Andhra Pradesh won’t reopen all power purchase agreements for renegotiation but will do so only in cases where there’s “manifest wrongdoing”, Union Power Minister RK Singh said referring to a statement issued by the state government.
This comes after the newly formed Andhra Pradesh government, led by Chief Minister YS Jagan Mohan Reddy, said it was going to review power purchase agreements signed between the state’s electricity distribution companies and power generators to renegotiate tariffs.
“I saw a communique yesterday whereby Andhra Pradesh government has clarified that they do not intend to reopen all PPAs,” Singh said at a press conference in New Delhi today. “It will only be where there’s manifest wrongdoing that they will be pursuing for the course of action.”
Only a few power purchase agreements will be reviewed where corruption is evident, a top official from Andhra Pradesh government told BloombergQuint requesting anonymity. These would be the projects that were not awarded through bidding, the official said.
The state government had earlier cited higher tariffs of wind and solar power purchase agreements and financial crisis at discoms with dues amounting to nearly Rs 20,000 crore as reasons to review the “exorbitantly priced wind and solar power purchase agreements”.
The central government, solar and wind power developers, analysts and investors had voiced concerns on the move, saying that it will hurt investor sentiment in the sector. According to Acuité Ratings, a debt exposure of around Rs 9,000 crore will be at potential risk if the state cuts tariffs on operational projects to bring it to current auction levels. “It will not only impact the investment pipeline of Rs 60,000 crore in renewable projects in the state over the next three-five years but will also send a wrong signal to the investor community regarding the sustainability of renewable projects in India,” the credit rating and research company said in a press statement.
Reneging on contracts would also threaten India’s target of 175-gigawatt of renewable energy by 2022 as the nation looks to cut emissions to meet commitments under the Paris agreement.
Source: bloomberg
