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AP, T'gana discoms payment delay may weaken credit outlook

AP, T'gana discoms payment delay may weaken credit outlook

Mumbai, Oct 17 (PTI) Rating agency Crisil on Thursday

said the prolonged delay in resolution of payments by discoms

of states like Andhra Pradesh and Telangana to renewable

energy producers can weaken the credit outlook of the sector

and moderate investor sentiment.

According to the agency, few renewable energy

producers are managing the stress arising from payment delays

by these discoms because of their diversified operations and

financial flexibility.

Crisil has analysed 10 companies which have won around

half of the projects awarded in the past two years and account

for 32 per cent of installed renewable capacity in India.

Discoms of Andhra Pradesh have been delaying payments

for contracted renewables assets for around one year. This was

further compounded by the new state government's decision to

set up a committee to review and bring down the purchase cost

of wind and solar energy, it said.

For these renewables companies, the liquidity crunch

also got intensified because Telangana discoms stretched their

payments, and contributed to cash-flow mismatches.

According to the agency, aggregate cash flows from

Andhra Pradesh and Telangana discoms to these leading

renewables companies were 20 per cent of aggregate revenues as

of March 2019.

'While smaller companies with single-asset exposure to

the discoms were impacted the most, diversified renewable

companies have managed the stress better. On aggregate, these

may see their receivables days inch up by 35-45 days by the

end of the current fiscal, from around 115 days in fiscal

2019, despite Andhra Pradesh and Telangana stretching payments

by more than 240 days,' its senior director Manish Gupta said.

The agency noted that leading players with relatively

higher exposure to Andhra Pradesh demonstrated superior

financial flexibilities reflected in timely refinancing of

debt in the wake of building delays, attracting equity capital

and prioritizing cash for debt servicing above capex thereby

differentiating themselves.

'These companies refinanced/ extended maturities of

debt repayments for impacted projects and attracted equity

flows of over Rs 5,500 crore during the first half of the

current fiscal,' it said.

Also slower pace of new capacity awards in the past 18

months as against in fiscal 2018, allowed these companies to

conserve cash and focus on consolidating capacities before

embarking on the next phase of growth, the agency noted. PTI