Andhra Pradesh holds renewable energy payments citing coronavirus force majeure

Andhra Pradesh’s decision to revise tariffs of renewable energy projects has already created a stir in the industry and hit the national mission to have 175 giga-watts of renewable energy capacity by 2022.

Andhra Pradesh has informed renewable power producers that its electricity discoms will not be able to pay renewable energy-based power producers as they are facing a reduction in collections due to the lockdown to contain the coronavirus outbreak.

In a letter, a copy of which was reviewed by FE, the Southern Power Distribution Company of Andhra Pradesh has said that the ‘force majeure event’ is ‘affecting the performance obligations’ of the discoms under the power purchase agreements (PPAs) and ‘no cause of action for breach or liability will arise as a consequence of the said force majeure event’. Andhra Pradesh’s decision to revise tariffs of renewable energy projects has already created a stir in the industry and hit the national mission to have 175 giga-watts of renewable energy capacity by 2022.

As FE reported earlier, following the footsteps of Uttar Pradesh, the discoms of Madhya Pradesh and Punjab have also invoked the force majeure clauses in their power purchase agreements (PPAs) with power producers, with the discoms saying that the lockdown is preventing them to ‘perform obligations’ under the contracts. A force majeure means an extraordinary event or circumstance beyond human control.

Responding to queries related to the invocation of the force majeure provisions, Sumant Sinha, CMD, ReNew Power, said that these ‘may not be applicable to renewable energy companies due to the terms and conditions which govern the setting up of a renewable energy project and are clearly set out in the PPAs’.

“It is also prudent to note that as per the law of the land the renewable energy projects have a must run status,” Sinha said. About Uttar Pradesh’s notification, state-run Solar Energy Corporation of India (SECI) had informed the relevant companies that the force majeure event claimed by the state ‘shall apply mutatis mutandis’ to the PPAs between SECI and the project developers. SECI has signed PPAs with these firms, and has tied up back to back power supply contracts with Uttar Pradesh.

The renewable energy industry is one of the major FDI recipients with the sector attracting $4.8 billion foreign capital till 2019 end since FY15. Highlighting their issues regarding irregular payments, the Solar Power Developers Association has written to the Prime Minister informing that ‘if monthly payments are stopped abruptly by discoms, there will be a huge impact’ on the industry, resulting in companies being declared as non-performing assets.