Crisil Insight Power Sector Compendium

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RATINGS

CRISIL InsightJuly 2015

CURRENT WORRIES



CRISIL Insight

Analytical contacts

Sudip Sural

Senior Director, [email protected]

Sridhar CDirector, [email protected]

Tushar Shah Associate Director, [email protected]

Vydianathan Ramaswamy

Associate Director, [email protected]

Chhavi AgarwalManager, [email protected]

Kapil Babbar Manager, Ratings

[email protected]

Manish GuptaDirector, [email protected]

Rajat BahlDirector, [email protected]

Anubhav Arora Associate Director, Ratings [email protected]

Aswin Kumar BalasubramanianManager, Ratings

[email protected]

Kanmaani S

Manager, [email protected]

Rajat GuptaManager, Ratings

[email protected]



RATINGS

ForewordIt gives me great pleasure to present you this insightful, timely report on India’s power and nancial sectors.

It has been 44 months since CRISIL cautioned that the ebbing performance of India’s power sector, unlessreversed, will trip India’s nancial system. Specically, we had warned generating companies would face

an existential crisis because of fuel shortage. We also advocated proactive policy measures to reform thedistribution sector such as making available dependable nancial information, meaningful and regular tariff

hikes, and concerted reduction in aggregate technical & commercial (AT&C) losses.

On October 5, 2012, exactly a year after CRISIL’s warning, the government notied a nancial restructuring

package (FRP) for distribution companies, or discoms, wherein their short-term debt was converted to

long-term loans backed by state government guarantee. The FRP also envisaged regular tariff hikes andreduction in AT&C losses. But while tariff hikes were high in the rst two years following the FRP, things

have zzled out since then. And on the AT&C front, there has been hardly any progress.

And here’s how a vicious cycle got set off:

■ Because discoms remain nancially fragile, they are chary of committing to long-term power

purchase agreements

■ Lower power purchases by discoms, and inadequate coal and gas supplies, are leading to sub-optimal plant load factors at generating companies, especially the new projects

■ Further, tariff aggression shown during competitive bidding to bag projects has meant poor cashows, which is cramping the ability of generating companies to service debt in spite of the cost of

imported coal declining

■ Weak generating companies with no long-term PPAs defeats one of the objectives of FRP, which isto progressively reduce short-term power purchases by state discoms.

The government has proactively provided mitigants such as the e-auction to reallot coal blocks andallocation of imported regassied liqueed natural gas, which have improved fuel supplies. But this was

offset by the tariff aggression seen during the coal block auctions. Clearly, private developers haven’theeded the hard lessons of the past.

The upshot of all this is that if state governments do not provide support to discoms in repaying debt, non-performing assets (NPAs) in the banking system will surge. While the Reserve Bank of India’s 5/25 scheme

can provide some respite to the generation sector, viability issues of some projects can crank up NPAs.

It is said that static is hazardous to those living close to power lines. While the jury is out on whether

this is for causal or coincidental reasons, analogically, it describes aptly the static cling that lenders andpromoters of power projects nd themselves in today.

Clearly, concerted action is in order, and speed is of essence.

I am sure you will relish the read-through.

Raman Uberoi

Business HeadCRISIL Ratings-Large Corporates



CRISIL Insight



RATINGS

Table of contents

Voltoids............................................................................................................................ 01

46,000 mw at r isk!........................................................................................................... 04

Discoms gasping for l iquidity....................................................................................... 20

Rs 75,000 crore loans in jeopardy ................................................................................ 30

Page no



RS 85,000 CROREValue of power lost annually

VOLTOIDS

25%

Of power produced is lost

6 hours per day Average power cut in rural India

Generation mix

Thermal 71%

Hydel 15%

Nuclear 2% Renewable

12%

Power availabilityvs consumption

1031

960

911

857

939

882

824

785

0 500 1000

2015

2014

2013

2012

Consumption

Availability

in billion units



DAILY CONSUMPTION

17 LAKH HOMESWhat a 1,200 mw power

plant can light up for a year*

* Assuming per household electricity consumption of 4040 units & PLF of 65%

Chennai

Mumbai

Bengaluru

KolkataEstimates by CEA

532012 2017E

7530 4036 5137 48

Millionunits

Capacity ownership

Central & state

sector 63%

Private sector 37%

India's installed capacity267,181 mw



CRISIL Insight

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4

46,000 mw AT RISK!



CRISIL Insight

5

On October 19, 2011, CRISIL had predicted that India’s generation sector will face fuel scarcity and pricingproblems in the medium term, and underlined that close to a third of the capacity under implementation atthat point in time will be affected.

As things stand, nearly a third of the coal-based capacity additions done between April 1, 2009, and March31, 2016, are facing viability risk. That’s not all: nearly 40% of the gas-based capacities have also becomeunviable.

Reason? Shortages in domestic coal supply, and dwindling gas supplies from the D6 block in the Krishna-Godavari basin. Further, aggressive bidding for projects and lower electricity offtake by state-owneddistribution companies (discoms) have increased the risks for generating companies. To be sure, the government has not been a mute spectator. It has been quite proactive, trying to iron out thecreases. For example, in 2012, it facilitated the implementation of a nancial restructuring package (FRP)

for discoms. Then there was a Presidential Directive on July 17, 2013, asking Coal India to sign fuel supplyagreements (FSAs) for 78,000 mw of capacities to be commissioned by March 31, 2015.

This was followed by the creation of a framework to auction coal mines de-allocated by the Supreme Court. A chunk of them were put on the block in 2015 to end disruption in feedstock supply. A mechanism was alsodevised to re gas-based plants using subsidised and imported re-gassied liqueed natural gas (RLNG).

So yes, there have been admirable efforts made to address woes, but the crux of the matter is that India’spower sector remains in doldrums.

Private sector coal-based plants dominate new capacity addit ions since 2009

India’s electricity generation capacity has grown at a CAGR of 10% since April 2009. Of around 119,000mw of capacity added (Chart 1), nearly 87,000 mw is coal-based.



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6

Private sector contributed the most -- nearly 60% -- of the new coal-based capacities (Chart 2) by investingaround Rs 320,000 crore. Central power generation companies added 21%, and state-owned ones theleast. Consequently, private sector’s share in India’s coal-based power generation capacity galloped to35% as on March 31, 2015, from 7% as on March 31, 2009.

