Recently, eight multilateral development finance institutions, including the Asian Development Bank and International Finance Corporation, wrote to key economic and energy ministers, warning that unilateral renegotiations of renewable energy Independent Power Producer (IPP) contracts would be detrimental to the sector’s long-term stability and discourage much-needed private investment.

This is a troubling sign for an economy desperate for foreign investment and loans to restore growth.

The issue is not with renegotiating IPP agreements per se. This is not the first time it has happened, and investors factored in such risks when signing Power Purchase Agreements (PPAs). Historically, each successive power policy has seen investors demand higher returns and stronger guarantees.

However, the tone of the letter—and informal conversations with IPP owners and lenders—suggests that the manner in which........

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