Andhra Pradesh has been in the forefront among states in setting up green power plans with a commissioned capacity of 7.2 gigawatts—solar at 3.2GW and wind at over 3.9GW.bloomberg
Andhra Pradesh has been in the forefront among states in setting up green power plans with a commissioned capacity of 7.2 gigawatts—solar at 3.2GW and wind at over 3.9GW.bloomberg

Clean energy firms move HC against Andhra govt decision to renegotiate PPAs

  • The order has alarmed power developers as it is likely to set a precedent for other states to follow suit
  • AP has been in the forefront among states in setting up green power with commissioned capacity of 7.2 gigawatts

A clutch of several renewable power producers have challenged the Andhra Pradesh government move to renegotiate power purchase agreements (PPAs) which could see a downward revision of current tariffs, two people aware of the development said. These companies filed a writ petition in the Andhra Pradesh high court on Wednesday seeking a stay on the state government’s 1 July order, the people cited above said on condition of anonymity.

Private renewable energy companies with substantial presence in the state include ReNew Power, ACME Solar, Greenko Energy Holdings and Mytrah Energy India Ltd.

Andhra Pradesh has been in the forefront among states in setting up green power with commissioned capacity of 7.2 gigawatts, with solar at 3.2GW and wind at over 3.9GW. On 1 July, the state directed a high-level negotiation committee to use current tariff rates, rates prevalent at the time of commissioning of projects, and the current opportunity cost of other sources of power to benchmark and renegotiate agreements, and submit a report in 45 days.

The order has alarmed renewable power developers and investors alike as it is likely to set a precedent for other states to follow suit and lower tariffs. Andhra Pradesh’s insistence on lowering tariffs will also place 5.2GW of installed wind and solar power, with combined debt of 21,000 crore, at risk of default, a report by credit ratings agency Crisil estimated. Ratings agency Icra has already downgraded two projects of Mytrah Energy and ACME Solar, since part of the power generated from these projects would be supplied to AP power distribution companies (discoms).

“Prolonged delay in PPA resolution would put about half of capacity in the state (2.6GW with roughly 10,600 crore of debt) at immediate risk of default in debt servicing as these projects would have no other liquidity support apart from project-level liquidity reserves, which are typically at six months of debt servicing," said Ankit Hakhu, associate director, Crisil Ratings.

Some developers are, however, still hopeful of an amicable solution without involving litigation. “We are hoping that the Andhra Pradesh Electricity Regulatory Commission (APERC) will take a favourable view to our argument that the state shouldn’t unilaterally change tariffs. We hope it will not come to taking legal recourse," said the first of the three people cited earlier, a senior official with a private developer.

According to the persons cited above, the bone of contention for the state government has been PPAs signed from 2014-2019 that were over and above the mandated 5% renewable power purchase obligation (RPPO) of the state, when cheaper options in thermal power were available.

Now, with tariffs having fallen for wind and solar power over the last two years, the state government wants to replace the old tariffs with new ones in line with the current PPAs being signed.

To this end, in the past month, the state government has slashed power developer Greenko’s tariff twice over from 5.74 per kilowatt hour (kWh) to 3.74 per kWh and then to 2.44 per kWh, a decision which has been stayed by the Appellate Tribunal for Electricity.

Solar Energy Corp. of India Ltd (SECI), the intermediary between state discoms and private developers, and NTPC Ltd, have both denied Andhra Pradesh’s request for renegotiation, with the latter threatening legal action if outstanding dues at the original tariffs aren’t paid.

The state has justified its stand, arguing that the new government has “inherited a bankrupt exchequer with a huge deficit of 2.62 lakh crore, electricity distribution companies’ unpaid generator dues of 20,000 crore and accumulated losses of discoms of 15,000 crore."

Close