Open ICICI
3-in-1 Account
Manage your Savings, Demat and Trading Account conveniently at one place
- 24 Apr 2023
- ICICIdirect Research
-
Share
-
-
-
-
-
HIMACHAL GOVERNMENT TO IMPOSE WATER CESS ON HYDRO POWER PROJECTS
News: As per media and industry sources, hydropower companies face the prospects of a dent to their financials due to the new water usage cess imposed by the Himachal Pradesh government in March. According to industry insiders, the impact is expected to be two-pronged. Functional projects are expected to see a sharp rise in operating costs - by up to 25%. Under construction projects will have to renegotiate terms with bankers for financing because the underlying financial projections on the basis of which those loans were granted have changed. There are total of 172 projects in the state is likely to impacted by the cess
View: There are three buckets of projects, which will be impacted in different ways. Central utilities like NHPC and SJVN have projects to the tune of ~1770 MW and 1920 MW in H.P but the same are under fixed RoE basis wherein any increase in costs are passed on to the discoms and ultimately to the consumer thereby making this move neutral for such companies. Private companies that have signed PPAs, which do not cover the clause of increase in cost on account of law, will have to bear the brunt of the increase and the same will impact profitability of such projects. For instance, GMR 180 MW project and Statkraft projects do not have the clause and, hence, impact on profitability. Finally, Greenko and JSW Group have under-construction projects with capacities of around 500 MW and 240 MW, respectively. Financing terms on those under-construction projects could be affected because the cost structure has changed
Impact: Negative