Lanko Solar Panel Scam in JNNSM Exposed by Centre for Science and Environment (CSE)

Lanko Solar Panel Scam in JNNSM Exposed by Centre for Science and Environment (CSE)

An investigation by Centre for Science and Environment (CSE) researchers found a corporate scam, which could well destroy the working of this project of national importance.

In July 2010, the Union ministry of new and renewable energy (MNRE) had issued guidelines for the selection of solar power projects.

Jawaharlal Nehru National Solar Mission (JNNSM)
Launched in 2008 with a goal of 22,000 MW of Solar Power in India by 2022.
• 20,000 MW grid-connected and 2,000 MW off-grid
• Grid-connected split into 3 phases:
– 1000 MW by 2013
– 10000 MW by 2017
– 20000 MW by 2022



1st phase JNNSM
First phase (1000 MW) has been split up into two batches.
1st Batch – 150 MW of Solar PV (divided into 5 MW each) and 470 MW of Solar
Thermal (max 100 MW) – Auctioned in November 2010

2nd Batch – 350 MW of Solar PV (project max 20 MW; 1 company 50 MW) –
Auctioned in December, 2011

Process of awarding projects
Reverse bidding process. Companies were asked to give discount over the tariff fixed by
CERC. Companies who offered the highest discount in a closed bid got the project.
CERC benchmark tariff was Rs 17.81/ kWh for solar PV for first batch. The average tariff quoted by winning companies was Rs 12/kWh.
For solar thermal CERC fixed Rs. 15.31/ kWh as tariff, the average bid was Rs. 11.48/kWh
The winning bidders will receive this tariff for all electricity they produce for the next 25 years.

Process of awarding projects
NTPC Vidyut Vyapar Nigam Ltd (NVVN), 100% owned subsidiary of NTPC was made responsible for the contracting, buying and selling of solar power
Solar power was subsidized by bundling 1 unit solar power with 4 unit of unallocated coal power. These power are then bought by discoms at Rs. 5.50/kWh. 1000 MW unallocated coal power was made available to subsidize solar power.
Discoms bought this expensive power because
they have solar RPOs (0.25%).

3 key guidelines
Each company only allowed to apply for one 5 MW PV plant and 100 MW of solar thermal – to increase competition and to allow more companies to participate.

No changes in the shareholding pattern was allowed between Request for Selection (24th September 2010) and signing of PPA (10th January 2011). No change in controlling
shareholding for one year after completion of the project. This was to deter companies from bidding and then selling project at premium - ‘2G effect’ – to allow only serious
players

Net worth: For each PV project of 5 MW a net-worth of 15 crore had to be shown 7 days before applying for Request for Selection. For a Solar Thermal project of 100 MW the net-worth needed to be 220 crore. This to deter bidders without financial strength

One Company = One Application but what happened

LANCO managed to get nine.
At the end of the first phase of the solar mission, LANCO has got its hands over 235 MW of allocation and with this it has cornered an assured revenue of about Rs 13,000 crore.

Names of the 9 companies –
1. DIWAKAR SOLAR PROJECTS 100%
2. KHAYA SOLAR PROJECTS 100%
3. DDE RENEWABLE ENERGY
4. ELECTROMECH MARITECH
5. KVK ENERGY VENTURES
6. VASAVI SOLAR POWER
7. SAIDHAM OVERSEAS
8. FINEHOPE ALLIED ENERGY
9. Newton Solar

Six of the solar PV projects indicated same village as the proposed location during RfS (Vill. Bhojas, Tehsil Khinvsar, Dist. Nagaur)
Both 100 MW solar thermal projects indicated same site during RfS (Vill. Chinnu, Tehsil. Nachna, Dist. Jaisalmer)

During signing of PPA all 9 project shifted location to Askandra village in Jaisalmer – Questions asked?

Each PV project bid with 5 paise difference between each other.
• Coincidence?

Detailed project reports are practically identical.
In two reports found the same hand-writing doing correction.

Lanco is EPC contractor to all projects.
Coincidence?

Land documents and project reports seem to show they are more than that – Land lease documents are all signed by the same Lanco employee.
The offices addresses given by Rajasthan Renewable Energy Corporation were visited:

Phone numbers didn’t work
. Saidham Overseas (one of the projects taken by Lanco) office was a construction site in Gurgaon (near the Lanco main headquarters), no one on site knew of Saidham
Overseas at the site.

. Finehope allied and Vasavi stated “given the project to Lanco”. No clarification on what ‘giving’ means. . Most other sites yielded companies with strong ties to Lanco.

Incidentally, all projects are funded by Axis Bank. This Bank is also the main banker of LANCO.

The case of DDE Renewable Energy and Electromech Maritech.
Upfront Lanco has 26% equity and 100% preference share in both companies.
investigation shows that the remaining 74% equity is held by companies whose directors are
Lanco employees or their family members.
The original promoter of these two projects now own nothing.

