MUMBAI: The risk of non-payment of contributions by electricity distribution companies (discoms) has resurfaced for wind power projects, with four key states – Madhya Pradesh, Maharashtra, Rajasthan and Andhra Pradesh – which are acting as counterpart to around 40% of overall wind capacity in India totaling unpaid contributions of Rs 5,450 crore to 156 renewable projects in January. This is a 50% increase in contributions from one year to the next, according to an analysis by the rating agency Crisil.
The payments crisis, if continued, could put nearly Rs 30,000 crore of corporate debt at risk of default.
Wind projects, which account for nearly three-quarters of the total private renewable energy capacity (wind and solar) in these four states, have suffered a greater share of late payments as the majority of them are old. projects with tariffs of more than ??4.5 per unit. These tariffs are higher than the average purchase prices for electricity in these states, making discos reluctant to honor them.
“For the wind projects rated by Crisil, the total period of the receivables of these state discos has increased to 9 months from the invoice date, compared to 3 to 5 months on average in March 2020,” said Manish Gupta, Senior Director of Crisil Ratings. in the report. “For the projects in Andhra Pradesh, it lasted up to 18-19 months.”
These late payments are due to the persistent weakness of the financial health of discos, which deteriorated in 2020 due to the drop in customer receipts in the context of the pandemic. Although collections have recovered from their April-June quarterly lows, they remain below pre-pandemic levels.
So far, wind power developers have been able to manage the cash pressures on the utility with the help of the Reserve Bank of India’s moratorium on debt service and / or excess liquidity from the ‘Previous exercice. However, a prolonged delay of another quarter could strain the liquidity buffers, typically 6 to 9 months in these projects, making them vulnerable to delays.
This could expose nearly Rs 30,000 crore to delays in 9.5 GW of wind projects. The remaining 6.5 GW of wind projects are present in large groups and therefore have more flexibility to manage delays, given the strength of their balance sheet and the diversity of other counterparties in the overall portfolio.
Ankit Hakhu, Director of Crisil Ratings, said: “In the future, we expect the liquidity position of discoms to improve as collection efficiency returns to normal, as well as the release. state government grants, which typically accelerate toward the end of a fiscal year. This should help restore the payment cycle to pre-pandemic levels. “
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