Govt’s role crucial to ensure minimal disruption in power sector, says
Ind-Ra
26/09/2014 11:54
The Supreme Court’s (SC) judgment would bring in the much-needed transparency in the coal sector which has been marred with non-transparent ad-hoc allocations, according to India Ratings & Research (Ind-Ra), a leading rating agency. “Over the long-run, this will boost investments in the sector and lower India’s dependence on imported coal, leading to energy security. However, the government must act promptly to ensure minimal operational disruption for the existing operational projects to further build investor confidence,” the agency said in a report. Commenting on Supreme Court verdict, the agency said the judgment was in line with our expectations expressed in the commentary government action key post Supreme Court’s Coal Block Ruling dated 27 August 2014. Ind-Ra expects the government to play a pivotal role in the resolution of coal supplies linked to operational end use projects (EUP). Independent power producers (IPP) with merchant sales are likely to see significant profitability erosion FY16 onwards in the absence of coal linkage beyond March 2015; they will have to rely on imported coal or pay higher for the coal obtained under the auction mechanism, it said. FY15 would see a one-time cash flow hit on such IPP’s due to the penalty to be paid for coal extracted till date. The ability of these merchant IPPs to tie up for domestic coal under linkage route remains remote, it added.
26/09/2014 11:54
The Supreme Court’s (SC) judgment would bring in the much-needed transparency in the coal sector which has been marred with non-transparent ad-hoc allocations, according to India Ratings & Research (Ind-Ra), a leading rating agency. “Over the long-run, this will boost investments in the sector and lower India’s dependence on imported coal, leading to energy security. However, the government must act promptly to ensure minimal operational disruption for the existing operational projects to further build investor confidence,” the agency said in a report. Commenting on Supreme Court verdict, the agency said the judgment was in line with our expectations expressed in the commentary government action key post Supreme Court’s Coal Block Ruling dated 27 August 2014. Ind-Ra expects the government to play a pivotal role in the resolution of coal supplies linked to operational end use projects (EUP). Independent power producers (IPP) with merchant sales are likely to see significant profitability erosion FY16 onwards in the absence of coal linkage beyond March 2015; they will have to rely on imported coal or pay higher for the coal obtained under the auction mechanism, it said. FY15 would see a one-time cash flow hit on such IPP’s due to the penalty to be paid for coal extracted till date. The ability of these merchant IPPs to tie up for domestic coal under linkage route remains remote, it added.