17 November 2009 - DDE Renewable Energy was incorporated by K L Bansal and 3 family members as directors and owners. It had Rs. 1 lakh in equity and authorised/ paid-up capital of Rs. 1 lakh.
24 August 2010 - Request for selection and the method of bidding was announced
10 September 2010 – Nice Infracon is incorporated as Rs. 1 lakh equity with Tonu Kumar and Krishna K Sharma has directors and owners with 50% equity each. On the same day Premchand and Sahithi Kurumoju joins as directors. They are both children of
long time Lanco employee Subhramanyam Kurumoju

11 September 2010 – Tonu Kumar and Krishna K Sharma resigns from Nice Infracon
. 17 September 2010 - was the original last date for Request for Selection. 7 days before this net worth of Rs. 15/220 crore needed to be shown.
. 24 September 2010 – Request for selection is extended to this date.

8 October 2010 – DDE Renewable Energy files its annual returns and balance sheets for FY 2009-10 to Ministry of Corporate Affairs showing no changes in shareholding since incorporation.

16 November 2010 – Bids are opened with DDE Renewable Energy winning 5 MW of capacity.

17 December 2010 – DDE Renewable Energy raises its authorised share capital to 25 crore, of which 24.99 crore in preference shares.

31 December 2010 – DDE Renewable Energy issues 15.2 crore in preference shares to DEE
Development Engineers – K L Bansal's company.

10 January 2010 – DDE Renewable Energy signs Power Purchase Agreement (contract) with NVVN

8 February 2011- DDE Renewable Energy retroactively revises its annual returns document for FY 2009-10 showing a different shareholding – now K.L. Bansal owns 23% of the 1 lakh equity shares and the rest 77% is owned by an unnamed corporate entity.

On the same day Premchand and Sahithi Kurumoju become directors in DDE Renewable Energy.

. 30 March 2011 – All of the Bansal family except K L Bansal resigns as directors in DDE Renewable Energy.

31 March 2011 – In the annual returns document ending on this day the company is shown to now be owned to 100% by two companies. The majority is owned by Nice Infracon.
. Almost all the funds – 15 crore – is shown to be in 'Loans and Advances' in DDE Renewable Energy's

The Lanco annual report on the same day shows that Lanco has 26% of the 1 lakh equity shares in DDE which means Nice Infracon must have 74% of the equity shares. Lanco also now owns the 15.2 crore in preference share earlier issued to DEE Development
Engineers.

14 November to 16 December 2011 – Premchand and Sahithi Kurumoju resign and Ravinder Singh and two others become directors in DDE Renewable Energy and Nice Infracon. Ravinder Singh becomes Managing Director of DDE.

Ravinder Singh is an employee of Lanco Solar

The end result: Lanco controls 26% of equity directly and 74% of it through Nice Infracon. It also has almost all the capital of the company through the 15.2 crore worth of preference shares. DDE Renewable Energy is now 100% in control of Lanco.

Modus operandi of Scam in Short
All seven companies formed as Rs 1-10 lakh capital. No assests, no reserves from past
Looks as if most were created just for bidding (Newton incorporated just 4 days before the original bidding date. Won't have qualified if date was not extended by a week)
. All increase their authorised capital after getting letter of intent. Most issued as preference share on the same day Dec. 31, 2010; not directly to LANCO but through an intermediary.
LANCO holds 99% shares in all companies.

Short info about Lanco –
LANCO Infratech is the flagship company of LANCO Group. It was founded in 1986 by Rajagopal Lagadapati, the current MP from Vijayawada in Andhra Pradesh. Lagadapati is LANCO’s chairperson, his brother Lagadapati Madhusudan Rao is the executive chairperson and frontman of the company.

.

CSE and Down To Earth’s investigations have revealed that these guidelines were blatantly flouted by LANCO Infratech.
This company floated front companies and grabbed no less than nine projects worth 235 MW. This is about 40 per cent of the 620 MW worth of projects auctioned by the government during the first batch of the first phase of the Solar Mission.

LANCO Infratech is the flagship company of the LANCO group.
CSE said that the company will get assured revenue of Rs 13,000 crore from these projects over a period of 25 years.


LANCO has 100% of the preference shares in all projects which is equal to the net worth requirement for applying for bids under solar mission.

The preference shares represent almost all capital infused into the projects.

The preference shares are compulsorily convertible, which means they must be converted into equity shares in future.

When converted the preference shares will give LANCO a 99% ownership in each project.

Now what should be done?

Now I think CBI should investigate the matter and High Court or Supreme Court of India should keep the watch on this investigation on day to day basis.

Only after that we Indians will know exactly what happened and who did what and who got the commission and who owns what

Lanco Told to TOI that it "objected to" CSE's statements which it claimed were "wrongly perceived" and not cross-checked with the company. CSE said it had repeatedly tried to solicit comments from the company.


Reality views by sm –

Thursday, February 02, 2012

Tags – Solar Scam CSE Lanco