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.