What can be the possible impact of renegotiation of PPAs i Affect Investor Sentiment ii Ea...........

Economic and social issues(Phase-I/II) Sustainable Development and Envirnmental Issues

Recently, various states have been working to renegotiate the Power Purchase Agreements (PPAs) with the renewable energy companies. A Power Purchase Agreement (PPA) is a contract between two parties, one who generates electricity and one who is looking to purchase electricity.These define all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination.In India, the state governments have entered into such agreements with private renewable energy companies to establish the power plant and sell the power back to the government.Many states including Andhra Pradesh & Tamil Nadu have sought to renegotiate power purchase agreements (PPAs) which were signed a couple of years ago with producers of wind & solar power.

What can be the possible impact of renegotiation of PPAs?

i. Affect Investor Sentiment

ii. Ease of Doing Business

iii. Will increase Non-Performing Assets

Select the correct answer using the code given below

i and ii only

ii and iii only

i and iii only

all of the above

none of these

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Explanation:

Possible impact of renegotiation of PPAs

•Affect Investor Sentiment –The cancellation of contracts and arm- twisting of agreements would effect investor sentiments & discourage new investments.

•Ease of Doing Business- The key to the ease of doing business is enforceability of contracts which needs to be protected.

•Will increase Non-Performing Assets- As the banks have lent heavily to these developers, so with shutting down of projects, the loans may not be serviced. It could start a new cycle where the banks will be apprehensive in advancing loan to such generators.