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MOSL: UTILITIES-Prevailing ‘Discom’fort; AP DISCOM – SPDCL: Debt increases despite UDAY

Utilities: Prevailing ‘Discom’fort; AP DISCOM – SPDCL: Debt increases despite UDAY

 

• Andhra Pradesh (AP) accounts for ~5% of India's electricity demand (ninth largest). The state's DISCOMs (SPDCL and EPDCL) are among the top 10 DISCOMs in the country, based on the MoP Integrated Ratings (ICRA and CARE). In this note, we have analyzed the financials of SPDCL - the larger amongst the two AP DISCOMs.
• After incurring a cash loss of INR27b in FY16 and INR11b in FY17, SPDCL turned cash positive at INR7b in FY18, led by prior-period subsidy of ~INR7b (not received) and judicious management of surplus power (estimated to have earned ~INR3b). The DISCOM is expecting a revenue gap of ~INR66b and ~INR73b in FY19 and FY20, respectively, which, if not met by subsidy support from the government, will lead to huge cash losses. We estimate a cash loss of ~INR5b in FY19 in the best-case scenario.
• Interestingly, the DISCOM's AT&C loss of ~11% is one of the lowest among the country's public sector DISCOMs. Despite this, it is still incurring a high loss.
• SPDCL received an UDAY grant of ~INR54b, but its debt still increased from ~INR112b in FY16 to ~INR123b in FY18. Trade payables are well above the normative of 60 days at ~80-89 days over the last three years, suggesting no relief for generators even after the UDAY support.