CARE Downgrades Outlook of 11 Telangana Solar Firms

After CRISIL, Indian ratings agency CARE has downgraded the outlook of 11 solar companies in the wake of AP order to review PPAs.

Care Ratings has revised its outlook to negative on the borrowing programs of 11 solar power producers. The agency did so due to delayed payment to the solar firms by distribution companies in Telangana for electricity purchased.

In a press release issued on Aug. 12, Care Ratings said the 11 companies had a combined installed capacity of 574 MW. “Revision in outlook and ratings reflects increased counter-party risk and weakening in the liquidity position of these generators owing to significant delays in the receipt of payments from the off-takers-Telangana discoms,” the statement said.

The agency in its revision of outlook has downgraded the ratings on projects of two subsidiaries of Acme Solar (Dayakara Solar and Grahati Solar) from A- to BBB+. Projects whose rating outlook has been revised downward include assets of ReNew Power and Mytrah Energy.

The news comes after CRISIL, another ratings agency which raised concerns over the debt risk that Andhra government decision to review PPAs has put. According to CRISIL, financial trouble for 5.2 GW of renewable projects with estimated debt exposure of over Rs 21,000 crore. Of this, Rs 10,600 crore worth of projects may be at a higher risk of default.

The Ministry of New and Renewable Energy too gave a “must-run” status of renewable energy plants after AP authorities started curtailing power generation of Wind and solar farms in the state. The argument has so far heated as the Andhra High Court has put a ‘stay’ on the AP orders.

Meanwhile, CARE ratings has also downgraded the ratings on borrowing programmes of two solar power generators who have installed capacity of 80 MW and sell electricity to discoms in the state.

“Off-taker risk, stemming from delays in payments by discoms has been a major rating weakness for solar power generators exposed to Telangana. Solar power generators in the Telangana have been facing delays in payments by up to eleven months,” Care Ratings added.

According to the agency, as on June 30, 2019, total installed capacity of solar power in Telangana was at 3,621 MW and Care Ratings has rated projects/SPVs having aggregate exposure towards Telangana discoms of approximately 900 MW.

As per reports, all solar entities have long term power purchase agreements (PPAs) with Telangana discoms for 25 years tenure at tariffs in the range Rs 5.26 to 6.889 per unit.

The agency has further added that state utilities in Telangana are severely cash strapped and relying on government subsidies to survive. Furthermore, there is no revision in tariffs for FY2019-20, the agency said.

As per the tariff order for FY2018-19, expected revenue deficit for discoms was projected at Rs 5,940.47 crore for FY 2018-19.

The Telangana government provided budgetary allocation of Rs 4,984.30 crore on account of subsidy for FY2018-19. Out of subsidy of Rs 4,777 crore payable by the Telangana government for FY2017-18, Rs 850 crore was not released by it that year.

In view of worsening of liquidity position of these SPVs, apart from ability to service debt in timely manner, operations and maintenance activities and the desired plant availability can also get impacted, the rating agency said.

-With inputs from PTI and agencies

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