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Andhra Pradesh’s green energy investors now fear loan recall

Andhra Pradesh’s green energy investors now fear loan recall


  • 5.2 GW of solar and wind energy projects with estimated debt exposure of 21,000 crore is hanging fire due to the state government’s decision to reopen renewable energy contracts inked under the previous N. Chandrababu Naidu government

New Delhi: Green energy developers, caught in a bind due to Y.S. Jagan Mohan Reddy-led Andhra Pradesh government’s decision to reopen power purchase agreements (PPAs), now run the risk of their loan facilities getting recalled, said two people aware of the development.

This comes in the backdrop of 5.2 giga watt (GW) of solar and wind energy projects with an estimated debt exposure of over Rs21,000 crore in the state hanging fire, due to the state government’s decision to reopen renewable energy contracts inked under the previous N. Chandrababu Naidu government.

A renewable energy chief executive officer’s council of lobby group Federation of Indian Chambers of Commerce and Industry (FICCI) has raised the issue before union ministry of new and renewable energy (MNRE), and said that despite reduced interim tariffs to be paid by the state, there is power curtailment happening.

The Electricity Act of 2003 states that power offtake can only be curtailed for grid safety reasons. With the contracted quantum of wind and solar power in the PPAs not being procured, the state government told Mint that while it has directed its electricity distribution companies (discoms) to procure all such electricity generated, the low power demand due to the pandemic has raised grid safety issues.

In a communication to MNRE last month reviewed by Mint, FICCI’ renewable energy CEOs council chairman Ranjit Gupta wrote, “In these circumstances, generators are gravely harmed as are also running the risk of recall of our loan facilities and consequent shutting down of our projects.”

The fund starved discoms reduced the contractually approved tariff under the PPA to ₹2.44 per unit for solar projects and ₹2.43 per unit for wind projects since July 2019; and informed the developers that in the event of them not agreeing to the revised tariffs, the PPAs would be terminated. Also, the developers claim that the contracted quantum of wind and solar power in the PPAs is not being procured by the state.

“We would also like to draw your attention to the fact that during the pendency of the court proceedings, APSLDC (Andhra Pradesh State Load Dispatch Centre) and APTRANSCO (Andhra Pradesh Transmission Company) have also resorted to excessive illegal curtailment of electricity resulting in huge generation and revenue losses,” the communication from the lobby group added.

The tariff renegotiation by the AP government was challenged by the developers and the dispute is currently before the Andhra Pradesh High Court. While setting aside the state government’s order, the Andhra Pradesh High Court directed the discom to make payment at the reduced interim tariff of ₹2.44 per unit for wind projects and Rs. 2.43 per unit for solar projects respectively, until the issue is resolved by the Andhra Pradesh State Electricity Regulatory Commission.

“Payment and curtailment issues in AP are sub-judice. Due to pandemic, HC has not been able to hear IPP (independent power producer) case. Industry is requesting central govt and state govt for their intervention to seek an early hearing and expedite decision from AP HC,” Gupta, who is the chief executive officer of Azure Power, told Mint.

Andhra Pradesh’s energy secretary N. Srikanth confirmed the representation made by the clean energy developers and said, “From our side the discoms have been told all wind and solar power has to be dispatched.”

“However, due to technical reasons only a certain quantum can be evacuated, given the grid safety issues on account of low electricity demand due to the coronavirus pandemic. This has led to coal fuelled projects of the state and the centre operating at low PLF (plant load factor). In such a scenario, we have left it to the grid management,” Srikanth added.

This comes in the backdrop of state government expediting efforts to float India’s largest solar tender for setting up 10 GW capacity to supply electricity to the farmers requiring an investment of around Rs35,000 crore.

Queries emailed to a MNRE spokesperson remained unanswered.

“In such a scenario where generators are getting paid at a reduced interim tariff and with no hearing date in sight, sustenance is getting difficult with each passing day. In order to service debts and meet other obligations arising out of RE (renewable energy) projects such as employee salaries, operation and maintenance costs, vendor payments etc., generators necessarily have to be reimbursed at full PPA Tariff,” the communication said.

The state government has drawn flak from the union government and global investors such as Goldman Sachs, Brookfield, SoftBank, Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec, JERA Co. Inc., GIC Holdings Pte Ltd, Global Infrastructure Partners, CDC Group Plc, EverSource Capital and World Bank’s International Finance Corp.

These marquee firms have invested in Indian companies, including ReNew Power, Greenko, Adani Power, PTC India Ltd, SB Energy, Mytrah and Hero Future Energies that have set up projects in Andhra Pradesh. The controversial decision not only drew criticism from the Union government, but also from the governments of France, Canada and Japan given the investments made by their firms in the state’s clean energy space.

Other states such as Punjab have taken a leaf out of Andhra Pradesh’ playbook and are seeking to renegotiate clean energy contracts for operational projects. The Andhra Pradesh government’s move led to the central government pitching to set up an Electricity Contract Enforcement Authority to ensure that conditions in PPAs are followed, through the draft amendments to the Electricity Act 2003.

Andhra Pradesh has around 7.7 GW of solar and wind projects and is home to India’s second-largest installed capacity of clean energy, accounting for around 10% of the country’s green energy capacity, with investments of ₹60,000 crore.

Source: livemint
Anand Gupta Editor - EQ Int'l Media Network