Rs 90,000 Crore Liquidity Infusion To Bring Relief For Power Gencos: CRISIL


The government’s Rs 90,000 crore liquidity infusion into cash-starved power distribution firms is a breather for generating companies and the move will help 9.4 GW private thermal coal capacities from defaulting post moratorium, CRISIL Ratings said.

The move would help clear a chunk of discoms’ obligations to generation companies (gencos), it said in a statement.
The loans are to be provided through Power Finance Corporation (PFC) and REC against receivables of discoms backed by state government guarantees.

According to the statement, the relief comes at a time when 53 GW coal-based power generation capacities of independent producers – excluding 22 GW under debt resolution – are facing the ramifications of the liquidity squeeze at distribution companies (discoms).

There has been a big fall in electricity demand from high-tariff paying industrial and commercial consumers, and collection efficiencies of discoms have also dropped because of the lockdown, it said.

The at-risk capacities have either inefficient power purchase contract structures (payments are linked to offtake for 5 GW capacities) or high generation cost (for 4.4 GW projects), making them disproportionately susceptible to payment delays by discoms, the statement said.

While most of these capacities have availed of the 3-month moratorium announced by the Reserve Bank of India till May 31, 2020, sustained disruption in cash flows will make them vulnerable versus obligations in June (accrued interest and regular principal repayments), it added.

Also, most of these capacities may not have adequate letter of credit limits to defer fuel payments by a quarter, it said.

The Rs 90,000 crore liquidity injection into discoms, therefore, comes at an opportune time for these generation companies, and can potentially alleviate the interim risks, it stated.

Last week, Finance Minister Nirmala Sitharaman said the government will provide Rs 90,000 crore for discoms as part of the strategy to bring the country’s battered economy on track. PFC and REC will infuse the liquidity.