Monday 23rd April 2018

    No visibility over resolution of stressed thermal capacity: ICRA

    The visibility over resolution of the vulnerable thermal power capacity of about 60 GW is expected to remain weak due to concerns like absence of fresh-long term power purchase agreements (PPA), unviable tariffs amidst rising fuel costs, escalation in capital costs and uncertainty on domestic gas availability. Read more

    Sabyasachi Majumdar, group head and senior vice president, ICRA Ratings said the revised framework for resolution of stressed assets approved by Reserve Bank of India (RBI) in February 2018, is likely to lead to a debt hair cut of about 35% (varying between 20% to 70% across the entities). He says, "This calculation is based on ICRA estimates, given the issues arising out of cost over-run, unviable tariffs and lack of PPAs."

    Nonetheless, research and ratings agency, ICRA said, there has been an improvement in demand growth during FY 2018 which is mainly led by a significant pick-up in electricity demand in the states of Uttar Pradesh, Telangana, Madhya Pradesh, Maharashtra, Andhra Pradesh and Gujarat; and given the focus on ensuring power supply to rural consumers in most of the states.

    Girishkumar Kadam, sector head and vice president, ICRA Ratings, added that the extent of improvement in the thermal PLF was moderated by the increase in the share of renewable energy-based generation in the overall electricity generation mix to 7.7% in FY2018 from 6.6% in FY2017. He said, "Improved energy demand coupled with coal availability constraints have led to an upward movement in spot power price level in last few months. Nonetheless, the spot power tariff is likely to be sustained at around Rs 3.5/unit in near to medium term, given the surplus thermal capacity, an increasing mix of renewable generation and still subdued thermal PLF levels."

    With respect to the distribution segment, the progress in filing of tariff petitions for FY2019 remains less than satisfactory with DISCOMs in only 16 out of the 29 states filing petitions before the respective state electricity regulatory commissions (SERC). The delay in filing of tariff petitions and subsequent issuance of tariff orders continues to be observed for utilities in large states like Rajasthan, Tamil Nadu and Uttar Pradesh. The tariff orders for FY2019 have been issued timely in only seven states so far as on March 31, 2018, namely Andhra Pradesh, Bihar, Odisha, Uttarakhand, Manipur, and Telengana with a median tariff revision of 3% (varying between nil to 13%).

    - TradeBriefs Bureau