Renegotiation of PPAs to hit cash flows

Kolkata: The Andhra Pradesh government's latest move to renegotiate its agreements to purchase solar and wind power will affect generators' operating cash flows and is likely to face strong challenges from RE operators. Normally state-owned distribution companies in the state delay payments to generators and that may eventually lead to a significant drop in generators' operating cash flows, the latest report from Fitch Ratings has suggested.

Earlier this month, the state government had formed a negotiation committee to renegotiate wind and solar PPAs in the state, citing the high tariffs that state distribution firms pay under the contracts.

“We believe that the state government will need to appeal to state regulators and then seek consent from the courts to overturn the existing PPAs. The attempt to renegotiate or cancel PPAs previously approved by state regulators is likely to face legal challenge from renewable operators and the central government,” the Fitch report said.