Wind mills
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Mumbai/Bhopal: Payment risk from discoms has resurfaced for wind power projects, with four key states - Madhya Pradesh, Maharashtra, Rajasthan and Andhra Pradesh - that act as a counter party to around 40 per cent of the overall wind capacity totalling up dues of Rs 5,450 crore to 156 renewable projects as of January 2021, ratings agency Crisil said on Friday.

With this, dues to wind generators have increased 50 per cent year-on-year. Wind power projects, constituting nearly three-fourth of the total private renewable (wind and solar) capacity of these four states, have borne a larger share of the payment delays. The reason being, bulk of these are old projects with high tariffs of over Rs 4.5 per unit, handed out under the earlier FIT3 regime. These tariffs are higher than the average power purchase prices of these states.

Manish Gupta, Senior Director, Crisil Ratings, said, "For wind power projects rated by Crisil, the aggregate receivables period from these state discoms has increased to nine months from the invoice date, compared to 3-5 months on average in March 2020. For projects in Andhra Pradesh, it has stretched to as much as 18- 19 months."

These payment delays are due to persisting weak financial health of discoms, which deteriorated in 2020 due to lower collections from customers amid the Covid-19 pandemic. Although collections have recovered from the lows of the first quarter of the current fiscal, these remain below the pre-pandemic levels.

So far, wind power developers have been able to manage cash-flow pressures on servicing with the help of the RBI-announced moratorium on debt servicing and/or surplus liquidity from the previous fiscal. However, sustained delay of one more quarter could test the liquidity buffers - typically of 6-9 months in these projects, making them vulnerable to delays.

This could put nearly Rs 30,000 crore of debt in 9.5 GW of wind power projects at the risk of delays, Crisil said. The remaining 6.5 GW of wind power projects are present in large groups and hence have greater flexibilities to manage delays, given their balance sheet strength and diversity from other counter parties in the overall portfolio.

Ankit Hakhu, Director, Crisil Ratings, said, "Going forward, we expect the liquidity position of discoms to improve with collection efficiencies coming back to normal, along with the release of state government subsidies, which typically picks up pace towards the end of a fiscal. This should help restore the payment cycle to pre-pandemic levels."

This unpredictability and volatility in payment pattern to renewable projects is a key risk for operational projects. To mitigate the issue, the government has bid out larger proportion of capacities through central counter parties - National Thermal Power Corporation and Solar Energy Corporation of India, which have maintained stable payment track record to developers despite variability in payments from the underlying discoms. As proportion of these central counterparties increases in overall installed capacity base, the risk of payment delays in the sector is likely to decline.

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