New power plants face financial uncertainties: India Ratings

About 8.3% of India’s power plants face financial uncertainties due to the lack of sufficient off-take agreements and transmission constraints


Mumbai: About 8.3% of India’s power plants face financial uncertainties due to the lack of sufficient off-take agreements and transmission constraints, an India Ratings and Research Pvt Ltd report said on Monday.

These plants, commissioned since April 2014 with capacity of 13,900 megawatts (MW), could have annual capacity charge losses of as high as Rs.51 billion, excluding return on equity, the rater said.

India’s total coal-based power plant capacity was 167,207MW at end-June 2015 and 8.3% or 13,900MW of the total capacity was added between April 2014 and June 2015.

Of the newly commissioned plants, the capacity of 40% of the plants is under strain and 37 billion units (BU) of generation may be foregone annually, unless sold through short-term markets, India Ratings said.

More than 5,500MW of capacity, which is set up for commissioning in the current financial year, also faces increased uncertainty of timely debt service in the absence of strong off-take agreements, the research firm said.

“Despite riding over the difficult construction period including overcoming land issues and delayed fund injections, the power projects are struggling to transition into the next stage of the project life cycle,” India Ratings said.

The capacity charges could be partially recovered, if power produced by these plants is sold in the power exchanges or through merchant power sale, the report said.