CARE Ratings has announced that it has lowered the outlook for 11 solar generators with an aggregate capacity of 574 MW to negative to replicate their dwindling liquidity position ascending from delays in getting payments from Telangana power distribution companies.
“Off-taker risk, stemming from delays in payments by discoms, has been a major rating weakness for solar power generators exposed to Telangana,” CARE Ratings believed. “Solar power generators in Telangana have been facing delays in payments by up to 11 months.”
Telangana had 3,621 MW of installed solar power capacity at the end of June, of which CARE has rated projects with an aggregate exposure towards Telangana discoms of about 900 MW.
The rating company supposed that these entities signed power purchase agreements with Telangana discoms for 25 years at tariffs ranging from 5.26 to 6.88 per unit. Of the downgraded projects, those with a combined capacity of 215 MW have neither created a debt service reserve account (DSRA) nor tied-up working capital limits, it said.
Telangana state power utilities are sternly cash strapped and depend on on subsidies to endure and there was no modification in tariffs for FY20, CARE said.
The projected revenue shortage for discoms was estimated at 5,940 crores for FY19, against which the Telangana government allocated 4,984 crores on account of subsidy. Of the 4,777 crore subsidy payable for FY18, the state government didn’t release ?850 crores.
“In view of the worsening liquidity position of these SPVs, apart from the ability to service debt in a timely manner, the O&M activities and the desired plant availability can also get impacted,” said CARE Ratings. “Timely collection of payments from the off-takers and maintenance or creation of DSRA will remain crucial for these companies’ overall credit profile in the near term.” CARE said the ratings may be downgraded if there is a further delay in payments or absence of promoter support. However, the outlook will be revised to stable if timely collections from Telangana discoms start in a sustained manner and there is a significant decline in receivable days, said CARE Ratings.
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