NGL Fine Chem Limited approves 25-year PPAs for 6.70 MW

NGL Fine Chem Limited has approved a proposed 25-year captive renewable-power arrangement covering a 3.10 MWp solar project and a 3.60 MW wind project, or 6.70 MW of stated capacity, with a 15-year lock-in. The PPAs will be executed after the two project special purpose vehicles are incorporated.

What renewable PPAs has NGL Fine Chem planned?

NGL Fine Chem has planned two long-term power purchase agreements, or PPAs, for captive consumption: 3.10 megawatt-peak, or MWp, of solar power through SPV1 and 3.60 megawatts, or MW, of wind power through SPV2. Each special purpose vehicle, or SPV, is a proposed project company to be incorporated in India, and the PPAs will be executed once those entities are incorporated.

The projects represent 6.70 MW of stated capacity, although the solar project is expressed in MWp and the wind project in MW. SPV1 is proposed to generate solar power through a 3.10 MWp project, while SPV2 is proposed to generate wind power, with 3.60 MW intended for NGL Fine Chem’s captive consumption under the Electricity Act, 2003 and the Electricity Rules, 2005.

The filing classifies the PPAs as being in the ordinary course of business because they procure power for NGL Fine Chem’s operations. The agreements will be executed together with share subscription and shareholders’ agreements, connecting the 25-year power procurement arrangements with equity participation in each proposed power producer.

How long will NGL Fine Chem be committed to the contracts?

NGL Fine Chem’s proposed PPAs will each have a 25-year tenure beginning on the Commercial Operation Date. The disclosed term is therefore linked to commercial operation of the 3.10 MWp solar or 3.60 MW wind project, rather than to the date on which SPV1 or SPV2 is incorporated.

The first 15 years will be subject to a lock-in. Early termination by either party during that period will trigger termination compensation, except in cases of default, force majeure or a change in law, which are the three exceptions listed in the PPA terms.

After the 15-year lock-in, either NGL Fine Chem or the relevant power producer may terminate the PPA by giving six months’ notice, without termination compensation. The terms thus distinguish the first 15 years, when an early exit can require compensation, from the remaining 10 years of the 25-year contract period, when the specified notice process applies.

How will NGL Fine Chem own the solar and wind projects?

NGL Fine Chem proposes to subscribe in cash for 26% of the equity share capital of SPV1, the solar project company, at an approximate cost of Rs 1.085 crore. Prozeal Green Power Private Limited is expected to hold 74% of SPV1, and the filing states that Prozeal is not related to NGL Fine Chem.

For SPV2, the wind project company, NGL Fine Chem proposes to hold 22.28% of the equity share capital at an approximate subscription cost of Rs 3.24 crore. Prozeal is also proposed to hold 74% of SPV2, while the filing does not specify the holders of the remaining equity interest in that vehicle.

The filing puts the total investment at about Rs 4.32 crore and states that NGL Fine Chem will invest Rs 54 lakh in an SPV on behalf of Macrotech Polychem Private Limited. It identifies both subscriptions as cash consideration and says the arrangement is not a related-party transaction because Prozeal is not a related party.

The names of SPV1 and SPV2 have not been finalised in the announcement. Their names will be those approved by the Ministry of Corporate Affairs, while Prozeal is proposed to hold 74% in each project company for renewable generation, solar in SPV1 and wind in SPV2.

What conditions must NGL Fine Chem meet for captive status?

NGL Fine Chem must hold at least 26% equity in the power producer together with other captive users and consume at least 51% of the electricity generated each year to maintain captive status. These are the stated ownership and consumption conditions attached to the proposed solar and wind PPA framework.

The 26% direct holding proposed in SPV1 matches the minimum ownership percentage cited in the captive condition. NGL Fine Chem’s direct 22.28% stake in SPV2 is below that percentage, but the filing specifies that the 26% threshold can be held together with other captive users; it does not disclose those users’ ownership stakes.

The 51% condition is based on annual electricity generation, not on the 6.70 MW of stated project capacity. The announcement provides no projected generation, tariff, annual electricity cost, power-cost savings or financial impact from the 3.10 MWp solar and 3.60 MW wind arrangements.

How are the PPAs linked to the proposed project companies?

NGL Fine Chem will enter the PPAs with SPV1 and SPV2 after their incorporation, with each SPV acting as the power producer. The proposed entities will operate in renewable generation, with the 3.10 MWp SPV1 project producing solar power and the 3.60 MW allocation in SPV2 coming from a wind project.

The share subscription and shareholders’ agreements will be executed alongside the PPAs, according to the announcement. That structure places the Rs 1.085 crore solar subscription, the Rs 3.24 crore wind subscription and the 25-year electricity agreements within the same proposed captive-power arrangement.

The filing does not state a Commercial Operation Date for either project. It also does not disclose construction timing, commissioning milestones, the total capacity of the wind project beyond the 3.60 MW allocated for NGL Fine Chem, or any date for incorporation of either SPV.

Conclusion

NGL Fine Chem’s proposed arrangement combines a 3.10 MWp solar project and 3.60 MW of wind capacity with 25-year PPAs, cash subscriptions of about Rs 1.085 crore and Rs 3.24 crore, and captive-use conditions. The 15-year lock-in gives the contracts a defined early-exit compensation mechanism, while the proposed ownership structure links power sourcing to stakes in the generating entities.

The next disclosed steps are incorporation of SPV1 and SPV2, followed by execution of the PPAs and the related share subscription and shareholders’ agreements. NGL Fine Chem will also need to meet the stated captive-status requirements of at least 26% ownership with other captive users and consumption of at least 51% of annual electricity generation.