Gujarat discoms shine in MoP’s integrated ratings exercise


Four power distribution utilities of Gujarat and one of Haryana have secured the top rating of A+ from credit rating agencies ICRA and CARE in the ninth round of the annual integrated ratings exercise instituted by the Ministry of Power (MoP) in 2012.

The ratings exercise coordinated by power sector financier Power Finance Corporation (PFC) undertook a review of operation of 41 state distribution utilities.

The ratings exercise this year has brought out interesting results. In Punjab, where people took to the streets over power cuts and shortage of supplies to the industry, the Punjab State Power Corporation has secured A rating, which means high operational and financial performance capability.

Similarly, while the Maharashtra State Electricity Distribution Company Ltd has also got A rating, the distribution utilities of Uttar Pradesh have fared badly in the ratings exercise, scoring ratings between B+, B and C+, indicating moderate to low operational and financial performance capability.

The worst C rating has come for some of the state distribution utilities of Rajasthan, Tamil Nadu, Andhra Pradesh and a few Northeastern states. The C rating indicates very low operational and financial performance capability.

The grading scale of A+ to C adopted under the Power Ministry’s integrated ratings methodology is different from the normal rating scale adopted by the credit rating agencies (AAA to D). The integrated ratings reflect the operational and financial health of the distribution entities.

“The Indian power sector will benefit from a fair and accurate assessment of the true position of the distribution sector and which in turn will help in assessing and improving its performance. This will also assist the state governments, lending institutions and other stakeholders to take important decisions,” Union Power and Renewable Energy Minister R.K. Singh said while releasing the ninth edition of the annual integrated ratings exercise for state discoms.

“A strong and efficient power distribution sector is key to the performance and viability of the power sector,” he added.

The ratings of distribution utilities is based on their assessment on more than a dozen operational and financial parameters with maximum weightage given to aggregate technical and commercial losers, cost efficiency and power purchase dynamics. The ratings also evaluated cost coverage, interest coverage and debt to net worth ratios.

Some of the key finds from the ratings exercise is improvement in cost coverage and also in AT&C loss level. While the average cost coverage for 41 disconsolate covered under the ratings has improved to 0.87x during the ninth exercise as compared to 0.86x in the eighth ratings exercise, AT&C loss level of rated discoms has also improved to 21.16 per cent in FY 2020 as compared to 21.85 per cent in FY 2019.

Nine discoms were the strong performers on cost coverage, which include Hubli Electricity Supply Company Limited (HESCOM), two Haryana discoms, three Gujarat discoms (UGVCL, MGVCL, and PGVCL), and one discom each of Chhattisgarh, Himachal Pradesh and Assam.

Overall, 16 power distribution entities (out of a total of 41) have shown improvement in their cost coverage ratios. Out of these, 6 discoms have shown improvement of more than 10 per cent in their cost coverage ratio.

In all, 20 of the rated power distribution entities have shown improvement in their AT&C loss levels during FY 2020 (19 in the previous year). Nine utilities have reported AT&C loss levels within 15 per cent as compared to eight utilities in FY 2019. Fifteen utilities have been able to achieve more than 10 per cent reduction in AT&C loss parameter.

In terms of Interest Coverage Ratio (ICR), there are 29 utilities which have exhibited positive ICR in FY 2020. All the Gujarat discoms have exhibited ICR of over 5.0x, while there are seven discoms whose ICR is over 2.0x, including Assam Power Distribution Company Limited (APDCL).

Sixteen discoms have positive debt to net worth ratio (D:E), out of which 1o have D:E of less than 2.0x, indicating sound support from the state governments. Out of those 10 discoms, Gujarat discoms have the minimum D:E ratio and the other discoms include Bihar discoms, Punjab State Power Corporation Limited (PSPCL), Mangalore Electricity Company Limited (MESCOM), Maharashtra State Electricity Distribution Company Limited (MSEDCL), and Tripura State Electricity Corporation Limited (TSECL).