Azure Power: operational and financial update
EBONY, Mauritius, Dec. 27 2021 / PRNewswire / – Azure Power Global Limited (NYSE: AZRE) (the “Company”), a leading independent producer of renewable energy in India, today announced certain operational and financial updates in connection with the rights offering which was also announced today.
This is not an offer to sell or buy or the solicitation of an offer to sell or buy any securities and does not constitute an offer, solicitation or sale in any state or jurisdiction in which, or to anyone to whom such an offer, solicitation or sale would be illegal.
In November 2021, the Company has signed PPAs with Solar Energy Corporation of India (“SECI”) for 600 MW at a fixed rate of INR 2.54 per kWh and, in december 2021, has signed PPAs with SECI for an additional 2,333 MW at a fixed tariff of INR 2.42 per kWh for power supply for 25 years, as part of projects related to the manufacture of 4,000 MW.
The Company also received a letter of award (LOA), for its first 120 MW wind project and its first 150 MW solar-wind hybrid project, from SECI. The Company has also received an LOA for a 200 MW solar-wind hybrid project from Maharashtra State Electricity Distribution Co. Limited (MSEDCL).
The Company is evaluating and in preliminary discussions with sellers of renewable energy assets in India which would complement its current portfolio. Some of these assets may be significant and result in significant acquisitions. The Company’s strategy is to continue to create shareholder value and assess acquisition opportunities that meet the criteria for accretive returns.
During the second fiscal quarter ended September 30, 2021, the Company issued Solar Green bonds (the “Bonds”) of US $ 414 million through its wholly owned subsidiary, Azure Power Energy Ltd at a 3.575% coupon due 2026. The proceeds from the Bonds were used to repay the 5.50% US $ 500 million solar green bond issued in 2017 with a maturity in 2022. The Bonds have a term of 5 years with amortization and cascade structures and their issuance is a positive leveraged transaction for the Company.
During the quarter ending September 30, 2021, the Company has received a favorable order from the Electricity Appeals Tribunal (“APTEL”) regarding an ongoing litigation regarding the 40 MW Karnataka project having a power purchase agreement with Gulbarga Electricity Supply Company Limited (GESCOM). APTEL overturned the Karnataka Regulatory Commission (“KERC”) order in which KERC reduced the extension of the deadline, reduced the PPA tariff and imposed damages. After the period ended September 30, 2021, GESCOM also appealed to the Supreme Court against the order.
The Company also received a favorable order from the High Court of Karnataka (Order dated 02 December 2021 in WP 5368 of 2020) for its 50 MW solar power project in Karnataka, against Hubli Electricity Supply Company Limited (“HESCOM”), i.e. the DISCOM purchaser under its PPA, under from which HESCOM has, among other things, been ordered to pay and settle all arrears due by it regarding all invoices and invoices issued on the date of the order and to make prompt, regular and punctual payments without any delay with regard to future invoices. HESCOM has also been requested to immediately open or renew irrevocable monthly letters of credit under the PPA between the Company and HESCOM. In addition, the general instructions to all DISCOMs in the State of Karnataka have been, inter alia, to issue, honor, discharge and fulfill their duties, obligations and responsibilities under the respective PPAs, including including opening letters of credit in accordance with the EAA and making prompt, regular and punctual payments without any delay with respect to future invoices issued by power producers in the state of Karnataka.
During the current year, the Company has received anonymous complaints and denunciations making various claims against certain key management personnel of the Company, regarding their actions and those of the Company regarding the acquisition. and land use in Rajasthan, Assam and Uttar Pradesh, as well as certain other securities transactions. The Company, through its audit committee and with the assistance of outside counsel and forensic auditors, has completed its investigation to determine whether the allegations made in the complaints or contained in the
whistleblower reports are substantial. The issues raised, including those raised against key management personnel, were closed and the allegations were unfounded; however, the Company has determined that its ethics policies regarding external consultants should be improved. The Company, through its audit committee and with the assistance of an external advisor, will take corrective action (including training and review of policies).
During the third trimester ending December 31, 2021, the Company has received an adverse order from the Mumbai Center for International Arbitration (“MCIA”) Appeals Authority, relating to an arbitration proceeding initiated by the former Chief Executive Officer of the Company under his agreement of transition. The Company is in the process of evaluating the order received and will take the necessary action in due course.
The direction of the execution of India filed a complaint with a special court in New Delhi to October 1, 2021, with regard to an information report on a previous execution case in which Mr. Pawan Kumar Agrawal, the current Chief Financial Officer of the Company, is one of the persons named and charged with committing offenses under Articles 3 and 4 of the Prevention of Money Laundering Act 2002 of India with respect to Mr. Agrawal’s previous employment. The relevant transactions which are the subject of the complaint predate Mr. Agrawal’s tenure as an employee and CFO of the Company, and the criminal charges do not target and do not relate to the Company or its subsidiaries. The Company will continue to monitor the proceedings while Mr. Agrawal defends the charges against him.
Certain PPAs, in particular the PPAs concluded with SECI, require the project developer to keep his controlling interest (more than 50% of the voting rights and paid-up capital) existing at the time of the signature of the PPA until one year after the signing. date of commercial operation; however, the transfer of the majority stake in the same group companies is authorized with the authorization of SECI after the date of the business transaction, provided that management control remains with the same group companies.
In April 2021, the Supreme Court of India while passing an order for a public interest litigation (PIL) petition for the conservation of two species of birds, the great indian bustard and the lesser florida, ruled the states of Rajasthan and of Gujarat including developers with identified priority overhead transmission lines and potential area to take necessary measures for the conversion of overhead power lines to underground lines and in the meantime install bird deflectors on overhead lines . However, if it is not possible to convert high voltage lines into underground lines, the case may be referred for technical evaluation by a committee set up by the Supreme Court. The conversion of overhead cables to underground power lines, whenever deemed feasible by such a committee, must take place within one year. The Supreme Court order referred to the transfer of these expenses incurred by electricity developers to the end consumer, subject to the approval of the competent regulatory authority. The Company and other industry players through the Solar Power Developer Association. as well as the Union of India (The Ministry of New and Renewable Energies (MNRE) submitted a request for amendment to the Supreme Court of India, requesting an allowance for the installation of overhead transmission lines outside the priority areas as well as inside the priority areas if the lines are high / very high voltage of 33 kV or more and to examine on a case-by-case basis the burying requirement even for 33kV and less in priority areas. Management has preliminary assessed that all costs incurred to comply with said order are likely to be substantially or fully recoverable by the Company under the change of law and / or force majeure provisions of their respective PPAs in time. wanted following the procedure prescribed under the PPAs and the respective law.
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