The visibility of a resolution to the vulnerable thermal power capacity of about 60 GW is likely to concerns like absence of fresh-long term PPAs, unviable tariffs amidst rising fuel costs, escalation in capital costs and uncertainty on domestic gas availability, says ICRA Ratings.
In this context, the revised framework for resolution of stressed assets approved by RBI in February 2018 is likely to lead to a debt hair cut of about 35 per cent (varying between 20 per cent to 70 per cent across the entities) for such affected thermal capacity based on ICRA estimates, given the issues arising out of cost over-run, unviable tariffs and lack of power purchase agreements, Sabyasachi Majumdar, Group Head and Senior Vice President, ICRA Ratings said in a statement.
Nonetheless, there has been an improvement in demand growth during FY18 mainly led by a significant pick-up in electricity demand in the states of Uttar Pradesh, Telangana, Madhya Pradesh, Maharashtra, Andhra Pradesh, and Gujarat. This has put the focus on ensuring power supply to rural consumers in most of the states.
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 FY18 from 6.6% in FY17, supported by large capacity addition in the renewable energy segment.
"Improved energy demand coupled with coal availability constraints have led to an upward movement in spot power price level in the last few months. Nonetheless, the spot power tariff is likely to be sustained at around Rs3.5/unit in near to medium-term, given the surplus thermal capacity, an increasing mix of renewable generation, and still subdued thermal PLF levels, said Girishkumar Kadam, Sector Head & Vice President, ICRA Ratings.
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 (SERCs).
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, Mizoram and Telengana with a median tariff revision of 3 per cent (varying between nil to 13 per cent), it added.
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