New capacities reduce power decit, but lower energy demand of discoms hit PPAs

Despite inadequate fuel supply, signicant growth in generation capacity has led to energy availability

increasing at a compound annual growth rate (CAGR) of 6% in the last three years, outpacing the energyrequirement of discoms, which grew at CAGR of 4% (Chart 3). Arithmetically, this has reduced India’s basepower decit to 3.6% last scal from 8.5% in scal 2012 (Chart 3).

Chart 2: Coal capacity additions driven largely by private sector

Chart 1: 75% of capacities set up after scal 2009 based on coal

5

5842

58

30

48

2009 2015

GW

Private State Central

78

165

78

165

70

87

32

102

2009 Coal capacity additions Other capacity additions 2015

GW

Coal Others

148

267



CRISIL Insight

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Chart 3: Growth in energy availability outpacing energy requirement of discoms,thereby reducing power decit

Chart 4: Energy requirements have been driven by consumption growth

except in scal 2014

Chart 4 shows that except in scal 2014, the energy requirement of discoms has been driven by consumption

growth. In scal 2014, discom demand grew only 0.4% even as actual consumption grew at 7%. Had it

synced with consumption growth, demand would have risen by another 10,000 mw. A portion of this couldhave translated into PPAs.

The lower energy requirement of discoms has meant fewer PPA bids were announced – just 10,000 mw inthe last three years, or equal to what was signed in scal 2011 alone (Chart 5).

Consequently, there has been an increase in private sector capacities without PPAs in the last three years.If PPA signing does not commence soon, by the end of scal 2016, nearly 15% of private sector capacities

-- or 10,000 mw -- sans PPAs will be exposed to the vagaries of the short-term electricity market.

0.4%

7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2012 2013 2014 2015 2016 (CEAestimates)

Energy requirement growth y-o-y Consumption growth y-o-y

Energyrequirementgrowth y-o-y(%)

Consumption growth y-o-y (%)

8.5% 8.7%

4.2%3.6%

2.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2012 2013 2014 2015 2016 (CEAestimates)

Energy requirementgrowth y-o-y (%)

Energy availabilitygrowth y-o-y (%)

Power deficit (%)



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8

Going forward, signing of new PPAs will depend on the ability of discoms to enter into long-term commitments,which means generating companies will till then be exposed to volatile prices in the short-term market.Chart 6 shows the movement in merchant power prices (through power exchanges). After falling to Rs 2.07per unit in August 2013, they increased to Rs 4.33 in October 2014 only to tumble anew to Rs 2.56 per unitin June 2015. CRISIL believes that merchant power prices will remain subdued over the near-to-medium

term on account of large untied capacities leading to increased competition in the merchant market.

Chart 5: Private sector capacities without PPAs are increasing

Chart 6: Volatile short-term prices enhancing pric ing risk

Additionally, PPA bidding under the Case 2 route (where land availability, fuel, and clearances are takencare of by states) was impacted by issues pertaining to bidding documents. In the last few years, thegovernment had invited bids for 4,000 mw ultra-mega power projects in two states -- Orissa and TamilNadu -- under Case 2 bidding. The response from private developers was tepid due to lack of clarity

GW 2015 2016E

Private sector capacitycommissioned

58 66

Capacity without PPA 8 10

% 14% 15%

10,130

1,644

6,000

2,648

1,540 1,414

2011 2012 2013 2014 2015 2016E

MW

PPA bids announced & signed

7.75

2.04

5.4

2.07

4.33

2.56

0

1

2

3

4

5

6

7

8

9 Monthly average prices (Rs/unit)

Apr il 2010

June 2015



CRISIL Insight

9

Chart 7: Base decit (billion units)

in regulations pertaining to ownership of the plant. Case 2 bidding guidelines mandated project assetsbe handed over to state utilities after successful completion of the concession period, which left lenderswary. Going forward, successful bidding for these projects will depend on modication of standard bidding

documents, which is currently being reviewed by a government-appointed panel.

But guess what, there is enough latent demand

Rough calculations show India would have become a power surplus nation (where base decit gets wiped

out) if its installed thermal capacity of 165,000 mw operated at a PLF of 70% (Chart 7).

However, the reality is that India’s latent demand is much more than the energy requirement estimates ofdiscoms. Per capita power consumption (Chart 8) is low because large swaths of population are yet to getaccess to electricity. And despite low power decit, outages remain high.

-87

-42 -38

37

-100

-80

-60

-40

-20

0

20

40

60

2013 2014 2015 2015E - @70% PLF



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Chart 8: Huge latent demand is yet to be served

Coal suppl ies improve, but problems far from over and fuel availability risks remain

After scal 2009, Coal India refrained from signing FSAs for upcoming power plants because domestic

coal production was stagnant. For agreements already signed, it was meeting 90% of the annual coal

requirement.

However, after the Presidential Directive, Coal India signed FSAs with 78,000 mw of capacities that wereto be commissioned by March 31, 2015. Under this, the largest miner was supposed to meet 65% of theannual coal requirement of the plants but eventually came up short.

The problem was that growth in domestic coal production was muted at a CAGR of less than 4% betweenscals 2009 and 2014 – not good enough to stay apace with demand and capacity additions. But in scal

2015, domestic coal supplies to power sector rose 10.7% as Coal India ramped up mining. Speedierenvironment clearances and land acquisition, coupled with concerted efforts by Coal India, led to theincrease in production.

However, domestic availability is still below what is required to operate installed capacities at the normative

PLF of 85% stipulated by the Central Electricity Regulatory Commission (CERC). CRISIL’s calculationsshow that India’s coal-based power generation plants require about 713 million tonne of coal in scal 2015

to operate at 85% PLF. But domestic supply stood at 451 million tonne and 90 million tonne was imported–totalling to 76% of what was required – because of which, the all-India thermal PLF declined to a decadallow of ~65% in 2015 (Chart 10).

1,010

3,4572,509

6,602

12,947

15,558

India China Brazil Russia US Canada

Per capita consumption (kWh)

Per capital consumption figure for India is for 2015. For rest of the countries it is for 2012



CRISIL Insight

11

Chart 9: Improving production from Coal India and captive blocks

We believe domestic coal production is likely to grow at a healthy CAGR of 9% in the next three years asCoal India -- and captive mines allocated in the recent round of coal block auctions and allotment – crankup production. Yet imports will be in the range of 100-105 million tonne because of the requirements ofnew capacities.

Between April 1, 2009, and March 31, 2015, nearly 87,000 mw of capacities were commissioned. Followingan improvement in domestic coal production, PLFs at these plants improved to an average of 41% in scal

2015 compared with 37% in scal 2013 (We arrive at this number by assuming that the entire incrementalcoal production after 2009 was used to re incremental capacities commissioned after 2009).

