India wind projects in peril as states rethink purchases

Bloomberg

Two Indian states at the forefront of adding renewables to their power mix are backtracking on agreements for at least one gigawatt of wind projects and are seeking lower prices, potentially dealing a blow to Prime Minister Narendra Modi’s green energy goals.
The southern states of Andhra Pradesh and Karnataka, which account for a quarter of the country’s installed wind capacity, are renegotiating or scrapping purchase agreements with developers and want power at prices lower than what had been stipulated in contracts already signed,
developers said.
“We have lost 75 megawatts of our project pipeline as Karnataka has canceled 400 megawatts of PPAs and there seems to be no other option than taking legal recourse for this,” London-listed Mytrah Energy Ltd. CEO Vikram Kailas said in a phone interview.
The developments are a fallout of India’s shift toward auctions to buy electricity from wind that brought tariffs to record lows, prompting states to renegotiate feed-in tariffs that guarantee a fixed price to producers for their power.
This puts at risk the developers’ financial health if price agreements are renegotiated and could threaten Modi’s resolve to install 175 gigawatts of renewables by 2022.
Andhra Pradesh wants to pay a lower price for wind power projects than what was agreed to for 684 megawatts of capacity, people with knowledge of the matter said, asking not to be identified citing rules. Neighboring Karnataka scrap-ped power purchase agreements, or PPAs, signed earlier this year for 400 megawatts of wind projects, said P. Krishnamoorthy, general manager for power purchase at state electricity retailer Bangalore Electricity Supply Co Ltd.
While Mytrah’s projects are yet to be built, Bangalore-based Atria Power has lost investments of 1.9 billion rupees ($30 million) to build a 24-megawatt project in Karnataka, a company official said. International Finance Corp.-backed Hero Future Energies Ltd. faces renegotiation of the tariff for its 70 megawatts of commissioned projects out of a planned 120 megawatts in Andhra Pradesh.
“Andhra Pradesh should honor what they have signed,” Hero Future Energies Chief Executive Officer Sunil Jain said. “If all these PPAs are renegotiated, you could have bad debts of millions of dollars and what’s worse is that you’ll drive investors away.” The first wind auction held in February brought wind tariffs to the
lowest level in the country.
Various states are now seeking the same from developers and are even reneging on previous pacts. By March, states stopped signing PPAs with projects either in development or commissioned and now the situation has escalated to
reopening the pacts.