New Delhi: Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) backed Azure Power Global Ltd is among developers that the Congress- ruled Punjab government wants to renegotiate clean energy contracts with, said two people aware of the development.
Starting 1 July, Punjab State Power Corporation Ltd (PSPCL) that supplies electricity in the state, has sought a discount from solar power developers, on account of low interest rates and a financial crunch exacerbated by the coronavirus pandemic, Mint reported on Monday.
An Azure Power spokesperson declined comment.
Punjab’ move comes in the backdrop of investor criticism over a controversial attempt by the Y.S. Jagan Mohan Reddy-led Andhra Pradesh government to renegotiate clean energy tariffs.
CDPQ is a majority shareholder in Azure Power with 50.9% stake. World Bank’ private-sector development arm International Finance Corporation (IFC) is among other investors in Azure Power, India’s first renewable energy company to list on the US stock market. Azure Power has a pan-India portfolio of over 7 GW. Founded in 2008, it had developed India’s first utility-scale solar project in the following year.
“We have written to all major solar power and co-generation plant developers including Azure Power that supply electricity to the state," said a senior state government official cited above requesting anonymity.
New Delhi is also pitching for setting up an Electricity Contract Enforcement Authority to enforce power purchase agreements (PPAs), through the draft amendments to the Electricity Act, 2003.
The other developers who have received a similar communication include billionaire Gautam Adani promoted Adani Power Ltd’ solar power special purpose vehicle—-Prayatna Developers Private Limited (PDPL)—-that has received a request for 10% discount in tariff from PSPCL.
This comes at the time of India’s solar power tariffs hitting a record low of ₹2.36 per unit during a bid conducted by state run Solar Energy Corporation of India Ltd last week.
A communication dated 29 June to PDPL reviewed by Mint, Punjab State Power Corporation Ltd said, “The energy rate payable as per the subject cited PPA was determined based upon tariff determined by CERC (Central Electricity Regulatory Commission)/PSERC (Punjab State Electricity Regulatory Commission). While determining energy tariff, CERC/PSERC had considered interest rate on loan capital/working capital as 13% to 13.50%, whereas these interest rats have reduced considerably over the period."
“It is pertinent to mention here that RBI on 27-03-2020 has come out with a slew of measures to ease financial woes of the commercial sector. RBI has inter-alia has reduced the Repo rate which effectively bring down interest rates applicable to term loans taken by generating companies. Further, RBI has also directed banks to grant a moratorium of three months on payment of all instalments falling due between 01-03-2020 to 30-05-2020. The present rate of interest is about 8.5% thereby generators are having benefits on ROE (return on equity), working capital etc.," the communication said.
Revisiting PPAs could hurt India’s ability to attract investments and the perception about the sanctity of legal contracts. Also, mounting dues to generators threatens to dent India’s image as a clean energy champion.
“Besides, the solar energy tariff has significantly come down to about Rs2.55/- per kWh (kilowatt-hour) as compared to the tariff of Rs5.80 and Rs5.95 per kWh being paid to your generating company," the communication to PDPL said.
The development also assumes importance given that the rapid pace of clean energy capacity addition by India. Clean energy projects now account for more than a fifth of India’s installed power generation capacity. India has 34.6 GW of solar power, with an aim to have 100 GW of solar capacity by 2022.