PPAs for renewables: Andhra Pradesh move to hit sector’s growth, RK Singh tells Amit Shah

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Updated: July 27, 2019 5:04:02 AM

The copy of the letter, reviewed by FE, warned that “if this is not corrected, the FDI will stop coming, the banks will stop financing, and the growth in the renewable energy sector will come to a halt”.

PPA for renewables, Andhra Pradesh government, RK Singh, Amit Shah, FDI in renewable energy sector, YS Jaganmohan Reddy, AP discomsThe state sourced 18% of its electricity from renewable energy sources in FY19; it houses about 12% of the country’s wind and solar capacity.

Stating that the recent decision of the Andhra Pradesh government to revise power purchase agreements (PPAs) signed with solar and wind developers is detrimental to the renewable energy sector, Union power minister RK Singh has intimated home minister Amit Shah that “this has alarmed the sector and the investors”.

The copy of the letter, reviewed by FE, warned that “if this is not corrected, the FDI will stop coming, the banks will stop financing, and the growth in the renewable energy sector will come to a halt”. Since FY15, FDI in the renewable energy sector has been a whopping $4.8 billion. Singh reiterated that “sanctity of the contract is the key to giving confidence to the investors to invest”.

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As FE reported earlier, Singh had tried to persuade Andhra Pradesh CM YS Jaganmohan Reddy against revising PPAs, reminding him that “almost all the major pension funds of the world are invested in India through renewable energy companies”. The state sourced 18% of its electricity from renewable energy sources in FY19; it houses about 12% of the country’s wind and solar capacity.

The new government in Andhra Pradesh has formed a committee to revise “abnormally priced wind and solar” PPAs, saying these have “resulted in unjustified burden on the consumers of the state”, besides contributing to the financial woes of state-run discoms. It believes that many of these agreements were signed with “malafide intentions”. Even with the state’s aggregate technical and commercial losses — a benchmark for power pilferage and discom inefficiency — of 11% is one of the lowest among the country, its FY19 discom losses stood at Rs 1,563 crore.
The Andhra Pradesh government’s move to revise PPAs could put additional stress on about 5.2 gigawatt (GW) of wind and solar energy projects with an estimated debt exposure of over RS21,000 crore, according to a Crisil report. Nearly half of the above capacities are “higher risk of default since they lack liquidity support beyond project level,” the rating agency said.

AP discoms, with FY19 losses of Rs 1,563 crore, have already been delaying payments to renewable generators by 6-12 months. Their estimated outstanding dues to renewable generators stood at a whopping Rs 2,800 crore at the beginning of FY20.

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