The possibility of resolution of issues of 60 giga watt of stressed thermal power capacity is expected to remain weak due to concerns including absence of fresh-long term power purchase agreements, unviable tariffs amidst rising fuel costs, escalation in capital costs and uncertainty on domestic gas availability feels ICRA.
Sabyasachi Majumdar, group head & senior vice president at ICRA Ratings said: “The revised framework for resolution of stressed assets approved by Reserve Bank of India in February 2018, is likely to lead to a debt hair cut of about 35% — varying between 20% to 70%, across affected entities based on ICRA estimates. The factors that would affect hair cut would be issues arising out of cost over-run, unviable tariffs & lack of power purchase agreements.”
Nonetheless, there has been an improvement in demand growth during 2018 which is mainly led by a significant rise in electricity demand in Uttar Pradesh, Telangana, Madhya Pradesh, Maharashtra, Andhra Pradesh and Gujarat; and given the focus on ensuring power supply to rural consumers in most of the states.
“The extent of improvement in the thermal capacity utilisation was moderated by the increase in share of renewable energy-based generation in the overall electricity generation mix to 7.7% in 2018 from 6.6% in 2017, 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 last few months. Nonetheless, spot power tariff is likely to be sustained at around Rs 3.5 per unit in near to medium term, given the surplus thermal capacity, an increasing mix of renewable generation & still subdued thermal PLF levels,” said Girishkumar Kadam, sector head & vice president at ICRA Ratings.
With respect to the distribution segment, the progress in filing of tariff petitions for 2019 remains less than satisfactory with discoms in only 16 out of the 29 states filing petitions before the respective state electricity regulatory commissions. The delay in filing tariff petitions and subsequent issuance of tariff orders continues to be observed for utilities in large states like Rajasthan, Tamil Nadu and Uttar Pradesh.
Tariff orders for 2019 have been issued timely in only seven states so far as on March 31, 2018. These are Andhra Pradesh, Bihar, Odisha, Uttarakhand, Manipur, Mizoram & Telengana with a median tariff revision of 3% (varying between nil to 13%).
