Cost overrun, lack of long-term PPAs hurt credit profile of IPPs

Debt of Tata Power, Adani Power & others rises to Rs 1.95 lakh cr

Capital cost escalation, domestic coal availability issues, shortfall in domestic gas supply and drying up of long-term power purchase agreements (PPAs) have adversely affected the credit profile of leading IPPs (independent power producers). According to an Icra report, the debt level of IPPs has shot up due to the high capital expenditure.

Between March 2011 and March 2017, the debt coverage metrics (ratio of total debt and tangible net worth) of these companies increased from 1.5 times to 2.5 times. Interest coverage ratio has declined sharply from 4.6 times in FY11 to 1.2 times in FY17. The report pointed out