Monday, 8 February 2016

IMPLEMENTATION AGREEMENT FOR UPCOMING SOLAR PARKS IN INDIA-A SIMPLIFIED OVERVIEW









BRIEF BACKGROUND


In my previous write-ups, I had discussed about the concept of Solar Parks. Just to refresh your memory, solar parks in India will be concentrated zones for development of solar power generation projects. Solar parks will provide solar power generators an area that is well characterized with proper infrastructure and access to amenities and where the risk of the projects can be minimized. Considering potential of large size projects in bringing down solar power cost, government is planning to set-up 25 (twenty five) solar parks with capacity of 500 MW or above.
POINT OF CONTACT


Solar parks will be developed by body corporates nominated by the respective state government in whose territorial jurisdiction the park will situate (“Solar Power Park Developer/SPPD”). The SPPD will be tasked with acquisition of land for solar park, cleaning it, levelling it and allocating the plots for individual projects. In other words, for an individual solar power generator or solar power developer (“SPD”), SPPD will be the point of contact.
IMPLEMENTATION AGREEMENT


Upon being selected through tendering process, an SPD will have to execute a legal document with SPPD which is referred to as Implementation Agreement (“IA”). The SPD will have to execute the project according to the IA and hence it is very essential to understand the obligations and risks that one SPD will stand exposed to in respect of its generation unit(s) in a solar park.
Important Definitions (Technical)


CTU” or “Central Transmission Utility” refers to Power Grid Corporation of India Limited (PGCIL).

Inter-Connection Point” or “Delivery Point” refers to point of 220 kV or above where the solar power from one or more pooling station is injected into the transmission system. All costs and losses up to that point will be on account of the Solar Power Developers.

Metering Point” refers to point at 220 kV side of 400/220 kV grid sub-station of transmission utility.

Pooling Substation” refers to an intermediary substation within the Solar Park where each generation unit interconnect with pooling substation through 33 kV/ other suitable voltage underground or overhead cable.

STU” or “State Transmission Utility” refers to a government Company notified by the respective State Governments (e.g. Gujarat Energy Transmission Corporation Limited for intra-state transmission within Gujarat).
Obligations Effective


IAs normally comes to effect from the date on which the same is signed by both parties. Typically authorized representatives of both SPD and SPPD meets over a pre-determined place and time where 2 (two) copies of IA are signed and sealed.
Longevity


An IA remains in effect during the lifetime of the solar project which is 25 (twenty five) years currently. However, depending on the negotiation of SPD and SPPD, the IA can be extended for a longer tenure as well.
SPPD’s roles, obligations and confirmations/assurances

Confirmations And Assurances

  • Clear Title. SPPD to confirm that there is no mortgage, charge and/or claim on the plot and the plot is free from all encumbrances.
  • Authority. SPPD to confirm that it has got full rights and absolute authority to lease the plot in favor of the SPD.
  • No Prohibition. SPPD to confirm that it has not been restrained either under Income Tax Act or any other statute from dealing with the plots.

Obligations And Functions

  • Clearances. SPPD to obtain all necessary statutory and non-statutory clearances for developing the Solar Park.
  • Matching Infrastructure. SPPD to provide infrastructure facilities so as to match the commissioning schedule of the solar power generation unit.
  • Internal Evacuation System. SPPD will set-up the internal evacuation system (i.e. with 220/33 kV, 220/66 kV or as may be suitable switchyard and respective transformers).
  • Internal Roads. SPPD will lay and maintain the main roads to provide access to all the plots along with street lighting (Internal access roads with in the plot shall have to be laid by the SPD at its own cost).
  • Water Supply. SPPD will arrange necessary water supply for operations and maintenance of the solar generation projects (This chargeable to the SPD).
  • Drainage Works. SPPD will lay and maintain the main drains along the main road to which SPDs may connect their internal project drains.
  • Solar Irradiation Data. SPPD will install necessary equipment to monitor the solar irradiation and other necessary weather data.
  • Construction Power. In respect of power supply required during construction period, SPD has to apply to local power distribution authorities at its own cost. SPPD will only extend necessary support.
SPD’s roles, obligations and confirmations/assurances

  • Legal Compliance. SPD to construct and operate the solar power project in accordance with applicable Law, the Grid Code, the terms and conditions of this Agreement and Prudent Utility Practices.
  • Project Clearances. The SPD shall obtain and renew, if necessary, at its own cost and risk, all necessary permissions, approvals, licenses and permits for the solar power project and shall pay all license and other levis, cess and taxes in respect of the plot.
  • No-Other-Use. SPD needs to use the plot only for constructing, maintaining and running the solar project and incidental matters. No other usage is allowed.

  • Construction Approval. SPD can construct the buildings, structures only as per plans/drawings approved by the SPPD.

  • No Alteration. SPD should not carry out any variation of the premises unless drawings/plants approved by the SPPD.
  • Encumbrance and Financing. SPD cannot encumber the plot without SPPD’s approval. However, SPD, for constructing the solar plant, can mortgage the lease hold interest with a financial institution after obtaining SPPD’s consent.
  • Right of Access. SPD needs to provide access to SPPD’s authorized persons of for inspection of the project for discharging their obligations.
  • Audit. SPD shall permit audit by SPPD to ensure compliance with applicable Laws, the Grid Code, the IA and Prudent Utility Practices.
  • Metering. Metering point shall be the point at 220 kV side of 400/220 kV grid Sub-Station of CTU/ STU. The Metering and connected equipment shall be provided by SPDs at their cost. SPD shall follow and be bound by the Central Electricity Authority (Installation and Operation of Meters) regulations, 2006 and Amendment Regulations, 2010 and Technical Standard for Connectivity to the Grid (Amendment) Regulation, 2013, the Grid Code, as amended from time to time.
  • Insurance. During IA term, the SPD needs to ensure that the plant is insured at its own cost against any possible loss or damage.
  • Fire Safety. SPD needs to maintain its own fire-fighting and safety equipment to avoid/minimize the loss/damage of property/equipment in case of fire. SPPD will not be responsible for any loss/damage of property/equipment of SPD due to fire accidents.

Power Evacuation

  • Pooling. SPPD will set up the pooling stations (with 400/220, 220/66 KV or as may be suitable switchyard and respective transformers) inside the solar park and will also draw transmission line to transmit power to 220 KV/400 KV sub-station.
  • Project Inter-Connection. SPD will interconnect its solar project to the pooling sub-station through 33 kV/ other suitable voltage underground or overhead cables at its own cost. 
  • Park Inter-Connection. The responsibility of setting up a sub-station nearby the solar park and to take power from one or more pooling stations will lie with the CTU or the STU. All costs and losses up to that point will be on account of the SPD.

Fees and Payment Terms

  • One Time Payment. One time solar power park development expenses on execution of the IA entering into this agreement. This is exclusive of taxes which is reimbursable within 7 days from the date of issue of bill by SPPD.
  • Annual O&M Charges. Payable by SPD on or before 30th April at the beginning of each financial year during the agreement period. This is exclusive of taxes which is reimbursable within 7 days from the date of issue of bill by SPPD.
  • Water Supply Charges. Water consumed by SPD shall be metered and charged. Rate per Kilo Litre is fixed for the agreement period. Payable within 15 days from the date of issue bill by SPPD.
  • Transmission And Scheduling Charges. SPPD will forward all the bills received from concerned authorities. Payable within 7 days from the date of issue of bill by SPPD.


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