Andhra Pradesh Supreme Court has issued its injunction on March 15, 2022 in the matter of renegotiation of PPA tariffs for wind and solar projects, has instructed the state discoms to comply with the terms of the signed PPAs and the ongoing payments to be settled, according to the agreed rate under the PPA within six weeks from the date of the order.

Andhra Pradesh’s Supreme Court upholding the sanctity of PPAs (power purchase agreements) is a positive development for the renewable energy sector, ICRA said on Wednesday.

Andhra Pradesh Supreme Court has issued its injunction on March 15, 2022 in the matter of renegotiation of PPA tariffs for wind and solar projects, has instructed the state discoms to comply with the terms of the signed PPAs and the ongoing payments to be settled, according to the agreed rate under the PPA within six weeks from the date of the order.

“The AP High Court order upholding the sanctity of the signed PPAs is a significant positive development for the renewable energy sector and will thus provide significant liquidity relief for the affected IPPs in the state,” Girishkumar Kadam, Senior Vice President & Co-Group Head – Corporate ratings, ICRA, said in the statement.

According to Kadam, pending a resolution of renegotiation of PPA rates was a major concern for the RE sector and in turn impacted the credit profile of wind and solar IPPs in AP, particularly the entities that rank relatively weaker. sponsor groups.

However, he stated that timely execution of the HC order by the discoms is a key factor, given the discoms’ weak financial profile in AP, characterized by ongoing losses and high debt dependency.

The AP High Court has overturned its previous injunction issued by a single judge of the HC in September 2019, ICRA said in a statement. In its September 2019 order, the AP High Court had ordered the AP distribution companies (or discoms) to make the payments at an interim rate of Rs 2.43/2.44 per unit, instead of the PPA rate and had the AP government ordered in July 2019 to form a strong committee to review wind and solar tariffs, it said.

Based on the guidance of the AP High Court, the incremental impact on the purchase cost of power is estimated to be about Rs 10,500 crore, due to the accrual of dues resulting from the difference between the PPA rate and the intermediate rate over the past period of 3 years.

“Assuming these additional power purchase costs are approved as regulatory assets to be depreciated over a 5-year period, the incremental impact on power supply costs for AP discoms is estimated at 54 paise/unit, which represents an upward pressure of 8. 5 percent reflects. on the average retail delivery rate for AP discoms,” Vikram V, Vice President & Sector Head? Corporate Ratings, said.

The tariff order issued by the Andhra Pradesh Electricity Regulatory Commission (APERC) for FY2022 has an approved annual turnover requirement for AP discoms which is based on average RE purchase cost of Rs 2.55/unit taking into account the intermediate PPA rate .
Despite pressures on power costs, average retail rates for AP discos have remained unchanged according to rate orders issued since FY2019, he added.

According to ICRA, the outlook for the RES sector remains stable, helped by strong policy impetus, improved tariff competitiveness of both solar and wind energy and a supportive regulatory framework.

Vishrov Mukerjee, Partner, J Sagar Associates, who has represented Green Infra Wind Solutions in a series of Writ Appeals before the AP High Court, said the verdict underscores the importance of certainty in contracts by rejecting pleas that PPAs can be reopened under of financial hardship.

The cessation of the pending procedure before the regulatory committee can finally (hopefully!) quieten this matter down. This, coupled with instructions for payment in a time-bound manner and the rejection of curtailment of RE projects that are in must-run status, will provide much-needed relief to the industry, Mukerjee said.


This post Andhra Pradesh HC recommends the sanctity of PPAs positive for renewable energy producers: ICRA was original published at “https://www.financialexpress.com/industry/andhra-pradesh-hc-order-upholding-sanctity-of-ppas-positive-for-renewable-energy-producers-icra/2462886/”

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