With Coal India producing and supplying more, and production from captive coal blocks on the rise, wesee PLFs of thermal capacities that have come up after April 1, 2009, improving even further to an averageof 45% in the current scal. But this remains a very sub-optimal level and exposes generating capacities

to fuel availability risk, impacting viability. That’s why we believe fuel availability risk is particularly high forthese projects.

325 332 337 345377 387

423456

48351428

71

90

105

713

909

0

100

200

300

400

500

600

700

800

900

1000

2009 2010 2011 2012 2013 2014 2015 2016(P) 2017(P) 2018(P)

Imports

Captive coal

Domestic coal supply (a)

Implicit coal demand at 85% PLF (b)

Implicit coalshortfall @ 85%PLF: 220 MT

Share of captivecoal in coal mix

to double toaround 10% withramp-up inproduction

(MT)

CAGR:4.5% Assumption

9%CAGR

Note: (a) Domestic supply includes coal from Coal India Ltd, Singareni Collieries Company Ltd(b) Implicit demand for each year is the coal requirement at 85% PLF for the installed capacity at the end of that year Source: CRISIL Ratings , Coal India Ltd, Central Electricit y Author ity



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12

Chart 10: Average PLF of post-scal 2009 capacities improving, but remains sub-optimal

Some domestic coal-based projects which enjoy Availability Based Tariff (ABT) – where fuel-cost pass-through is allowed -- will be able to report plant availability factor (PAF) and recover their xed charges.

However, players that do not have ABT are subject to high fuel availability risk as they will not be able to

blend expensive imported coal or e-auction coal.

To address this issue, the government has allowed pass-through of fuel costs in the standard biddingdocument, thereby facilitating blending of imported coal.

For projects based on imported coal, aggressive bidding and weaker rupee offsetting

gains from lower international coal prices

Competitively bid out imported coal-based projects, which can’t pass on fuel costs, are exposed to fuelprice risk. These projects were bid out quite aggressively with no scalable fuel charge component at a timewhen the price of coal imported from Indonesia was low. But later, the Indonesian government changed therules, which made imports costly. This signicantly dented the cash ows of the projects.

While the prices of imported coal have declined in the last four years (Chart 11), this has been offset bya signicant depreciation in the rupee, leading to continued under-recoveries on variable cost. Further,

aggressive bidding sans return on equity (RoE), cost overruns and rupee depreciation are also leading tounder-recovery in xed costs for these projects.

715 34 53 68 87 104

35%41%

45%

77%

64%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015 2016 P

PLF: post- fiscal 2009 capacities

PLF: All-India

Cumulative capacity addition (gw) since April 1, 2009 (LHS)



CRISIL Insight

13

Chart 11: Weaker rupee offsets lower coal prices

Chart 12 below shows that a tariff of Rs 3.11 per unit (without return on equity) is necessary for theseprojects to recover their cost of production at prevailing prices of imported coal. Our analysis reveals thatthe levelised tariffs approved under competitive bidding for these projects based on international coal aresignicantly lower than these levels.

These projects had sought compensatory tariffs for the cost under-recovery. The CERC approved variablecost under-recovery in February 2014, but discoms appealed against the order in the Appellate Tribunalof Electricity (APTEL), which provided interim relief by allowing compensatory tariff until nal proceedings

are complete. However, the Supreme Court stayed the interim order passed by APTEL after a petition bydiscoms. The nal decision on compensatory tariff is pending.

CRISIL believes, despite compensatory tariff, these projects will continue to have under-recovery on xed

charges which will impact their viability.

1 Assumptions for generation cost: Imported coal : $35 per tonne, Freight $9 per tonne, Rs/$ 60, PLF 85%, Capital cost / mw Rs 5 crore, Interest rate11.5%

63

34

45

64

30

40

50

60

70

A p r / 1 1

J u n / 1 1

A u g / 1 1

O c t / 1 1

D e c / 1 1

F e b / 1 2

A p r / 1 2

J u n / 1 2

A u g / 1 2

O c t / 1 2

D e c / 1 2

F e b / 1 3

A p r / 1 3

J u n / 1 3

A u g / 1 3

O c t / 1 3

D e c / 1 3

F e b / 1 4

A p r / 1 4

J u n / 1 4

A u g / 1 4

O c t / 1 4

D e c / 1 4

F e b / 1 5

A p r / 1 5

J u n / 1 5

Indonesia Coal FOB Price ($/tonne) Exchange Rate (Rs./$)Indonesia coal f.o.b price ($/tonne) Exchange rate (Rs/$)



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14

Chart 12: Fixed-cost under-recovery will continue even if compensatory tariff is awarded

Winner’s curse: Private sector aggression continues

After the de-allocation of coal blocks by the Supreme Court in September 2014, the government concluded

the rst phase of auctions in a timely manner. Reeling under chronic supply shortage, private sectorcompanies bid very aggressively for nine coal blocks which had fuel to re around 6,500 mw. This approach

showed strategic fuel security had become more important than protability. The bidders, who had agreed

to a zero fuel charge in their PPAs, thus foregoing mining costs, also agreed to pay a forward premium of

Rs 100 to Rs 1,010 per tonne to the state government concerned. With mining cost and forward premiumsnot recoverable through the variable charge component in PPA, bidders were exposed to the risk of under-recovery.

Some of these capacities are yet to sign PPAs, so they could have sought higher xed charges to

compensate for the under-recovery in variable costs. But as per the revised Case 1 bidding guidelines,where bids are invited from players having domestic captive coal mines, the buyer of electricity has to capxed charges per unit in consultation with the state electricity regulator. That means, depending on where

the tariff is capped, there could be under-recovery.

An example of this is highlighted in Chart 13. As seen in it, the tariff needed to break even for a coal blockwinner 2 (including non-recoverable variable cost) will be higher than the normative xed cost and allowable

variable cost for the winner even after considering a 15.5% RoE. Hence, if there is a capping at this level,there will be huge under-recovery.

2

Assumptions: PLF=85%, Capital cost / mw=6.5 crore, Interest rate=11.5%, Mining cost: Rs 600/mt, Forward premium: Rs 380/mt

1.38

0.88 1.00

1.40

0.00

1.00

2.00

3.00

4.00

Generation cost @ importedcoal $35

Levelised tariff Project A Levelised tariff Project B Generation cost @ importedcoal $50

(Rs/unit)

Variable charge Fixed charge RoE



CRISIL Insight

15

Chart 13: Capping of xed cost may lead to under-recoveries

Chart 14: Declining domestic gas supplies sharply impacting the PLF of gas-based capacities

Gas-based units hit by dwindling feedstock supply; RLNG auction provides only interim

relief enabling interest servicing

Domestic production of natural gas has been falling since scal 2012, mainly because of a precipitous

decline in output from the D6 block -- from 55 million metric standard cubic metre per day (mmscmd) inscal 2011 to 14 mmscmd in 2014 (Chart 14).

