“The industry segment is facing significant other headwinds in the near-term which has impacted investor sentiments. The overall tendering of solar PV projects have slowed down with the solar capacity addition in six months of FY2020 remaining subdued at 2.9 Gigawatt (GW),” ICRA said
October 17, 2019. By News Bureau
India’s solar and wind energy sector is facing headwinds and the liquidity profile of the IPPS in the segment is slowly declining, rating agency ICRA said, adding it has revised the outlook for almost one-third of the portfolio.
“The industry segment is facing significant other headwinds in the near-term which has impacted investor sentiments. The overall tendering of solar PV projects has slowed down with the solar capacity addition in six months of FY2020 remaining subdued at 2.9 Gigawatt (GW),” ICRA said.
It added that the solar capacity slowdown has begun and has continued over the past 12-15 months, reflecting in FY2019 capacity addition which was 6.5 GW compared to 9.4 GW in FY2018. On a calendar year (CY) basis, the overall tendering action is lower by 28 per cent in nine months of CY2019 to about 7 GW on Y-o-Y basis with many bids remaining under-subscribed.
“As per CEA data, payment dues to renewable players stood at Rs 97 billion as on July 31, 2019 with almost 67 per cent of it being contributed by utilities in three states - Andhra Pradesh, Tamil Nadu and Telangana. Such payment delays along with uncertainty over resolution of tariff issue for projects and instances of grid curtailments have adversely affected the credit profile of the wind and solar power projects having PPAs with these state discoms,” said Girishkumar Kadam, Vice President - Corporate ratings, ICRA.
The industry has been affected by a mix of factors including continuing delays in payments from utilities in states like Andhra Pradesh, Telangana & Tamil Nadu; regulatory uncertainty on tariff matters for IPPs in Andhra Pradesh and delays in tariff adoption by SERC in Andhra Pradesh; execution delays witnessed for land acquisition and transmission connectivity approvals and; tight financing environment over the last 8-10 months’ period.
“As a result, the ability to achieve the financial closure for the projects in a timely manner remains a challenge for many of the IPPs. As opposed to this, the industry segment had a decent capacity addition in FY2018, supported by relatively sizeable capacity addition in open access segment due to favorable state solar policies in Karnataka,” he note said.
In order to tide over payment issues, the IPPs are currently meeting obligations through a mix of available or enhanced working capital facility and debt service reserve account (DSRA) apart from the incremental funding support from their respective promoter entities.
However, IPPs with large exposure to the discoms in Andhra Pradesh and Telangana and especially, belonging to the promoter groups having relatively modest financial strength remain vulnerable from debt servicing perspective.
Given the execution challenges for IPPs in utility scale as well as the limited share of capacity addition in the roof-top and open access segment, the agency expects the overall solar energy capacity addition in FY2020 to remain at around 6.5-7 GW.
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