For the past year, Adani Power has been undergoing an overhaul for its debt, including measures such as equity infusion and refinancing. These have helped the company survive the rough times since proceeds from the compensatory rates are yet to come by.
The firm expects its recent equity infusion, debt refinancing and the compensatory rate to lead to a turnaround in its financial position.
“Adani Power is on a path to regain strong financial position,” said a spokesperson in response to a query on the company’s debt position and servicing capabilities.
So far in the current financial year, promoters of the company have infused around Rs 1,700 crore equity, added the spokesperson. In the past financial year, promoter equity infusion was Rs 1,100 crore.
There has been traction on the debt side as well.
“Finance costs for the September quarter was substantially lower at Rs 1,434 crore, compared to Rs 1,650 crore in the September 2015 quarter. This reduction is in interest cost that has been achieved through continuous refinancing efforts including the completion of 5/25 scheme for Adani Power and all its subsidiaries,” Adani Power said in an analyst call for its September quarter results.
On its debt payments, the company spokesperson added, “The company is current in its debt service obligations and expects to meet with its ongoing commitment in a timely manner. We have almost concluded our refinancing programmes. We are working very closely with banks to complete appraisal and avail additional working capital facilities, pending for some time.”
A large part of this exercise for APL and its subsidiaries is over. The balance is expected to be completed during the quarter ending March. The spokesperson did not share further details on the planned refinancing.
The steps to refinance debt have also met with some pain points. The delay in refinancing some of its outstanding external commercial borrowings is a concern raised in some of CARE Ratings’ reports on Adani Power.
“The envisaged refinancing has been inordinately prolonged resulting in tightening of its liquidity, which also led to delay in repayment of a part of its ECBs as reported by APL’s statutory auditor in their audit report for FY16. However, APL had approached its ECB lenders before the due date with a request for deferment of upcoming instalment payment; and the same was considered by the lenders, along with recovery of additional charges,” said an August 2016 CARE report.
A person close to the company, who did not wish to be identified, said the company would continue to refinance some of its other ECBs.
Most power analysts believe these measures over the past year have helped the company meet its debt obligations, but not much would have changed in terms of debt quality. As of March, the company had total debt of Rs 53,052 crore, which fell marginally to Rs 49,548 crore.
“They have been infusing equity and refinancing debt; this has helped them stay afloat. I do not think they have seen any significant change due to it if one looks at the profit and loss statement,” said a power analyst, who did not wish to be identified.
According to the company, its debt position has improved with further promoter equity infusion.
“With total equity infusion of Rs 2,800 crore from the promoters, APL’s net worth position has strengthened and has also addressed leverage issue,” said the spokesperson.
What remains key to Adani Power’s overall financial improvement is the compensatory rate.
“The impact of the pending compensatory rate in terms of retrospective payable will be large and help retire some of its debt but there needs to be a final order and second how many instalments will it be paid in,” said the analyst quoted earlier.
On December 6, the Central Electricity Regulatory Commission granted a compensatory rate for Adani Power’s Mundra unit on the grounds of changes in Indonesian coal policy and shortage of domestic coal.
In the address to analysts, after the September quarter results, the management said: “Once we have clarity in the form of CERC orders, we would obviously have the reason to work with the rating agencies and then we will make our plans.”
The CERC order, however, has not led to any change of credit ratings so far for the company as its implementation hinges on the required Supreme Court approval for the same.
For 2015-16, the company recognised compensatory tariff income of Rs 919 crore at the standalone level and Rs 401 crore for the first half of the current financial year.
“The formula suggested in the CERC order may not very high, but should help the company cover up the debt costs involved for Mundra operations,” noted a power consultant who did not wish to be identified.
Image: Engineers inspect electric transmission lines at the Adani Power Company thermal power plant at Mundra in Gujarat. Photograph: Amit Dave/Reuters.
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