India's wind power producers owed nearly $400 million

INDIA: Three Indian states -- Maharashtra, Rajasthan and Madhya Pradesh -- together owe around $390 million to wind power producers.

Wind power producers are seeing their unpaid bills stack up in three Indian states
Wind power producers are seeing their unpaid bills stack up in three Indian states

According to data shared by the Wind Independent Power Producers Association (Wippa), Maharashtra owes more than $181 million, Rajasthan $135 million, and Madhya Pradesh $73 million. With these three states accounting for around 11GW of wind capacity (nearly 40% of India’s total), the impact of the delayed payments is being felt across the industry.

The main reason for the delay is the bad financial health of these state utilities, which are saddled with huge debts and losses. Although all three states have large backlogs of payments to generators, both conventional and renewable, there seems to be a clear preference for paying dues to conventional and even solar power producers over wind power producers.

Rajasthan has been behind schedule in making payments to all power producers because of its financial difficulties. Madhya Pradesh and Maharashtra, although also cash strapped, appear to be delaying payments to wind power producers. The discrimination is most apparent in Maharashtra, where, in addition to the delay in payments, the utility has not signed power purchase agreements for nearly 560MW of new ready-to-commission capacity since early this year, effectively stranding investments worth $600 million.

Fixed tariffs

According to industry watchers, one of the reasons for this discrimination is a perception that wind power tariffs are high. Unlike solar power, where tariffs established through competitive bidding have pushed down prices, wind’s feed-in-tariffs are fixed by the state regulators for the project’s lifetime. Utilities are averse to locking themselves into binding commitments for "high cost" power as they believe that solar tariffs will fall further over time.

The delay in payment has had a serious impact on wind power generators, particularly independent power producers (IPPs), many of which are supported by overseas investors. Goldman Sachs-backed Renew Power has the highest outstanding dues of $86 million, of which $52 million is from Maharashtra alone. CLP India, part of Hong Kong’s CLP Holdings, has an outstanding bill of $58 million. Mytrah Energy, listed on the London Stock Exchange, is owed $33 million.

Other wind IPPs with large dues are Green Infra ($34 million), Greenko ($24 million), Hero Future Energies ($18 million) and Orange Renewable ($12 million). In many cases, the payments have been pending for six months to a year.

Understandably, this has impacted new investments by increasing the cost of finance, and making potential foreign and domestic funders and lenders wary of investing in the Indian wind sector. "More risk for lenders will have higher cost so it will make loans unattractive to investors," said KS Popli, chairman of the Indian Renewable Energy Development Agency.

Government intervention

Aware of these delays and their negative impact on the sector, the Ministry of New and Renewable Energy has asked the defaulting state utilities to settle all pending dues at the earliest date possible. It has also directed utilities not to discriminate between wind power producers and other energy generators in the settling of outstanding payments.

However, considering the financial state of the utilities, the settlement of all pending dues may take time. In the short term, the wind industry is hoping that the ministry’s intervention will help to rationalise disbursement practices from state utilities, allowing some fund flow and breathing space to supporti operational expenses of existing projects.

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