PPAs: Renegotiation vs Delayed payments vs NPA
This is in the context of the recent attempts of Andhra Pradesh state Government, in India to renegotiate the PPAs of existing Solar/Wind assets. To give you a brief context, the previous Government encouraged renewable power installations in an attempt to encourage green power generation in the state inspite of the government's financial conditions in not such a great condition. The new Govt., came and alleges that the contracts with those renewable assets would be renegotiated as the Govt. cannot afford payments to those companies and also that the contracts were awarded only to a few companies that had alleged relationship with members of the previous regime. AP govt has been insisting upon renegotiating the PPAs that have been signed as it is unable to honour the high cost contracts, inspite of the recommendation from govt of India to not do so. Is there any merit in the approach by AP. Before we get into further analysis, if we take a peek into the ground reality...