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'Credit Positive for Banks'

Published: 31st March 2015 06:00 AM  |   Last Updated: 31st March 2015 03:25 AM   |  A+A-

HYDERABAD: Efforts to revive the stranded gas-based power projects will benefit banks with significant exposure to power projects, said credit rating agency Moody’s.

It added that state-run banks including the country’s largest lender State Bank of India and IDBI Bank, private player ICICI Bank are likely to be the biggest beneficiaries.

For instance, SBI and ICICI Bank have exposure to Ratnagiri Power Plant - the largest gas-based power plant in the country.

“The government approved measures to revive and improve the utilisation of stranded gas-based power generation plants in the country. This is credit positive for India’s banks because they have significant credit exposure to such plants,” it said.

It may be noted that last week, the government approved financial support to private power projects to help them use costly LNG for generating electricity.

The move will revive `60,000 crore of stranded projects and as many as 30 power stations with a combined capacity of 14,305 mw, stalled for want of gas, can bid for support from the Power System Development Fund for generating 30% of their installed capacity (plant load factor), using LNG.

Power generation plants that use regasified LNG as their fuel have been facing significant availability and pricing challenges because the actual domestic production of LNG has been significantly lower than the assumptions made when the plants were set up, it said. According to Moody’s, importing LNG at prevailing prices has proved difficult because it increased the generation costs, which in turn, raised the prices beyond the reach of buyers.

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