Andhra Power Finance Corporation Set to Raise Resources for Lending to Power Companies

State-run power companies have been raising money at high-interest rates, resulting in huge payouts

December 9, 2019


The Andhra Pradesh Power Finance Corporation Limited (APPFCL) has stated that the state-run power companies have been raising funds from financial institutions and other lending organizations at high interest rates resulting in high payouts by these companies as interest.

The state-run power companies include Transmission Corporation of Andhra Pradesh (APTRANSCO), Andhra Pradesh Power Generation Corporation (APGENCO), Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL), Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL), and Andhra Pradesh Power Development Company Limited (APPDCL).

This has put an undue burden on APPFCL, which is a state-owned financial corporation and is also registered as a non-banking finance company (NBFC) with the Reserve Bank of India to raise resources for lending to power utilities of the state government.

APPFCL said it is trying its best to provide all the necessary financial support to the state utilities and provide a seamless financial framework to these state-run power sector companies. In its order, APPFCL noted that the state’s power companies have identified certain freehold properties and are willing to transfer the assets to APPFCL at the book value and in the process, strengthen its assets.

The state government has given its permission to transfer the properties identified by the power utilities in favor of the APPFCL, Vijayawada, and help it raise resources for lending to power companies run by the state government.

DISCOMs across states have been reeling under financial stress, which has been exacerbated in recent months. In September 2019, a Central Electricity Authority report stated that the total payment due for 513 renewable projects amounted to ₹97.356 billion (~$1.356 billion) as of July 31, 2019, showing an increase of nearly ~ ₹15 billion (~$0.21 billion) compared to the previous figure of ₹82.3 billion (~$1.14 billion) for the same period.

In August 2019, Mercom had reported that the payment dues were spread across the states of Andhra Pradesh, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Odisha, Tamil Nadu, Rajasthan, Telangana, and Uttar Pradesh.

Addressing the large outstanding dues on power bills, the central government has now mandated opening and maintaining of adequate letters of credit (LC) as a payment security mechanism.

Meanwhile, in a recent development, the government of Andhra Pradesh has issued a notification amending the state’s policy for wind, solar, and wind-solar hybrid projects, taking away some vital incentives from the renewable generators. The amendments have changed or canceled many existing provisions in these policies that deal with transmission charges, energy banking, and tariff determination.