Two-thirds of the improvement will be because of increasing central counterparty offtake, and the rest due to state discoms implementing the late payment surcharge (LPS) scheme, the report said.
The incremental cash flow will allow renewable energy companies to build capacity for growth and reduce leverage.
“An assessment of 10 leading RE companies in the CRISIL Ratings portfolio, which are expected to build 50-55% of the renewable energy capacity in India in the next 2-3 fiscals, indicates as much," it said.
Payment cycles had stretched in the past two fiscals because state discoms such as Madhya Pradesh, Maharashtra, Telangana, and Andhra Pradesh (accounting for 23% of the overall capacity exposure) held back payments to renewable energy developers following liquidity crunch or contractual disagreements.
This increased the overall cycle for assessed companies by over 10% to 180 days as of March 2022, compared with the March 2019 level.
“Receivable levels could have deteriorated more but for the increase in the proportion of central counterparties (Solar Energy Corporation of India and National Thermal Power Corporation Ltd) to 40% of operational portfolio in March 2022 from 20% in March 2019. This fiscal, we expect the share of central counterparties in operating RE capacities to rise to 50%, which will improve receivables to 155 days as of March 2023, keeping other things constant," said Manish Gupta, Senior Director, Crisil Ratings.
Central counterparties are expected to maintain their payment track record, given the benefit of diversity, payment security funds, and higher bargaining power, because of their scale and flexibilities such as being beneficiary in tripartite agreement between state government, central government, and the Reserve Bank of India.
Ankit Hakhu, Director, Crisil Ratings said: “Some states2 have subscribed to the government’s LPS scheme under which they are to clear past dues of power generating companies and regularise their fresh dues. Under the scheme, Power Finance Corporation/REC Ltd will provide loans to state discoms to help pay off dues of gencos (over 1-4 years).“
Andhra Pradesh, Madhya Pradesh, Karnataka and Maharashtra, which have subscribed to this scheme, may potentially clear dues worth ₹2,000 crore in fiscal 2023, which will help improve the receivable level of key renewable companies by another 15 days, he said.
Confidence remains high on regularization of state discom dues given the penal provisions in the LPS scheme, such as cessation of short-term power access, curtailment on medium and long-term power access, and additional liabilities for delay in payments, or if generators dip into payment security funds, the report said.
