Two state-owned power discoms (distribution companies) of Andhra Pradesh have moved to reopen contracts signed with wind generators in recent months, a step that could impact at least 40 of India’s biggest RE (renewable energy) developers and raises serious questions about the sanctity of contracts.
The move is a body blow for RE developers, who have been the only bright spark in the otherwise sluggish electricity generation sector, and there are concerns that other states could take cue from this and initiate similar reopening if wind and solar project PPAs on the same grounds cited by the Andhra discoms — that tariffs discovered in subsequent years have been cheaper.
Private developers have raised concerns that this move by the state utilities to cancel contracts signed with developers of new wind projects comes amid a general reluctance to renegotiate pacts signed with old and inefficient state-owned thermal plants, most of which are idling due to high tariffs but the distribution utilities are still forced to fork out fixed charges. A reworking of tariffs for these new projects could lead to a fresh wave of non-performing assets (NPAs) in the renewable energy sector, which has seen FDI inflows of $3.22 billion over the last four years alongside significant domestic investment leveraged by bank funding.
