News Analysis

NTPC to be the biggest beneficiary of liquidity lifeline to power sector

Vivek Ananth BL Research Bureau | Updated on May 13, 2020 Published on May 13, 2020

Gencos have been reeling under unpaid dues by Discoms   -  Bloomberg

Finance Minister Nirmala Sitharaman’s announcement of a ₹90,000-crore liquidity facility for power distribution companies (discoms) is a booster for power producers. This facility will be against the receivables of discoms from their consumers. REC and Power Finance Corporation will extend loans against discoms’ receivables.

Discoms have racked up overdue payments to power producers of nearly ₹77,000 crore at the end of March 2020, according to data from PRAAPTI portal. This has left many power producers with stretched working capital cycles and little cash to fund their operations.

Unpaid dues of discoms to power producers has been creating liquidity problems over the last few years. The Power Ministry had introduced a payments security mechanism to ring-fence power generators’ liquidity issues. This was done by mandating a letter of credit or a deposit covering the full monthly billing by power producers to discoms.

In March, the Power Ministry relaxed this norm to effectively cover only half the monthly billing by power generators to discoms. This, along with many State governments relaxing payment terms for end consumers, has added to the liquidity woes of both power producers and discoms.

Who will benefit?

Out of the power generating companies in the listed space, the one that could benefit the most from this move is state-owned NTPC. It has nearly ₹15,000 crore stuck in unpaid bills from various discoms at the end of March 2020, according to data from PRAAPTI portal.

Three other state-owned firms NHPC, NEEPCO and SJVN can benefit from this liquidity facility for discoms. NHPC has nearly ₹2,500 crore of unpaid overdue bills, while NEEPCO has nearly ₹520 crore unpaid overdue bills. SJVN has around ₹515 crore unpaid overdue bills.

Two Adani Group companies — Adani Power and Adani Green Energy — are also expected benefit from this facility. Adani Power has nearly ₹3,200 crore unpaid bills, while Adani Green Energy has around ₹1,260 crore unpaid bills.

Another listed company that could benefit from this facility is Jindal Steel & Power Ltd which had ₹1,075 crore unpaid bills at the end of March 2020.

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Published on May 13, 2020
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