Ind-Ra estimates SGPs could generate EBITDA of INR13.7bn and DGPs could generate additional EBITDA of INR538m under this scheme over FY17. Against this, the subsidy pay out will be INR40bn. There will be an INR26bn additional cost on distribution companies towards expensive power and there could be further INR40bn of concessions by various stakeholders towards tariffs and taxes. Thus against a total contribution of INR96bn by stakeholders, EBITDA generation could be INR14.2bn over FY17.
Moreover, the gas plants benefitting from the government subsidy are unlikely to fully meet debt servicing, and bank loans towards these assets would remain stressed in the short to medium term. Ind-Ra estimates SGPs for the full year can generate an EBITDA of INR14.2bn under this scheme as against their annual debt servicing requirement of INR70bn, thus leading to a debt service coverage ratio of 0.2x. An estimated investment of INR600bn is at stake in 32 SGPPs. These assets would carry an estimated minimum normative project debt of INR420bn, which would balloon further on account of unpaid interest.
The scheme provides only short-term visibility for operations and servicing of debt. The long-term operations and viability of these plants would remain dependent upon tying up gas from domestic sources, subject to production ramp-up at existing and under development gas fields. The scheme's success will also depend upon the continued willingness and ability of distribution companies to buy this power at INR4.7/kWh from SGPs and INR3.39/kWh from DGPs along with continued benign spot RLNG prices, favorable exchange rates and availability of required quantity of gas.
The scheme divides power plants into two categories: SGPs totalling 14.3GW which received no gas and DGP totalling 9.8GW which received limited domestic gas. The mechanism also envisages the waiver of VAT, CST, Octroi and entry tax on LNG supplied, waiver of service tax on regasification and transportation, a 50% reduction in pipeline tariffs, a 50% reduction in regasification charges for RLNG and a 75% reduction in marketing margins. This would go towards lowering the landed cost of RLNG for gas-based plants under the scheme to USD9/mmbtu-USD10/mmbtu.
In the current round of bidding, the base tariff has been fixed for SGPs and DGPs at INR4.7/kWh andINR3.39/kWh, respectively. Additionally, they will be provided with a subsidy from PSDF, based on the reverse auction mechanism. The cap on the subsidy payable to generators out of PSDF has been kept at INR1.74/kWh for SGPs and INR2.06/kWh for DGPs. The scheme will in the first phase benefit 10 out of 32 SGPs and five out of 23 DGPs during June-September 2015.
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