130 143 130112 97 92

3335 48

4747 42

020406080

100120140160180200

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

H 1 - 2 0 1 5

Domestic production Liquefied natural gas (LNG)

1339 55 43 26 14 KG-D6

0.00 0.50 1.00 1.50 2.00 2.50 3.00

Coal block allottee: Likely tariff

Coal block winner: Likely tariff (FC + Recoverable VC + RoE)

Coal block winner: Tariff neededto break even

FC: Fixed cost

VC: Variable cost

Possiblecapping of

tariff

Non-recoverablevariable cost

Fixed cost at 85% PLFRecoverable

variable costRoE

67 6660

40

25 21 21

2010 2011 2012 2013 2014 2015 2016(P)

in %

PLF of gas-based capacities

(Rs/unit)

(mmscmd)



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16

The shortfall has meant a sharp deterioration in both the credit quality of power projects based on domesticgas, and PLFs (Chart 15). Nearly 14,000 mw of gas-based capacities were completely stranded (zero

PLF), while 10,000 mw capacities were receiving limited supply and operating at a sub-optimal PLF.

To ameliorate the situation, the Ministry of Power came up with a scheme to e-auction imported RLNG, andconducted it on May 12 and 13, 2015.

The scheme provided for a per-unit tariff subsidy from the Power System Development Fund (PSDF). Thiswill be disbursed -- based on a reverse auction mechanism -- to stranded gas-based power plants rst

and then to plants already receiving domestic gas. Between June and September 2015, PSDF supportequivalent to Rs 844 crore is allotted for this mechanism.

Further, the delivered price of the e-bid RLNG is estimated to be around $3 per mmBtu lower than spotRLNG prices because of support from various stakeholders in the form of reduced marketing margins,re-gassication charges and transportation charges, apart from customs and sales tax waivers. This

translated into Rs 870 crore of support – over and above the subsidy support.

In the auction, plants with 7,000 mw of capacity successfully bid for subsidy under PSDF. The averagesubsidy is around Rs 1.43 per unit and the tariff to be charged to discom is Rs 4.7 per unit. Thus, revenueof around Rs 6.13 per unit will be available to these power plants.

CRISIL believes the scheme will enable this 7,000 mw stranded capacity (out of a total 14,000 mw) tooperate at around 27% PLF – which is good enough to service their interest payment obligations. So thesuccess of the scheme will depend on the availability of a principal moratorium period from lenders and theability of power plants to nd buyers for electricity at Rs 4.7 per unit.

Chart 15: Tariff under RLNG import scheme adequate to service interest: Scheme success

depends on availability of principal moratorium

4.704.06

1.43

0.54

1.57

0.03

Average tariff - successful bid Generation costs (without RoE and principalrepayment)

Maximumsale price todiscom

PSDF subsidysupport

Energy cost atsubsidisedRLNG

O&M cost

Interest cost

Interest on WC

(Rs/unit) 6.13 6.20



CRISIL Insight

17

Further, out of the 10,000 mw of capacities that are already operating at sub-optimal PLF, nearly 3,500mw has won RLNG supplies through the auction. CRISIL believes that the PLF of these capacities willimprove to 32% from last scal’s 24%. Since this is not very signicant and most of these players already

have a favourable availability-based tariff structure that facilitates cost-recovery, the scheme is unlikely tomaterially benet them.

Then there is the currency issue

To add to all the woes, many power producers faced cost overruns due to a sharp depreciation in the rupeeagainst the dollar. These developers had contracted foreign currency debt in a benign macro-environmentbetween scals 2009 and 2011 and left the exposure unhedged. They are now facing the exchange rate

heat. These capacities also face the risk of under-recovery in xed cost.

Net-net, 46,000 mw at risk

CRISIL believes the viability of around 46,000 mw of capacities is at risk today. Of this, nearly 36,000mw are coal-based and nearly 10,000 mw gas-based. This includes 33,000 mw out of the 87,000 mwof coal capacities added between April 2009 - March 2015, and 3,000 mw of capacities expected to becommissioned by March 2016, for the following reasons:

■ For nearly 3,000 mw of capacities, there are no long-term buyers, so they are susceptible to thevagaries of the short-term electricity market

■ For nearly 16,000 mw of capacities, the inability to pass on higher price of imported coal, andaggressive bidding done to win projects are leading to under-recoveries

■ For nearly 13,000 mw of capacities, coal supply is inadequate leading to sub-optimal PLF. Someprojects are also hit because their coal blocks got de-allocated

■ For nearly 4,000 mw, aggressive bidding to win coal blocks and no recourse to a pass-through havemeant under-recovery of fuel cost even as xed cost is capped

And nearly 10,000 mw of gas-based capacities are at risk, including those that have won subsidised RLNG(which will only help service interest payment obligations), and stranded ones with zero PLF.



RATINGS

18

The way forward

In CRISIL’s opinion, the following can be done to address the woes of the sector:■ Focus on augmenting domestic coal production: Domestic coal supplies to the power sector

increased 10.7% in scal 2015, driven by speedier environmental clearances and land acquisition,

leading to higher coal production. The government is also taking critical steps such as expeditingthe construction of three critical railway lines (Tori-Shivpuri-Kathotia in Jharkhand, Bhupdeopur-Korichhaapa to Mand Raigadh mines in Chhattisgarh and Barpali-Jharsuguda in Ib Valley, Odisha).

CRISIL believes that continued and concerted efforts in this regard are necessary to address fuelavailability issues. Rake availability also needs to improve in line with increasing production.

■ Quick resolution of compensatory tariff issue: The matter of compensatory tariff is pending with APTEL. A faster resolution will help reduce under-recoveries for the aggressively bid-out projectsusing imported coal.

■ Flexible structuring under 5/25 scheme: Flexible structuring of loans of under the 5/25 schemewith a moratorium of 2-3 years can provide respite to stressed power projects and ease the pressureon cash ows.

