Private thermal power cos get Rs 40,000 cr liquidity boost: Report

The liquidity boost is coming in from government initiatives along with Coal India decision to offer longer term credit to them, says a report

Private sector thermal power plants are in for better times with a likely Rs 40,000-crore liquidity boost coming in from government initiatives along with Coal India decision to offer longer term credit to them, says a report.

While the government has decided to liquidate the overdue receivables from state discoms under a rescue package, national miner Coal India has decided to allow private thermal power plants to get coal on 90-180 days credit.

These two measures can help them with a liquidity support of Rs 40,000 crore, improving their overall credit profiles, Crisil said in a report on Tuesday.

The government support is by way of a Rs 1.2-lakh-crore loan scheme to enable discoms to pay outstanding dues to gencos. The scheme requires the first tranche, accounting for half the package, to be disbursed immediately and the balance upon discoms committing to operational improvements.

Delayed payments by state discoms and the weakening cash flows due to the lockdowns have the overdues to private gencos to the tune of Rs 59,000 crore as of October. The overall overdues run up to Rs 90,000 crore as of March 2020. This includes overdue to Central, state and private capacities and also across coal, gas, hydro and renewables.

To reduce the overdues, discoms have already begun signing into this loan scheme. As of end-November, nearly half of the first tranche has been disbursed. Given the policy thrust, we expect full disbursement by March.

Private coal-based power plants should see a liquidity relief of about Rs 30,000 crore given that half of the overdues are owed to them, says the report.

In addition, gencos received relief from Coal India which caters to 80 per cent of their coal demand, which form nearly three-fourths of a genco's operational costs.

As against cash advances for these coal purchases, Coal India has begun allowing letter of credit facility of 90-180 days.

Even with a three-month credit period, coal payments worth Rs 1,00,004 crore can be deferred by power gencos, helping better cash-flow management, according to the analysis by the agency.

Together, these two measures--relief to discoms under the loan package, and credit period by Coal India can provide a Rs 40,000 crore liquidity boost to gencos, says the report.

Lower working capital and easier access to coal will ensure lower interest burden and better operating efficiencies, lending stability to the credit profile of power gencos.

The analysis is based on the 53 gw of operational coal-based private power plants. The overall operational thermal capacity is 231 gw.