Power trading prices shoot up 20-25%

In this scorching heat as the power demand across the country keeps on increasing the power trading prices have also gone up . In an article of the Business Standard the cause of rising trading prices was highlighted. Short-term power prices have seen an increase of 20-25 %. The highest price at which the power was traded rose to Rs 5 per unit.

In an article of the Business Standard , Rajesh Mendiratta, Indian Energy Exchange’s Senior VP for Business Development said that “Due to mismatch in demand and supply, the prices are expected to increase further but it will not reach too high a level,” . The average for power trading was Rs 3.5-4 per unit where last year the average rates were 2.9 per unit in the same period.

Due to inadequate coal supply the power industry is unable to meet the rising need of power in the country.Demand for coal in India has grown at an annual rate exceeding 8.4 per cent over the past five years.

With the increasing demand of power and shortage of coal supply it seems that the our electricity bills will keep going up. Lets hope that the monsoon comes soon which will bring some relief to our regular power cuts.

Contributed by Rahul Tyagi

Power Distribution Utilities to be rated by Ministry of Power

In an interesting article of The Hindu Business Line, a new rating methodology developed by the ministry of power was highlighted. In this methodology all utilities will be rated on the basis of their performance and their ability to sustain commercially viable operations in the long run. The methodology focuses on rewarding efforts of distribution utilities and therefore stimulating and improving operational and financial performance of distribution entities. One of the criteria for ranking of the distribution companies will also be the level of their Renewable Purchase Obligation fulfillment. A system of negative marks has also been introduced in the rating methodology. The first ranking expected to be issued in March 2013.

This integrated rating methodology is expected to facilitate realistic assessment by Banks/FIs of the risks associated with lending exposures to various state distribution utilities. It would enable funding with appropriate loan covenants for improving operational, financial and managerial performance.

For Ex: Gujarat has improved its position by ICRA & CRISIL ratings because of improved performance in optimization of power purchase costs, overall improvement in operational efficiency, savings in interest costs because of debt restructuring and significant improvement in cash collections. Whereas utilities in States which have lower ranking like MP, UP & Tamil Nadu will have no proper debt restructuring & unbundling, no proper power purchase costs etc.
Therefore, financial institutions or investors will decide in which state to locate their projects based on the rankings similarly in the case of banks, as they will choose to finance or provide loans to those utilities which have a good ranking and a proper debt structuring.

Contributed by Chetan Adhikari

Go to top