PPA renegotiation may adversely impact RE sector growth:ICRA

New Delhi, Aug 21 (PTI) Renewable energy sector’s growth may be hit adversely if power distribution companies implement renegotiation or cancellation of signed power purchase agreements (PPA) with developers, rating agency ICRA has said.

The recent attempts by state-owned distribution utilities (discoms) in states like Andhra Pradesh, Karnataka and Uttar Pradesh to renegotiate or cancel signed power purchase agreements (PPAs) with wind and solar power developers are likely to have an adverse impact on the renewable energy (RE) sector, ICRA said in a statement.

If implemented, this would also impact the credit profile of the independent power producers (IPPs) and investment interest from the private sector in this sector, it added.

“Given the circumstances, significant uncertainty exists for wind-based IPPs, which have recently signed PPAs based on feed-in tariffs. The same is estimated to be about 830 MW in Andhra Pradesh and 490 MW in Karnataka,” Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA Ratings said.

However, Majumdar said that such cancellation or renegotiation if finalised by discoms may be legally challenged by the affected IPPs and the resolution of the same could be a protracted affair.

Besides, ICRA understands that the central government is trying to dissuade state discoms from such unilateral action on PPAs.

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