Can't renegotiate PPAs; clear RE dues in 6 weeks: AP HC on PPA reneging matter

The order settles a crucial two-year old matter that created news within the country and international investment community. Andhra Pradesh’s attempt to renegotiate Power Purchase Agreements (PPAs), first in India, has been followed by other states like Gujarat and Punjab.

The Andhra Pradesh high court on Tuesday held that executed power contracts cannot be renegotiated and asked the state to clear dues estimated at Rs 30,000 crore to renewable energy generators in six weeks.

The order settles a crucial two-year old matter that created news within the country and international investment community. Andhra Pradesh’s attempt to renegotiate Power Purchase Agreements (PPAs), first in India, has been followed by other states like Gujarat and Punjab.

A division bench consisting chief justice Prashant Kumar Mishra and justice Ninanla Jayasurya set aside an earlier judgment by a single judge asking Andhra discom to make interim payment to the generators. The division bench directed the discom to make payment of all pending and future bills at the rate mentioned in the PPAs. “The payment of arrears/pending bills shall be made within a period of six weeks from today,” it said.

The order held that any proceeding to revisit tariff after PPAs are signed and executed cannot be sustained.

The division bench rapped the single judge for allowing wriggle out terms of the contract. “It seems, learned single Judge was swayed by the financial difficulty of the discom and having felt that allowing the writ petitions would require full payment as per PPA rate to the petitioners, went on to fix interim rate for payment of pending and future bills,” the latest order said.

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“The High Court has decided the matter conclusively in favour of renewable energy generators. The High Court has affirmed the primacy of contract which should give confidence to entire sector. What is most heartening is that a time bound direction has been issued for payment for generation companies which would ensure that at the end of this long protracted litigation the legitimate dues are finally realised,” said SKV Law Offices advocate Shri Venkatesh, who represented Greenko in the matter.

The Andhra Pradesh government had on July 1, 2019 issued an order that directed a high-level committee to renegotiate 41 PPAs with renewable energy companies and submit report in 45 days. Following this, the Southern Andhra Power Distribution Co on July 12, 2019 had sent letters to 139 power plants, asking wind plants to revise down the tariff to Rs 2.43 per unit and solar plants to reduce the price to Rs 2.44 per unit retrospectively. The state high court had on September 24 quashed the July 1 government order as well as the July 12 letters issued by the state power distribution company. The order was challenged by the state government. During course of the litigation, the High Court dismissed a committee that was formed to review tariffs for buying renewable power. It also set an interim tariff of Rs 2.44 a kilowatt per hour (unit) for wind and Rs 2.43 a unit for solar power projects till the time Andhra Pradesh electricity commission takes a decision.

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