Rs 40,000 core liquidity boost on the anvil for private thermal power companies

Private sector coal-based thermal power plants may get a liquidity boost of Rs 40,000 crore from the Centre's Atmanirbhar Bharat scheme along with Coal India's decision to give a longer-term credit to them, according to a report by ratings agency Crisil.

Although the government has taken the decision to liquidate the overdue receivables from state-owned discoms as part of a rescue package, national miner Coal India has given its nod to allowing private thermal power plants to get coal on 90-180 days credit.

These two steps can help these plants with liquidity support of Rs 40,000 crore, thereby improving their overall credit profiles, Crisil said in a report released on Tuesday, December 22.

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The government support is by way of a Rs 1.2-lakh-crore loan scheme to enable discoms to pay outstanding dues to gencos. The scheme requires the first tranche, accounting for half the package, to be disbursed immediately and the balance upon discoms committing to operational improvements.

Delayed payments by state discoms and weakening cash flows due to lockdowns have overdues to private gencos to the tune of Rs 59,000 crore as of October.

The overall overdues run up to Rs 90,000 crore as of March 2020. This includes overdues to central, state and private capacities and also across coal, gas, hydro and renewables.

"To reduce the overdues, discoms have already begun signing into this loan scheme under the Atmanirbhar Bharat package. As of end-November, nearly half of the first tranche has been disbursed. Given the policy thrust, we expect full disbursement by the end of this fiscal year," said Nitesh Jain, Director, CRISIL Ratings.

Private coal-based power plants should see liquidity relief of about Rs 30,000 crore given that half of the overdues are owed to them, he added.

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In addition, gencos received relief from Coal India, which caters to 80 per cent of their coal demand, constituting nearly three-fourths of their coal requirements.

As against cash advances for these coal purchases, Coal India has begun allowing letter of credit facility of 90-180 days.

Even with a three-month credit period, coal payments worth Rs 1,00,004 crore can be deferred by power gencos, helping better cash-flow management, according to the analysis by the agency.

Together, these two measures -- relief to discoms under the loan package and credit period by Coal India -- can provide a Rs 40,000 crore liquidity boost to gencos, the report concluded.

Lower working capital and easier access to coal will ensure lower interest burden and better-operating efficiencies, lending stability to the credit profile of power gencos.

The analysis is based on 53 gw (gigawatt) of operational coal-based private power plants. The overall operational thermal capacity is 231 gw.

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(With PTI inputs.)