■ Reforms in dis tribution needed to restore PPA bidding: Discoms continue to be the weakest linkin the power value chain due to their precarious nancial health. This risk has historically manifested

through delayed payments to generators. However, in the recent past it has also started to manifestin the form of lower energy demand and therefore a reluctance to commit to long-term PPAs. Thishas spawned a new risk for the generating companies: exposure to the vagaries of the short-term

electricity market, which, in turn, leads to low PLFs. CRISIL believes structural reforms are critical toimprove the nancial health of the distribution sector. We discuss this in the next article.

The stress matrix

10,000 mw - gas-based capacities at risk

36,000 mw - coal-based capacities at risk

a) Domestic coalshortageb) No pass throughc) Coal blockde-allocated

46,000 mw of capacities (largely in private sector) facing viability risk

Apri l 2009 to March 201587,000 mw

Apri l 2015 to March 201617,000 mw

Capacity additions

33,000 mw2010 to 2015

3,000 mw2016

a.) No PPA signed

Key risk factors impacting coal-based capacities at risk

a) Imported coal-basedb) Fixed costs under-recovery

a) Aggressive biddingfor coal blockauctionsb) Capping of fixedcosts to lead tounder-recoveries

1

Offtake risks(3,000 mw)

Tariff under-recovery

(16,000 mw)

Coal block winners(Tariff under-

recovery-4,000 mw)

Fuel availabilityrisk

(13,000 mw)

2

Successful bidders undere-RLNG import scheme

5,000 mw

Stranded gas-based plants5,000 mw

At ris k

At r isk

a b c d



CRISIL Insight

19



RATINGS

20

Discoms gaspingFOR LIQUIDITY



CRISIL Insight

21

Distribution continues to be the weakest link in India’s power sector value chain. Riddled with high lossesand debt – stemming from tariffs not reecting costs, and high transmission losses – the sector has often

needed a lifeline. These include the nancial restructuring package (FRP) announced on October 5,

2012, and implemented in scal 2013, and a one-time settlement done as per the Ahluwalia Committee

recommendations in 2001.

Under FRP, short-term liabilities of discoms with weak credit proles were restructured with sponsor

states taking over half of them through state-guaranteed bonds in a phased manner. The remaining 50%was converted into long-term loans guaranteed by the state governments with a moratorium on principalrepayment for three years. This provided much-needed liquidity relief, but losses in FRP states did notreduce by the end of their moratorium period, because of continuing aggregate technical and commercial(AT&C) losses and insufcient tariff hikes.

CRISIL, therefore, believes discoms will face liquidity pressure in the medium term. Given the situation, weanalysed the performance of discoms with weak credit proles. We have also presented the ability of state

governments to support discoms with weaker credit proles.

Mounting losses and debt drove discoms to FRP

Losses and debt increased sharply for discoms because of insufcient tariff hikes, high AT&C losses and

low subsidy collections from state governments (Chart 1). This severely impacted their ability to servicedebt, and cascaded into crimped cash ows for generating companies.

Chart 1: Trend in discom losses

(80,000)

(60,000)

(40,000)

(20,000)

02009-10 2010-11 2011-12 2012-13 2013-14 2014-15

(Rs crore)Net losses (subsidy-booked basis)

CRISIL estimates

Accumulated losses Rs 2.5 lakh crore



RATINGS

22

The accumulated losses of discoms were at Rs 2.5 lakh crore as March 31, 2013, and these were largelyfunded by borrowings. To delineate their credit proles, CRISIL classied discoms based on the key

parameters impacting their debt servicing ability, such as gap/unit, AT&C losses and resultant debt levels.We found discoms of six states -- Karnataka, Chhattisgarh, Maharashtra, Gujarat, Himachal Pradesh andKerala -- in the low-risk quadrant with low gap/unit and AT&C losses. Discoms of Odisha and West Bengalhad moderate risk due to high AT&C losses despite near-nil gap/unit.

On the other hand, discoms of 10 states were classied as high risk in Cluster III and Cluster IV due to

yawning gap/unit and AT&C losses, which translated into soaring debt levels. Discoms of eight of thesestates – in Andhra Pradesh (including Telangana), Bihar, Haryana, Jharkhand, Rajasthan, Tamil Nadu andUttar Pradesh -- were restructured under the FRP programme. These states constituted 70% of the totaldiscom borrowings as on March 31, 2013.

Chart 2: Trend in state-wise discom debt, AT&C losses and gap (without subsidy)

Cluster I (Lowest risk) Cluster II Cluster IV (Highest risk)Cluster III

Outstanding debt as on March 31, 2013, in Rs billion

Rajasthan641 Tamilnadu

452

Uttar Pradesh336

Madhya

Pradesh 227Haryana

226

Punjab198

Maharashtra161

Andhra Pradesh215

Jharkhand99

West Bengal 92

Chhattisgarh11

Karnataka58

HP 45Kerala

41

Odisha 35

Bihar 32

Gujarat24

5%

15%

25%

35%

45%

55%

-3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 0.5 1

Gap (Rs/kWh)

AT&C losses (%)

III

IV II

I



CRISIL Insight

23

The objective of the FRP was to reduce AT&C losses and narrow the gap in the medium term. Hence,during the moratorium, states were to undertake concrete and measurable action to improve the operationalperformance of their discoms and overall commercial viability. To achieve the desired outcomes, discomsand the state governments had the following mandatory obligations, and expected outcomes fromimplementation of the scheme:

■ State governments had to ensure that discoms eliminate the gap between average cost of supply(ACS) and average revenue realised (ARR)1 within the moratorium period.

■ Go for cost-reective tariff hikes in line with the Appellate Tribunal of Electricity (APTEL) judgment2 dated November 11, 2011, and offer allowance of fuel cost adjustment mechanism, apart from atime-bound plan for liquidation of regulatory assets.

■ Ensure subsidy disbursals upfront.

■ Reduce T&D losses and increase collection efciency and work towards private participation in

distribution of electricity.

■ Not resort to short-term loans to fund operational losses except staggered funding provided duringthe rst three years.

The gap is estimated to have attened in scal 2015 following FRP implementation

The initial actions were quite speedy. Tariff hikes picked up pace in scal 2013 driven by the APTEL order

and the implementation of FRP. That year, the all-India average tariff hike was around 12.3%, while for FRPstates it was 20.9 %. And collection of subsidy from FRP states also improved substantially to 98.5% in

scal 2013 from 81% in scal 2012. Many states have also promulgated automatic adjustment of fuel andpower purchase costs, which helps in promptly reecting the increase in cost of power generation instead

of postponing the problem for tariff increases to a later date. Thus the gap/unit improved to 0.81 paise perunit in scal 2013 from 0.88 paise per unit in scal 2012.

