By Archana Balasubramanian, Partner, Agama Law Associates
In a renewable-energy project, the engineering contract, power purchase agreement and loan documents may treat completion differently. A project may be complete for the contractor’s purposes but still lack the grid access needed to start earning revenue. If the documents do not account for this difference, the developer may have to pay the contractor and begin repaying its loans before it can supply electricity and earn revenue.
When the project is examined across all three agreements, the real problem becomes clearer. An extension granted under the power purchase agreement may leave the contractor’s completion date unchanged. A contractor may agree to more time without the lender extending its repayment schedule. Temporary grid access may also allow the project to supply some electricity without meeting the requirements for commercial operation under the other agreements. Each party may therefore be acting within its contractual rights, while the developer still faces payments that the project has not yet started generating enough revenue to meet.
Recent reports indicate that approximately 21 GW of renewable capacity was operating with temporary grid access while the related transmission infrastructure remained incomplete. This brings the contractual problem into a current commercial context. These figures do not establish that every affected project has suffered a loss that can be recovered under its contracts. They do, however, show why transmission readiness needs to be considered before construction is complete. The project documents should address what happens if the plant is ready but the transmission infrastructure is not, including the effect on delay relief, contractor payments and loan repayments.
A board, lender or investor should examine what each agreement treats as completion, who bears the cost if grid access is delayed, whether contractor payments and loan repayments can be postponed, and whether the parent company must provide financial support if the project starts earning revenue later than expected. Reading each agreement separately may not reveal the full problem. The review should also check whether an extension or relief under one agreement leaves the developer bound by an earlier payment or repayment date under another.
Three Clocks Govern the Same Project
A renewable-energy project commonly operates against three separate timetables.
The engineering, procurement and construction contract governs when the contractor completes and tests the plant. The power purchase agreement governs when electricity can be supplied and paid for. The financing documents govern when interest and principal must be serviced.
These dates may have made sense when the contracts were signed. But the plant may be ready before grid access is available, while loan repayments may already be due.
An extension under the power purchase agreement does not, by itself, change the contractor’s completion obligations or postpone loan repayments. It also does not move the lender’s repayment schedule. Conversely, mechanical completion may trigger a contractor payment even though transmission access remains unavailable.
The result is a completed plant that continues to incur costs but cannot earn the revenue originally expected. Each contract may still be valid, even though their timelines no longer match. At the structuring stage, the parties can examine whether these documents use consistent definitions for completion, commercial operation and grid availability. They can also align notice periods, extension rights and final completion dates.
Any relief must appear in each relevant agreement. Alternatively, the affected parties must accept it through an amendment. One party’s extension cannot bind another party that never agreed to it.
Temporary Access Is a Bridge
Temporary General Network Access (T-GNA) allows a project to use the inter-state transmission system for a limited period, subject to the applicable rules and available capacity. This can help while dedicated transmission infrastructure is being completed. But temporary access may not provide the certainty needed to support the revenue assumptions in a long-term project.
Whether temporary access is enough to achieve the contractual commercial operation date depends on the project documents. The power purchase agreement may require specified connectivity or testing. The financing agreement may impose separate conditions before the project is treated as operational.
A transmission delay does not automatically entitle a generator to deemed-generation payments. These payments cover electricity that could have been generated but was not dispatched. Whether they are available depends on the power purchase agreement, the reason for the restriction, the applicable regulations and the evidence that the project was ready to generate.
Any entitlement depends on the power purchase agreement, the cause of the restriction, applicable regulation and evidence that the project was ready. The company should establish that record while the delay develops. Technical-readiness certificates, grid correspondence, notices to the procurer and generation data may determine whether relief is available.
The developer, contractor, procurer and system operator may each give a different reason for the delay. The project records, correspondence and notices issued at the time can help establish what caused it and who was responsible.
When the Project Reaches the Parent
A delay at a project company can become a problem for the wider group when the project runs short of cash and the parent has to step in.
A special-purpose vehicle, or SPV, is a separate company created for a particular project. It can hold the project assets, revenues, debt and contracts. Separate accounts and financing make the allocation of risk clearer.
Keeping the project in a separate company helps distinguish its finances from those of the parent. But the parent may still have to provide support under guarantees, cost-overrun commitments, equity-support obligations or security given over other group assets.
A cross-default may also matter. This is a clause under which default in one financing can activate rights under another.
The review should therefore cover more than the SPV’s loan. It should identify every commitment given by the parent, any security shared with other group companies and any clause that could allow a default at the project company to trigger rights elsewhere in the group. The label ‘non-recourse’ is not enough on its own. The practical question is which guarantees, support undertakings and other obligations the parent has agreed to provide.
A delay can also create commercial exposure without automatic legal liability. The parent may continue funding maintenance, interest or reserve shortfalls because abandoning the project would destroy more value. Those payments can gradually draw working capital away from established operations.
Financing the Gap Deliberately
Loan repayments may be scheduled on the assumption that a project will start earning by a particular date. The financing should also provide for what happens if grid access is delayed and that revenue does not arrive on time.
One option is to begin principal repayment after a defined revenue event rather than physical completion alone. Lenders may require a final outside date, additional reserves or tighter monitoring in return. This can give the project more time before principal repayments begin. It does not remove the interest, maintenance and other costs that continue during the delay.
The parties may also consider a pre-agreed facility for defined cost overruns and holding costs. Parent-support commitments could be capped by amount, duration or cause, if lenders accept those limitations. This gives the parent greater visibility while preserving essential project funding.
The financing structure should also account for the accounting treatment of borrowing costs. Under Ind AS 23, capitalisation may need to be suspended during an extended period in which active development of a qualifying asset is interrupted. Capitalisation ceases when substantially all activities necessary to prepare the asset for its intended use or sale are complete.
A delay in grid access does not, by itself, determine the accounting treatment. The assessment depends on the asset’s readiness for its intended use, the activities that remain outstanding and the circumstances of the delay. The contractual definition of commercial operation is relevant, but it does not settle the accounting question on its own.
Applying that test to a grid-delayed project requires a fact-specific accounting assessment. The contractual label attached to commercial operation is not conclusive.
Each arrangement has a cost for someone. A lender may resist open-ended repayment relief. A contractor may not agree to bear costs caused by transmission infrastructure outside its control. A procurer may resist paying for electricity it could not receive. A lender will not normally accept open-ended repayment relief. A contractor may resist carrying costs caused by infrastructure outside its control. A procurer may not accept payment obligations for power it could not receive.
The objective is to allocate each risk to the party able to manage, price or insure it. Where no party controls the risk, the documents still need a process for sharing information, preserving the asset and renegotiating before payment failures begin.
The Contract Cannot Build the Transmission Line
No clause can make delayed grid infrastructure available. The contracts cannot bring the transmission line into service sooner. They can, however, determine who bears the costs while the project waits.
It can clarify whether the contractor receives additional time, money or both. It can establish the evidence required to prove project readiness. It can determine whether debt repayment moves with revenue and how long the parent must provide support.
The broader lesson is that completion has several meanings. An asset may be physically complete, contractually incomplete and financially overdue at the same time.
The contracts should account for this possibility before construction begins. They cannot eliminate delay, but they can establish who bears the costs, when repayment obligations change and what support the parent must provide. That can prevent a delay at one project from becoming an unexpected financial burden on the wider business.
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