Energetica India - June 2020

WIND POWER directions from the High Court of Andhra Pradesh, the overall receivable position for the wind IPPs in Andhra Pradesh contin- ues to remain significantly high, in turn adversely affecting the liquidity profile of many IPPs having wind assets in the state. Also, the receivable position remains high for IPPs having power purchase agreements (PPAs) with the utilities in states of Rajasthan and Tamil Nadu. While the provision of letter of credit (LC) or advance payments has been made mandato- ry w.e.f. August 1, 2019, the implementation of the same has been mixed so far with many of the intra-state RE projects not receiving the LCs. Moreover, this does not address the issues pertaining to recovery of old receivables as on July 2019. Further, demand dip following lockdown restrictions due to the COVID pandemic has adversely affected the revenue & collec- tions for the state-owned distribution utilities since April 2020. This in turn is likely to increase the payment delays further from the distribution utilities. However, the availability of liquid- ity buffer (mostly seen in the form of debt service reserve ac- count (DSRA) and access to working capital limits) for majority of the IPPs provide a comfort. The extent of energy demand recovery & subsequently, progress in timely payments by the state-owned distribution utilities remains a critical monitorable in near term. Given the unprecedented impact on the cash flows of the state-owned distribution utilities, the recent policy actions by Ministry of Power, Government of India have been positive. Recent policy actions comprise of directive measures to distribution utilities to ensure “must run” status of renewable energy power plants, directive measures to CPSUs to provide rebates to distribution utilities, direction to CERC for relief in the applicable LC & late payment surcharge as well as notification of liquidity relief scheme in the form of long tenure loans from PFC/REC to be made available to discoms. The liquidity relief scheme for discoms is howevera short- term positive measure which would enable them to clear their pending dues towards the generation entities. Importantly, the implementation of reforms by the state governments and dis- coms remains extremely crucial in the long run for achieving a sustainable improvement in discoms finances. These include timely filing of tariff petitions by discoms to enable timely issu - ance of tariff orders by the regulators, approval of adequate tariffs in relation to cost of supply, timely and adequate subsidy payments by the state governments and proactive efforts to reduce the distribution loss levels through measures such as installation of smart meters and augmentation of distribution infrastructure. 44 energetica INDIA- June_2020