HYDERABAD: Power project loans worth Rs75,000 crore are at risk as plants aggregating 46,000 MW capacity are facing viability issues, according to ratings agency Crisil. Lack of long-term purchase agreements, inadequate fuel supply and aggressive bidding to win projects are dragging down the viability of power plants.
While 36,000 MW coal-based plants are unviable, about 20,000 MW is impacted due to tariff under-recovery, inadequate feedstock and poor electricity offtake by discoms. The remaining 10,000 MW gas-based projects are idle owing to falling fuel supplies from the KG-basin.
“Total loans to these stressed generation projects are currently about Rs2.1 lakh crore. A sixth of it, or about Rs35,000 crore, is for projects, which have the cushion of a strong parent. Additionally, projects with loans of Rs1 lakh crore could become viable if their payment profiles can be structured appropriately. This leaves the remaining Rs75,000 crore of loans at risk,” said Pawan Agrawal, Chief Analytical Officer, Crisil Ratings.
He added that another Rs1.9 lakh crore debt is owed by weak discoms for which moratorium on principal repayment - based on a Financial Restructuring Package (FRP) announced in 2012 - ends in the current and next fiscal. Till date, the government support has prevented these discoms from turning weak, it said.
According to Crisil, if discoms remain financially fragile and stay away from signing power purchase agreements (PPAs), capacities at risk will increase.
“Annual tariff hikes of 10 per cent over the next 3 years and a cut of at least 200 basis points in AT&C losses are necessary for discoms to break even in the medium term. As for sector health, improving agriculture metering and feeder separation, timely tariff filings and financial reporting, focus on power purchase cost optimisation and signing more PPAs are necessary,” said Sudip Sural, Senior Director, Crisil Ratings.