Group Captive
A group captive solar plant is a solar project developed for the combined use of multiple corporate buyers. In this model, the buyers, or captive consumers, own at least 26% of the plant and consume at least 51% of the power generated. The buyers use the open access framework to transmit the power from the solar plant to their locations.
The Electricity Rules of 2003 and the Electricity Act of 2003 also apply to group captive projects. The rules state that captive users must own at least 26% of the plant and consume at least 51% of the power generated annually. The act also exempts captive and group captive projects from cross subsidy surcharges. Each consumer in a group captive project must hold a minimum of 26% equity and collectively consume at least 51% of the power generated. Like individual offsite captive projects, group captive projects use the open access framework to transmit power from the solar plant to the consumers' locations.
Frequently Asked Questions
The corporate buyer must hold at least 26% of the equity while the developer arranges for the rest 74%. A 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
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.
