policy, was the responsibility of Gujarat Energy Transmission Corporation Limited (GETCO). APGPL had entered into a 25-year Power Purchase Agreement (PPA) with the state utility Gujarat Urja Vikas Nigam Limited (GUVNL) on 30th April 2010, which would be effected at the time of commissioning of the project. The APPC (Average Power Purchase Cost) as per the Gujarat Solar Policy 2010, was US$ 0.32/Unit (INR 15 per unit @ 47INR/USD) for the first 12 years, and US$ 0.11/Unit (INR 5 per unit @47 INR/USD) from 13th year to 25th year. The total capacity of 5MW was eligible for carbon credits. Proceeds of carbon credit were to be shared as follows: (a) 100% by APGPL in the first year after the date of commercial operation of the generating station/ transmission system;(b) in the 2nd year the share of GUVNL would be 10% which would be progressively increased by 10% every year up to 50% whereafter the proceeds would be shared in equal proportion, by APGPL and GUVNL. Transmission and/or wheeling charges would be paid by APGPL. Financial closure of the project took place in September 2011. The total project cost was USD 19.6mn.The debt equity ratio for the project was 75/25. Financing comprised of Debt of USD 14.7mn and sponsor equity of USD 4.9mn. The 15year credit facility of USD 14.7mn was solely arranged by Overseas Private Investment Corp (OPIC). Construction of the project was started and commercial operation was expected to start in November 2011. At the time of collection of information (May 2012), APGPL was in a legal tangle with the Gujarat government over the issue of owership of the Company that was putting up the project. The point under dispute was whether or not the company was in breach of a covenant of the PPA which stipulates that the “power producer should continue to hold at least 51 per cent of equity from the date of signing of this agreement”. APGPL had partnered with SEIPL, subject to which Gujarat Urja Vikas Nigam Limited (GUVNL) had issued notice terminating the PPA with APGPL. APGPL had petitioned to the Gujarat Electricity Regulatory Commission (GERC) stating that SEIPL had 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 was a breach of the PPA with respect to the covenant relating to the shareholding pattern is yet to be decided by the GERC. Meanwhile GERC had in its order stayed the operation of the termination notice served to APGPL.