See opportunities in renewables, wind sector: PTC Fin

A: Renewable is the buzz word today. In fact the present government is focusing quite a bit on the renewable sector, particularly, the solar one. They have scaled up the kind of capacity which has to be added and now we are talking about one lakh megawatt in next five year which is totally a game changer. This provides an opportunity of over seven lakh crore kind of lending opportunities.

On the wind side, government has restored, accelerated this depreciation benefit and also generation base incentive continues which should give further fillip to wind sector. More so, on the wind sector the preferential tariff regime continues to be there.

In between there was some uncertainty but that has settled now. So, these two sectors should provide us very good opportunity for growth in coming times.

The advantage of renewable over conventional energy is that renewables get quickly executed with the projects getting executed almost in one year.

Another advantage is they enjoy preferential tariff and don’t have to follow the merit order dispatch. So, they must run power generating units that ensure power supplies from these units and payments are also forth coming. So, lot of certainty vis-à-vis conventional energy and that is why we are now focusing.

Q: Will there be any viability questions like you currently have with coal-based and hydro-based plants?

A: The risk concerns are much less in terms of fuel, in terms of execution, in terms of the time lines and the sanction to disbursement ratio because of that is much better.

Q: About conventional energy issues, in passing you mentioned that there are problems there. We saw that financial bailout package being signed about two years. After the first round of tariff hikes we have not heard any; what is your sense about discom loans, is trouble brewing there?

A: The discom position is much better than what it was two years back. The filling of average revenue realised (ARRs) is also happening much better than what it used to happen.

Q: We didn’t hear any tariff hikes?

A: That is true, but now one thing is very clear with the Appellate Tribunal for Electricity (APTEL) order that incase the discoms don’t file their tariff application within a year’s time, the tariffs have to be mandatory revised. So, wherever there would be a delay, the state regulators will be, over a period of time coming up with the tariff revisions.

Q: Nearly 36 percent of your loan book comes from the renewable energy sector. How much could that grow to in say the next one year? What is the quantum of sanctions that you have in the pipeline?

A: As of now we have roughly over Rs 7,000 crore of sanction in pipeline. Talking about growth, our incremental growth in renewable sector should be anything from 60-70 percent.

The emphasis of the government is to add huge capacities to both in solar and wind so it should not be very difficult for us to meet this target which we have kept for ourselves.

Q: Has the cost of money gone down for you since wholesale yields have fallen? Should we expect improved margins for the second half of FY15 and secondly non-performing loans (NPLs), are fresh creations of power sector NPLs slowing or are they at the same space as it was in the first half?

A: As far as the interest spread and margins are concerned we would be able to sustain at present levels. On the interest yields there is a slight pressure because through competitive based tariff biding the prices bid by solar producers are little, sometimes very aggressive. However, we are quite selective and are selecting only those projects where the whole project has certain viability, where certain debt service coverage ratio (DSCR) is being maintained.

On the borrowing side, last two years were little tough for borrowers because on the hedge side, the hedge cost had gone up and the yields on G-Sec had also gone up considerably.

Now there is correction happening there and also the hedge cost is coming down. So, we have wide options available now which were not there for borrowing. We feel that our cost of borrowing should come down.

We have been able to do commercial paper which we have not done earlier and are able to do that at much more competitive rate.