APGENCO Seeks Approval for a Tariff of ₹3.57/kWh for 400 MW of Solar Projects

The solar projects are set up in the Ananthapuram solar park

September 14, 2020


The Andhra Pradesh Power Generation Corporation Limited (APGENCO) has requested the state’s electricity regulatory commission (APERC) to approve the power purchase agreement (PPA) signed with distribution companies (DISCOMs) on July 01, 2017.

It has also requested the state regulatory body to approve the tariff of ₹3.57 (~$0.05)/kWh for 400 MW of solar projects developed in the Ananthapuram II ultra-mega solar park at Talaricheruvu in Ananthapuram.

The commission has invited suggestions and comments from stakeholders by September 22, 2020.


APGENCO had filed a petition with APERC for approval of the PPA signed in July 2017 and the adoption of the tariff of ₹3.57 (~$0.05)/kWh for 400 MW of solar power projects in Ananathapuram. These tariffs were not discovered through competitive bidding but are based on tariff arrived through calculating the actual cash flow for the project by APGENCO.

The PPA was signed in 2017, and 250 MW of capacity was commissioned in October 2018. The remaining 150 MW was commissioned in February 2019.

In a letter to APERC, APGENCO mentioned that Vikram Solar Private Limited, KEC International, and McNally Baharat were the engineering, procurement, and construction (EPC) service providers for the project.

APGENCO further noted that the equity of ₹4.26 billion (~$57.9 million) was met by securing a loan from the Power Finance Corporation Limited (PFC) at the rate of 11%. The debt-equity ratio was 70:30.

APGENCO noted that the PPA was entered on a tariff base and not on the rate discovered through competitive bidding. Therefore, APGENCO considered actual cash flow to arrive at the tariff.

The state generator, while determining the tariff, took into consideration the useful life of the project as 25 years. The operation and maintenance (O&M) expenses are taken as ₹774,000 (~$10,535)/MW with an escalation of 5.72% for the first five years, and the sixth year onwards it would be ₹779,000 (~$10,600)/MW. The working capital for the computation of the tariff was taken as ₹1.327 million (~$18,041)/MW, and the interest rate for the working capital was considered as 11%.

APGENCO has also set aside ₹100,000 (~$1,361)/MW per year for the first five years to be paid to the solar park developer Andhra Pradesh Solar Power Corporation Private Limited (APSPCL) as per the Ministry of New and Renewable Energy (MNRE) guidelines.

APGENCO requested the statutory auditors for certification, but, due to the pandemic, they could not visit the units to certify expenditure details.

Citing these facts, APGENCO requested the state regulatory body to consider its tariff proposal and approve the PPA of the projects.

According to Mercom’s India Solar Project Tracker, Andhra Pradesh has 3.7 GW of large-scale solar projects in operation, and around 1.3 GW of projects are under development pipeline, as of June 2020.

In July last year, it was reported that the Andhra Pradesh government’s decision to review PPAs signed between the state’s DISCOMs and power generators to renegotiate tariffs had set a bad precedent for the rest of the states. The decision alarmed power producers, investors, policymakers, and legal experts.

Previously, Mercom had reported that APGENCO had tendered a 100 MW solar project at the Ananthapuramu-II solar park in Talaricheruvu, Andhra Pradesh.