Financial Daily from THE HINDU group of publications
Friday, Jun 18, 2004
CESC plans to retire part of debt to bring down interest costs
Kolkata , June 17
CESC is planning to go in for some refinancing, retiring a part of its debts and thus bringing down interest costs, company sources said.
They said that about Rs 300 crore of debt, out of a total borrowing of about Rs 2,800 crore was proposed to be replaced by cheaper financing. The refinance exercise is likely to be concluded in the later half of 2004-05.
"Following the debt recast exercise concluded last year, interest rates were reduced by an average of 5 per cent on rupee loans and has now come to settle at a rate of about 13.5 per cent. The company is now trying to retire a part of its debt and get refinancing at about 10.5 per cent," sources said.
The debt restructuring, concluded in November 2003, also entailed a moratorium on principal payment and an extension of loan tenor by three years. This has already resulted in a 13 per cent drop in CESC debt-servicing costs in 2003-04 compared to 2002-03. Annual outgo on this account stood at Rs 344 crore.
"We are looking at a further drop in this figure," sources said, adding that under the debt recast, CESC can refinance costly loans by taking refinance loan and also prepay loans without attracting any premium.
Sources said that CESC's high loan burden was because of high interest rate on the loans taken for implementing the 500 MW Budgebudge project, as well as delay in tariff decisions.
CESC now has four generating stations with an installed capacity of 1005 MW and a base of over 18-lakh consumers spread over its 567 square km licence area in the city and its vicinity.
On the recent coal price hike, sources said that this would push up costs and might lead to a further increase in tariffs. "There is a set formula for this and the amount of increase will be determined by the West Bengal Electricity Regulatory Commission (WBERC)," sources said, while admitting that CESC's margins would come under pressure on this account.
CESC's annual fuel cost is about Rs 650 crore out of a total expenditure of about Rs 2,000 crore.
On the recent CESC tariff review order for three years beginning 2002-03, sources said that the WBERC fixed an average tariff of Rs 4.03 per unit against the present rate of Rs 4.15 per unit.
Sources admitted that this order has helped the RPG-controlled utility to enhance its competitiveness in the post-Electricity Act, 2003 scenario, which provided for `free access' to any consumer to get electricity from any source or even set up his own captive sets.
About 42 per cent of CESC's total consumers who are high-tension consumers will enjoy lower tariffs on account of the recent WBERC order, sources said.
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