The Centre has written to the YS Jagan Mohan Reddy government not to consider reopening of Power Purchase Agreements (PPA) of renewable energy projects set up in the State.

Anand Kumar, Union Secretary For New and Renewable Energy in a letter Andhra Pradesh Chief Secretary LV Subramanyam has advised the state government not to re-visit the PPAs of the renewable energy sector. He stated that such a move would have adverse affect on investments in the state and also impact the investor confidence.

In the communique, the Centre felt that the proposed moves by the new Government as reported in the media would affect the investor sentiment in the country's renewable energy sector.

The Union Ministry wrote : Various renewable energy project developers sign PPAs with the State Governments either under Section 62 or Section 63 of the Electricity Act. In the first case the tariff is fixed by the State Electricity Regulatory Commission in line with the Central Electricity Regulatory Commission regulations and in the second case the tariff is arrived at through transparent open competitive bidding basis.

Anand Kumar mentioned about the proposed moves by the state to reopen some of the high cost wind power projects, as reported, and expressed that this would not augur well for the state and the growing renewable energy sector.

After his thumping victory in the elections, Jagan Mohan Reddy in various interviews mentioned about move to revisit high cost PPAs and also decided to cancel several big contracts awarded to infrastructure companies earlier this year.

Since the bankability of projects is based on PPAs and the price negotiated at the time of implementation of projects, independent power producers were a worried lot. This development of the Centre advising the state not to revisit PPAs augurs well for these IPPs.

The Centre observed revisiting these PPAs wills shake the confidence of the investors and also adversely affect the future bids and investments. It sought to drive home the point that PPA as a contractual agreement should not be revisited after it was inked unless there is a specific provision that enables such a move or when there is a conspiracy.

The Union Minister mentioned about the Centre's target to achieve total installed capacity of 175 giga watts from renewable energy sector by 2022 and felt such moves will dent confidence.

Over the past five years, Andhra Pradesh has seen the renewable energy capacity going up to close to 7.5 GW, with wind power accounting for about 4.2 GW and the rest majority coming from solar PV installations both small and under the large parks scheme.

The Andhra Pradesh Government headed by N Chandrababu Naidu had also put up a discussion on renegotiation of PPAs but there was not much progress even though it had taken up the matter with the regulator as well.

The Centre's move to convey its concern augurs well for the sector faced with payment delays leading to cascading affect on to their finances and strained relationship with lenders.

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