CARE Ratings Revises 11 Solar Power Companies’ Borrowings To Negative
Solar panels installed to power a bore well stand in a village on the outskirts of Alwar, Rajasthan, India. (Photographer: Anindito Mukherjee/Bloomberg)

CARE Ratings Revises 11 Solar Power Companies’ Borrowings To Negative

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Rating agency CARE Ratings has revised its outlook to negative on the borrowing programmes of 11 solar power producers due to delayed payment to them by distribution companies in Telangana for electricity purchased.

In a release on Monday, CARE Ratings said the 11 companies had a combined installed capacity of 574 MW.

It has also downgraded the ratings on borrowing programmes of two solar power generators who have installed capacity of 80 MW and sell electricity to distribution companies in the state.

"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," it said.

"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.

As on June 30, total installed capacity of solar power in Telangana stood at 3,621 MW and CARE Ratings has rated projects/special purpose vehicles having aggregate exposure towards Telangana discoms of approximately 900 MW.

All these entities have long term power purchase agreements with Telangana Discoms for 25 years tenor at tariffs in the range Rs 5.26 to 6.889 per unit.

The state utilities in Telangana are severely cash strapped and relying on government subsidies to survive.

Furthermore, there is no revision in tariffs for the fiscal year 2019-20, 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 FY2018-19.

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.

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