CleanMax FAQs: Get the Information You Need

The corporate buyer must hold at least 26% of the equity while the developer arranges for the rest 74%. A Long-term Power Purchase Agreement (PPA) can be signed on mutually agreed terms between the developer and the buyer. In such a project, the O&M responsibilities are usually passed on to the developer

For a consumer which doesn’t want to invest 100% of the project cost, a group captive project will provide the lowest landed cost of power with minimum investment, because it is exempted from certain grid charges and particularly Cross Subsidy Surcharge.

The corporate buyer should ensure that a Group Captive project is fully compliant with the spirit of the law, and with the Electricity Act and the proposed amendments to the Electricity Rules by following two simple guidelines:

• Equity participation: A genuine equity contribution, equal to 26% of the equity cost, assuming 70/30 debt to equity ratio
• Economic participation: Which means paid up equity share capital with full rights such as, value, share of profit/dividends, capital appreciation, voting rights, transfer of shares etc. should be applicable for all shareholders

Given the regulatory requirement for the lead captive buyer to own a minimum of 26 percent of the power generating plant, ownership must be transferred to another captive buyer or back to the primary investor if the PPA terminates or expires. Parties typically agree to a put/call option structure to transfer the shares upon expiry/termination of the PPA. If either the captive generator or the buyer is a non-resident or foreign-owned and controlled entity, then subscription/purchase of equity shares as well as subsequent transfer must comply with the Reserve Bank of India’s pricing guidelines.