1 ARR is dened as the total revenue realised per unit of total energy procured, ACS is the total cost of supply per unit of total energy procured by the

discom. Gap is the difference between ARR and ACS.2 APTEL’s judgment, OP1 of 2011, is a landmark in the distribution sector as it mandated discipline in tariff hikes. (Prior to 2011, several discoms hadnot undertaken tariff hikes for a consecutive ve to eight years). APTEL ordered state electricity regulatory commissions (SERC) to ensure timely

performance reviews and asked them to present a true picture of past expenses. It said tariff order for every year needed to be passed before April 1for the tariff year ahead. In the event of delay beyond December 31, SERCs were to initiate suo motu proceedings for tariff determination. APTEL also

said regulatory assets should not be created except in justiable circumstances and need to be diluted in a time-bound manner. The SERCs were alsomandated to institutionalise the fuel cost adjustment mechanism on a quarterly basis.



RATINGS

24

Subsequently, the pace of tariff hikes slowed down to 6.5% in scal 2014 and 5.5% in scal 2015 at an

all-India level. For the FRP states, at an aggregate level, it was 8.9% and 7.6% in scal 2014 and 2015,

respectively. However, the issuance of state government-backed bonds has meant a sharp reduction inthe interest burden of discoms. Further, growth in power purchase cost is estimated to have declinedbecause of lower all-India power decit and competitively bid-out projects coming on stream. Hence, the

gap, including subsidy, was estimated at 76 paise per unit in scal 2015 compared with 81 paise in 2013

for all the discoms put together, which reduced the overall losses (Chart 3).For FRP states, this gap isestimated to have improved marginally from Rs 1.63/unit in 2013 to Rs 1.5/unit in 2015. The loss levelshave attened and debt levels are estimated to have increased as follows:

Chart 3: Trend in discom gap/unit

2013 (Actuals) 2015 (Estimates)

AT&C losses % 27.9 26.4

Total losses of FRP states Rs lakh crore (0.57) (0.56)

Total borrowings of FRP states Rs lakh crore 2.00 2.95

% of all-India borrowings % 66 67

Table 1: Key operating and nancial parameters for FRP states

Had there been no AT&C losses, the gap per unit would have almost closed in the last two years. Thisclearly indicates the need for better structural efciencies and cost-reective tariffs that will enable discoms

to make reasonable prots.

FRP’s objective of gap elimination would be difcult to achieve given the current pace of

tariff hikes and AT&C loss reduction

Although discom losses are estimated to have attened out in scal 2015, the objective of gap elimination

3.3

3.7

4.24.4

4.7

4.0

4.6

5.05.2

5.5

2011 2012 2013 2014(E) 2015(E)

ARR (includingsubsidy)

Average cost of supply

4.4

4.7

5.2

5.5

014(E) 015(E)

Gap (includingsubsidy)

-0.65

-0.88

-0.81-0.74

-0.76(Rs/kWh)



CRISIL Insight

25

under FRP hasn’t been met. Hence, despite lowering of interest costs under FRP and optimism aboutpower purchase costs, we expect the nancial position of weak discoms to deteriorate in the medium term

because of fewer tariff hikes and inadequate reduction in AT&C losses. Our analysis is further ratied by

a closer look at some of the large FRP states such as Andhra Pradesh, Haryana, Rajasthan, Tamil Naduand Uttar Pradesh.

1. For Rajasthan discoms, subsidised power to agriculture (share of agriculture in power consumptionis 40%) and delayed subsidy receipts from the government led to poor nancials. After nil tariff hikes

for 6 years, Rajasthan went for successive ones between scals 2012 and 2015 – albeit a delayed

one in 2015. Despite this, power procurement costs and AT&C were elevated, leading to high gap/unit. With the moratorium ending this year, these discoms are facing liquidity pressure and hencehave approached banks to recast loans in June 2015.

2. Tamil Nadu, an early adopter of FRP, went for a 37% tariff hike in scal 2013, but here, too, subsequent

hikes declined. While AT&C losses are low, loss recognition is based on estimated agri consumption,which is unmetered. Apart from the possibility of being non-reective of actual technical losses,

the estimation of agri consumption also leads lower agricultural subsidy estimations and hence ahigher gap. (Agriculture constituted 20% of consumption and 0% of revenues). Given the high cross-subsidisation in state (average realisation from domestic consumers was at Rs 2.5/unit comparedwith overall realisation of Rs 4.85/unit in scal 2013), efciency improvements and optimising of

power purchase cost are necessary to bring down losses.3. The undivided Andhra Pradesh was a late adopter of FRP, doing so in scal 2014. As part of FRP,

discoms there recognised prior subsidy receivables from the government as unrecoverable losses,leading to write-offs, which reduced the gap per unit in scal 2015. Although the state has better

operating efciencies, high power purchase cost has been the nemesis for its discoms. And in the

current scal, the tariff hike was meagre at 4-5% in both Andhra and Telangana, which means the

gap/unit will remain static.4. Haryana did undertake consistent tariff hikes after scal 2011. While this was encouraging, its

discom’s operating efciency worsened. AT&C losses increased to 36.26% in scal 2014 from 32.5%

in 2013. With moratorium on FRP loans ending, the discom is expected to face liquidity pressure.Further improvement in gap/unit needs to be driven by sharper reduction in AT&C losses.

5. Uttar Pradesh, with signicantly weak collection efciency (78% compared with the all-India average

of 94% in scal 2013) has seen high AT&C losses. Its commercial losses constituted almost 37% of

AT&C losses due to rampant power theft. The state has undertaken tariff hikes consistently in recentpast, but its gap/unit is estimated to have remained high due to AT&C losses.

At an aggregate level, we expect discom debt to keep rising so as to fund accumulated losses and plannedcapex.



RATINGS

26

Chart 4: Trend in discom debt

Half of discom borrowings will remain high risk in the medium term

The distribution sector has been predominantly owned and controlled by state governments. Given theweak standalone credit proles of discoms, the ability and demonstration of support from states plays a

critical role in assessing the overall credit prole of discoms. After the implementation of FRP, states havehad a greater role in funding discoms.

With the moratorium under FRP ending in the medium term, and given the pace of losses, liquidity pressureon discoms, especially the restructured ones, is intensifying. That’s also because banks have been chary ofextending fresh short-term loans to fund shortfalls. To assess the weaker discoms, we have superimposedtheir credit proles (Chart 2), and the ability of their state governments to support in contingencies (Chart5).

