Significant regulatory uncertainty for wind, solar power plants in AP: ICRA
In the interim, the court directed the discoms to make payments for the pending bills and future bills at the rate of Rs 2.43 per unit for wind power plants and Rs 2.44 per unit for solar power plants.
The Andhra Pradesh high court on September 24 aside the notification issued by Andhra Pradesh on formation of a high high-level negotiation committee to renegotiate the cost of wind and solar power purchase agreements (PPAs) tied-up by the state distribution utilities (discoms). Instead, the high court has directed the state discoms and developers to approach Andhra Pradesh Electricity Regulatory Commission (APERC) to decide on the tariff issue.
The court has suggested a time frame of six months for APERC to decide on the issue. In the interim, the court directed the discoms to make payments for the pending bills and future bills at the rate of Rs 2.43 per unit for wind power plants and Rs 2.44 per unit for solar power plants.
Sabyasachi Majumdar, Senior Vice President and Group Head - Corporate ratings, ICRA, said, “While the quashing of the government’s notification by the APHC regarding appointment of a committee for negotiating signed PPAs is a positive development, the directions on referring the matter to APERC leads to continued uncertainty for wind and solar power projects in Andhra Pradesh. Moreover, the APHC issued directions to pay wind and solar IPPs at interim rates including past arrears. However, the timeliness of payments from discoms remains to be seen. The non-receipt of payments over the past 12 months along instances of grid curtailments has adversely affected the credit profile of the wind and solar power projects having PPAs with Andhra Pradesh state discoms.”
In another development, based on a petition filed by one of the renewable project developers in Andhra Pradesh, the APERC on August 31 had directed the Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL) to release the pending payments to this developer in instalments on a monthly basis till the entire payments dues are cleared. The regulator had also directed the discom to comply with the terms of the PPA and make timely payments for the power supplied. However, discom’s compliance to this order remains to be seen. In this context, timely resolution of the tariff issue remains important for the sector, an official statement said.
The receivable position for wind and solar power companies in Andhra Pradesh has worsened to more than 12 months as of September 2019, adversely affecting their liquidity position. The companies are meeting their obligations through a mix of available working capital facility and debt service reserve account, besides the incremental funding support from their respective promoter entities. However, IPPs with large exposure to the discoms in Andhra Pradesh and especially, belonging to the promoter groups having relatively modest financial strength, remain vulnerable from debt servicing perspective.