The regulator has maintained the status quo on most of the parameters as against Ind-Ra's expectation of a lower return on equity (RoE) and change in debt:equity (D:E) ratio in favour of debt, the rating agency said in a statement.
According to the statement, Ind-Ra estimates the annual fixed cost to decline by 1.4 per cent, as per the new guidelines, largely driven by the changes in the working capital norms. The CERC has tightened the working capital norms by lowering the normative inventory and receivable period allowed by 10 days and 15 days, respectively.
Moreover, it said that the regulator has changed the rate of interest on working capital to one year MCLR+350bp as against the earlier guideline of SBI base rate +350bp. Both the factors combined are likely to lower the interest on the working capital component.
The CERC has lowered the arbitrage available to generators on the late payment surcharge (LPSC) to 1.25 per cent from 1.5 per cent.
However, it said that there will be an increase in the billable energy charge rate (ECR), driven by an increase in normative auxiliary energy consumption; an allowance of additional 85kcal/kg GCV loss on account of variations during storage at generating stations and an increase in the normative allowance in transit losses. Ind-Ra expects the ECR to increase by 6 paisa/kWh under the new tariff guidelines.
In the proposed norms, CERC has reduced the normative availability to 83 per cent from 85 per cent, which would improve fixed cost recovery, it said.
However, it said that the basis of declaration has been changed to quarterly from annually. As per the guidelines, under-recoveries in a quarter cannot be recovered in the later part of the year.
About change in leverage profile, it said, as against earlier expectations of an increase in the leverage ratio of generators on account of an expected decline in RoE, EBITDA and increase in D:E ratio, Ind-Ra expects no major impact on the leverage profile as the overall impact on EBITDA remains neutral with no change in the proposed D:E ratio.
Ind-Ra believes that any decline in aggregate revenue requirement due to working capital changes is likely to be offset by higher energy charges as allowed under the new guidelines.