0.3 0.4 0.3 0.4 0.50.4 0.4

0.4 0.51.92.1

2.7

2.5

2.9

2011 2012 2013 2014 2015

As on March 31

Others

Banks/FIs

FRP bonds

FRP-guaranteed

loans

State governmentloans

4.43.73.042.52.2 Total

CRISIL projections

0.4 0.50.4 0.4

. 0.5

.5

.9

014 2015

.43.7

CRISIL projectionsRs lakh cr CRISIL estimates



CRISIL Insight

27

Chart 5: Risk c lustering of states

Source: CRISIL Ratings

Underlined states undertook FRP

Based on the above classication, CRISIL believes discoms of six out of eight FRP states will have weak

backing and hence face greater risk. Include the weak discoms of non-FRP states, and half of the totaldiscom borrowings are at risk today. Specically:

■ Telangana, Madhya Pradesh and Tamil Nadu have weaker discoms with high gap/unit. But theyare backed by strong state governments which can lend support through equity or loan infusion.

■ On the other hand, Andhra Pradesh, Bihar, Jharkhand, Haryana, Punjab, Rajasthan and UttarPradesh governments have comparably lower ability to support their discoms. They are estimatedto account for half of the total discom borrowings. For Haryana, Rajasthan and Uttar Pradesh, the

FRP moratorium ends in the near term, which will increase pressure.

Structural reforms, doubling of efciencies, tariff hikes necessary to hit break-even

CRISIL estimates that consistent tariff hikes of 10% CAGR over the next three years, accompanied by atleast 200 basis points reduction in technical losses, is necessary if discoms are to achieve break even inthe medium term.

Low risk Moderate risk High risk

Cluster I

(Highest ability

to support)

Karnataka,

Chhattisgarh

Cluster II

Goa, Puducherry,

Gujarat,Maharashtra

Telangana,

Madhya Pradesh,Tamil Nadu

Cluster III Kerala, Uttarakhand Assam, Odisha,

Jharkhand, Haryana,

Rajasthan, UP,

Andhra Pradesh

Cluster IV

(Lowest abil ity

to support)

Himachal Pradesh,

SikkimWest Bengal

Bihar , Punjab, J&K, north-

eastern states

(excluding Assam)

Risk profile of state power discoms

S t a t e g o v e r n m e n t a b

i l i t y t o s u p p o r t

~50% oftotal

discomborrowings



RATINGS

28

To be sure, tariff hikes per se are no solution and help only in making the tariffs cost-reective. Further, dueto high cross-subsidisation, some states will nd it difcult to even hike tariff. So the inherent inefciencies

of the system – evidenced in AT&C losses of around 25.4% -- need to be addressed. Decrepit infrastructureand collection losses, on the other hand, are the structural challenges.

As an initial step, improvement in agricultural metering and feeder separation should be achieved whichwill help estimate actual technical losses and focus on loss reduction. Further, discoms should also focuson power purchase cost optimisation through accurate demand estimation and hence enter into long-term power purchase agreements appropriately. Enforcement of timely tariff lings and quality nancial

reporting in a timely manner are imperative for improvement in operating efciencies of the system.

Near-term focus of the discoms should be to reduce AT&C losses and tariff and cost rationalisation. Overthe long term, privatisation through distribution franchisees and evolving the open access mechanism arenecessary for competition-induced efciencies.



CRISIL Insight

29



RATINGS

30

Rs 75,000 croreLOANS IN JEOPARDY



CRISIL Insight

31

Chart 1: Trend in power sector lending

CRISIL estimates that as much as Rs 75,000 crore of loans – or nearly 15% of aggregated debt to powergeneration companies -- are at risk of becoming delinquent in the medium term. Further, close to Rs 1.9lakh crore of loans to six weak discoms, wherein the moratorium under the nancial restructuring package

(FRP) is ending in the next 18 months, are also at risk if timely support is not extended by the central orstate governments.

Consequently, loans to power sector wi ll moderate in the medium term

Lending growth in the power sector, which had hit a high of 34% in scal 2011, more than halved to 16%

in scal 2015. CRISIL expects this trend to continue given lower incremental sanctions in the last two

years and fewer commissioning of capacities expected in future. Also, with risks rising, banks and nancial

institutions (FIs) are turning more cautious.

CRISIL foresees credit growth to the power sector declining further to around 14% in the period till March31, 2018. Yet the share of the power sector in total bank credit will remain high at around 9% till then.Outstanding loans of banks and FIs to this sector are expected to reach around Rs 16 lakh crore. Of this,around Rs 9.5 lakh crore would be for generation projects.

*Includes bonds issued by discoms

2.6 3.4 4.25.5 6.3 9.52.1

2.43.1

3.74.4

6.3

34

25 2528

16

14

0

5

10

15

20

25

30

35

40

0

2

4

6

8

10

12

14

16

18

2011 2012 2013 2014 2015 2018 (P)

Generation exposure (LHS) Exposure to discoms* (LHS) Growth (RHS)

(Rs lakh crore) (%)

As on March 31



RATINGS

32

Table 1: Bank and nancial institution exposure to power generation projects

Particulars Number of projects Debt (Rs crore)

1. Coal-based capacit ies at risk 32 1,60,000

(a) Off-take risk 6 12,000

(b) Aggressive pricing 11 81,000

(c) Fuel unavailability 15 66,000

2. Gas-based capacities at ri sk

(Due to lack of availability of gas)24 50,000

Total 56 2,10,000

Rs 2.1 lakh crore debt at risk in generation

CRISIL estimates around 46,000 mw of power generation projects (36,000 mw coal-based and 10,000 mwgas-based) are in distress today.

Loans to these projects are around Rs 2.1 lakh crore, with about two-thirds lent by public sector banks.CRISIL has classied coal-based projects (76% of the Rs 2.1 lakh crore exposure) into three buckets of

risk -- offtake, fuel availability, and aggressive bidding. The risk is highest where lenders are exposed toprojects that were bid so aggressively that there is a question mark over their viability. Gas-based projects(24% of the exposure), on the other hand, are weak due to lack of fuel availability.

Parent support, structuring under 5/25 scheme will provide succour

While overall debt to weak generation projects remains high, CRISIL believes there are two mitigantsavailable to materially reduce the risk:

1. Support from strong sponsor parent

About 10,000 mw of projects, with a total debt of Rs 35,000 crore, enjoy the cushion of robustparental support where:

(a) The project has strong operational and nancial linkages with the parent and there is past

track record of support, and,(b) The project is part of a group where cash ows are fungible between group companies.

