Supplying multiple facilities through group captive

Many industrial groups in Tamil Nadu operate several facilities — factories in different industrial estates, warehouses, offices. Rather than arranging renewable supply for each site separately, a group can supply multiple facilities from a single off-site plant through a group captive arrangement. This can be efficient, but it adds complexity in structure, allocation and compliance.

The basic structure

1. A special purpose company (SPC) owns the renewable plant
2. Consuming entities — the group's companies or facilities — hold equity in the SPC
3. The plant injects power into the grid
4. Power is allocated to each consuming facility's account with the distribution company
5. Each facility's consumption from the plant is tracked

Captive status depends on consuming entities collectively meeting applicable ownership and consumption conditions under the Electricity Rules, verified annually, and conditions may also apply to individual users' shares. Check the current rules and how they apply with legal advisers. See open access vs group captive.

Why supply multiple facilities

• Scale — one larger plant is often more economical than several small ones
• Simplicity — one project to develop, finance and operate
• Flexibility — allocation can be adjusted between facilities, within rules
• Sustainability reporting — group-wide renewable supply. See renewable power and sustainability reporting.

Ownership

How equity is held matters:

• Each consuming entity may need to hold equity
• Equity proportions may need to relate to consumption proportions, depending on current rules
• Changes in entities (mergers, new companies) may affect structure

Structure the SPC with legal and tax advice.

Allocation

Allocation decides how much of the plant's output goes to each facility. Considerations:

• Consumption at each site — no facility should be allocated more than it can use
• Tariffs at each site — allocating more to higher-tariff sites increases savings
• Network charges — differ by voltage and location. See landed cost of open access power.
• Banking — surplus at one site may be banked, subject to rules. See energy banking explained.
• Captive compliance — allocation must keep the arrangement within conditions

Operational complexity

• Separate open access approvals or schedules for each consuming facility
• Metering and reconciliation at each site
• Monthly tracking of consumption against allocation
• Annual verification of captive conditions

A clear system for data collection and reconciliation is essential.

Facility changes

Over a long contract, facilities change:

Agreements should anticipate these changes.

Third-party members

Some group captive arrangements include unrelated companies as consuming members. This widens participation but increases complexity: each member's compliance affects the others. Shareholder and supply agreements need careful drafting.

Contracts

Typical documents include:

• Shareholders' agreement — rights and obligations of equity holders
• Power supply or energy supply agreement — terms of supply to each consumer
• O&M agreement for the plant
• Open access agreements with utilities

Risks to manage

• Captive status failure — if conditions aren't met, surcharge exemptions may be lost, possibly with retrospective charges
• Regulatory changes — changes in rules, charges or banking
• Consumption shortfall — facilities consuming less than planned
• Plant underperformance — less generation than expected
• Member exit — a consuming member leaving

Questions to ask

• Which entities will hold equity, and in what proportions?
• How will allocation be decided and changed?
• How is captive compliance monitored, and by whom?
• What happens if a facility closes or a member exits?
• How are regulatory changes handled?

Common mistakes

• Allocating more power to a facility than it consumes
• Not monitoring captive compliance through the year
• Ignoring network charge differences between sites
• No provisions for facility closure or sale
• Weak data reconciliation

Choosing the plant location

For multi-site supply, the plant's location affects network charges and losses to each facility. A plant close to one facility but far from others may suit some members better than others. Locations near the transmission network, with capacity to inject, can simplify delivery to sites spread across the state. Land, resource and grid access still decide where a plant can actually be built, so location is a balance between these and delivery cost. See how developers source and qualify land.

Monitoring through the year

Captive compliance is assessed annually, but problems build month by month. A simple monthly dashboard — generation, allocation and consumption for each facility, cumulative share of consumption against the applicable threshold, and banking balances — gives early warning if a facility's consumption is falling short. Corrective action, such as reallocating supply, is far easier in the third month than in the twelfth.

How we help

Through open access and group captive solar work with industrial consumers, we help groups plan multi-facility supply, coordinate land and plant development, and work with legal and regulatory specialists on structuring and compliance.