CARE ratings sees higher counterparty risk from Telangana discoms

CARE Ratings has maintained a negative outlook for 13 solar generators that are selling electricity to financially-stressed distribution companies (discoms) in Telangana.

The aggregate installed capacity of generators that are being rated is 671 Mw. 

Of the total 14, CARE Ratings had downgraded the ratings of the borrowing programmes of four solar power generators that have installed capacity of 257 Mw.

The rating action reflects increased counterparty risk and weakening liquidity position of these generators owing to significant delays in the receipt of payments from these discoms.

Amod Khanorkar, senior director, CARE Ratings, said, solar power generators in Telangana have been facing delays in payments by 10 months. They saw a marginal improvement compared to the last review on account of commencement of payments by Telangana.

State utilities in Telangana are cash strapped and rely on state subsidies to survive. Furthermore, there is no revision in tariff for FY20. 

According to the tariff order for FY19, the two distribution licensees have projected a revenue deficit of Rs 9,770.98 crore for FY19. 

Based on the prudence check of the filings of distribution licensees, the revenue deficit for FY19 has been pegged at Rs 5,940.47 crore.

The Telangana government provided a budgetary allocation of Rs 4984.30 crore on account of the subsidy for FY19.

Khanorkar said, “In view of the worsening of liquidity position of these SPVs, apart from the ability to service debt in a timely manner, O&M (operation and maintenance) activities and the desired plant availability can also get impacted.”

Timely collection of payments from the off-takers and maintenance or creation of debt service repayment account will remain crucial for these companies’ overall credit profile in the near term.

Ratings may be downgraded if there is further delay in payments or absence of promoter support. The outlook may be revised to stable in case of a significant decline in receivable days on a sustained manner, CARE added.