2. Flexible structu ring under the 5/25 scheme

In December 2014, the Reserve Bank of India (RBI) allowed exible structuring of existing long-

term loans through the 5/25 scheme, whereby repayments could be stretched to 20-25 years tomatch the cash ow of the projects, with renancing done every ve years. The scheme enables

matching of loan repayment schedules with cash ows, which helps improve viability of large

infrastructure projects.



CRISIL Insight

33

Chart 2: Bank and FI exposure to power generation projects

CRISIL believes nearly 20,000 mw of weak generation projects involving debt of Rs 1 lakh crorecan benet from the 5/25 scheme in the medium-term. Of this, 15,000 mw are coal-based. Some

of these were operating at sub-optimal PLFs because of inadequate feedstock, but coal suppliesare improving now. They can further benet from elongated loan tenures under the 5/25 scheme.

Additionally, 5,000 mw of gas-based capacities, having been allocated subsidised RLNG in therecent round of auctions, will be able to service their interest obligations for the next two years.Therefore, providing moratorium on principal repayment under 5/25 till such time domestic gasproduction improves can provide relief to these projects.

However, as per stipulation, for debt to be structured under the 5/25 scheme, banks will have tobring in an additional lender or ensure zero net present value loss. And the performance of projects

even after structuring will be a monitorable.

Rs 75,000 crore debt at risk

Today, risk is highest in 16,000 mw of projects. While some have been boxed into a corner after aggressivebidding, others are facing cost overruns or gas-supply issues. These projects don’t have strong sponsorcompany support and are not expected to turn viable in the long run even if they are structured under the5/25 scheme. The exposure of banks and FIs to them was about Rs 75,000 crore as on March 31, 2015.CRISIL believes accretion of non-performing assets (NPAs) from these accounts could be high in medium-term.

Rs 2.1 lakh crore debt towards 46,000 mw of stressed projects

• Strong operational and financial link with parent

• Past demonstrated support

• Fungibility of cash flows within the parent group

• Coal-based projects expecting increase in fuel supplies/

PPA agreements in near term can be structured

• In gas-based capacities, auction winners can turn v iablewhen gas production improves

Strong parent support

Rs 35,000 crore

Structuri ng under 5/25

Rs 1 lakh crore

Debt at risk

Rs 75,000 crore

• Aggress ive bi dding on tar if fs

• Huge fixed-cost overruns including stranded gas-basedcapacities



RATINGS

34

Chart 3: Total debt of discoms has doubled between scals 2011 and 2015

Rs 1.9 lakh crore debt to discoms at risk

The aggregate debt of discoms grew at a compounded annual growth rate of about 20% in the last fouryears, touching a high of Rs 4.4 lakh crore as on March 31, 2015. This includes loans from banks andnancial institutions (such as Power Finance Corporation and Rural Electrication Corporation) as well as

bonds issued and loans given by state governments. Of this, the exposure of banks to discoms is aroundRs 2.5 lakh crore – or more than 55% of the entire debt of discoms.

Government support to discoms crit ical

Till now, central and state governments have prevented the debt of discoms from turning weak by providingnancial support. This was reected in the formulation of the FRP on September 25, 2012. Accordingly,

eight weak discoms were restructured and granted a moratorium of three years on principal repayment.Further, a signicant portion of their debt -- aggregating around Rs 60,000 crore -- was converted into

bonds with the state government supposed to take them over in a phased manner. Also, as part of FRP

commitment, discoms were to increase tariffs and reduce AT&C losses.

The commitments of state governments under FRP, however, are yet to be fully adhered to. Tariff increaseshave been insufcient and reduction in AT&C losses limited. And the takeover of bonds by state governments

within specied timelines as per FRP remains a monitorable.

Rs 1.9 lakh crore debt of si x discoms at risk

For six out of eight discoms (Table 2), moratorium ends in scals 2016 and 2017. Their nancials remain

weak, while the wherewithal of their respective state governments to offer support is in doubt. We believestrong government support is necessary to keep the debt of these discoms from turning weak.

0.3 0.4 0.4 0.4 0.50.5 0.6

0.8 1.11.4

1.41.5

1.81.8

1.9

0.4

0.6

2011 2012 2013 2014 2015

As on March 31

FRP bonds

Banks

PFC/REC

State governmentloans/ Others0.4 0.5

1.1.4

.8

1.9

0.4

0.6

014 2015

3.0

2.5

4.4

3.7

2.2

CRISIL estimates

(Values in Rs lakh crore)

(Rs lakh crore)



CRISIL Insight

35

Weak discoms Moratorium ending in Debt at risk (Rs crore)

Haryana, Rajasthan, UttarPradesh, Andra Pradesh, Biharand Jharkhand

2015-16or

2016-171,90,000

Table 2: Rs 1.9 lakh cro re of debt to weak discoms at risk

CRISIL estimates the exposure of banks and FIs to these half-a-dozen discoms totalled nearly Rs 1.9 lakhcrore as on March 31, 2015. Lack of support from state or central government could turn this debt weak.With two-thirds of the exposure in its books, public sector banks are very vulnerable to any backwash.

Note: The graphs and data in this report are sourced from CRISIL Ratings, Central Electricity Authority,CERC, Forum of Regulators, and Power Finance Corporation’s report titled ‘The Performance of StatePower Utilities’



RATINGS

36

Notes



CRISIL Insight

37

Notes



RATINGS

38

About CRISIL L imitedCRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We areIndia’s leading ratings agency. We are also the foremost provider of high-end research to the world’s largest banksand leading corporations.

About CRISIL Rat ingsCRISIL Ratings is India’s leading rating agency. We pioneered the concept of credit rating in India in 1987. Witha tradition of independence, analytical rigour and innovation, we have a leadership position. We have rated over95,000 entities, by far the largest number in India. We are a full-service rating agency. We rate the entire rangeof debt instruments: bank loans, certicates of deposit, commercial paper, non-convertible debentures, bank hybridcapital instruments, asset-backed securities, mortgage-backed securities, perpetual bonds, and partial guarantees.CRISIL sets the standards in every aspect of the credit rating business. We have instituted several innovations inIndia including rating municipal bonds, partially guaranteed instruments, micronance institutions and voluntary

organizations. We pioneered a globally unique and affordable rating service for Small and Medium Enterprises (SMEs).

This has signicantly expanded the market for ratings and is improving SMEs’ access to affordable nance. We havean active outreach programme with issuers, investors and regulators to maintain a high level of transparency regardingour rating criteria and to disseminate our analytical insights and knowledge.

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Crisil Insight Power Sector Compendium

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