Andhra Pradesh high court orders utilities to honour PPA agreements in key ruling for Indian renewables

Mar 17, 2022 02:13 PM ET
  • In a substantial ruling for the Indian renewables market, a high court in the state of Andhra Pradesh has ruled that state circulation utilities (Discoms) must pay renewable business the terms they agreed to when they authorized power acquisition agreements (PPAs) within 6 weeks.
Andhra Pradesh high court orders utilities to honour PPA agreements in key ruling for Indian renewables
Image: Azure Power

Reneging of PPA contracts from Discoms has actually been an issue for time in India and also the Andhra Pradesh High Court had actually formerly ruled that Discoms in the state could make the repayments at acting tariff of INR2.43 (US$ 0.032) -2.44 per unit, as opposed to the agreed PPA tariff.

Now, nonetheless, a single judge bench has actually ordered the Discoms to pay back the full PPA tariff rate within 6 weeks, with an estimated cost to the state's Discoms of around US$ 1.4 billion, comprehensive of charges arising from the difference between the PPA rate and the interim rate over the last three years.

" The High Court order is a relief for the market, particularly as it strengthens the fundamental tenet of agreement enforcement," said Vinay Rustagi, handling director of study firm Bridge to India.

Girishkumar Kadam, elderly vice head of state as well as co-group head of the ICRA score company, stated the ruling was a "substantial positive advancement for the renewable resource sector as well as therefore will certainly give a major liquidity alleviation for the impacted IPPs in the state."

"Pending resolution of PPA tariff renegotiation issue has actually been a key worry for the renewable resource industry and also in turn influenced the debt account of wind and also solar IPPs in Andhra Pradesh," stated Kadam.

A ROTH Capital note said the ruling would certainly be a major favorable for both Azure Power and ReNew Power, with ReNew standing to benefit the majority of. The firm had previously suggested that it was wanting to recoup practically US$ 200 million from Andhra Pradesh over a much longer time frame than 6 weeks.

In a similar way, Azure was chasing around US$ 24 million receivables and also long-lasting settlements. Both firms' stock rates have actually climbed today.

Yet the order does not manage the wider problem of Discom financial resources, noted Rustagi, which he claimed was "the origin for states looking for to renegotiate PPAs and delaying settlements".

It is very important to note that the south-eastern state of Andhra Pradesh is not the most solar-heavy state in India, with the huge majority of solar release in the nation concentrated in 4 north as well as western states-- Gujarat, Rajasthan, Maharashtra and also Uttar Pradesh.

Rustagi said various other states have been postponing payments to power manufacturers for more than a year which the ruling might "set a conclusive marker".

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