Barely three months after raising Rs 3,951 crore through government-serviced bonds, Uttar Pradesh Power Corporation (UPPCL) — the umbrella body of the state’s five electricity discoms is all set to issue another tranche of bonds worth Rs 4,000 crore to meet its working capital requirements – mainly to clear dues of the generation companies (gencos). The issue is likely to hit the market in early July.
According to sources, UPPCL had initially planned to raise Rs 8,000 crore in one go from the markets in March itself but the state government allowed it to raise only Rs 4,000 crore in the first tranche.
“A team of UPPCL officials have gone to Mumbai to finalise the issue but all other details pertaining to the issue are going to remain the same as they were in March, including its merchant banker Trust Investment,” said an official, adding that the bonds have already been rated ‘A+ (CE)’ by India Ratings.
In March, UPPCL had borrowed Rs 3,951 crore through bonds maturing in 10 years, at a coupon rate of 9.70%. The bonds saw a strong response from a diversified class of investors – comprising banks, mutual funds, NBFCs, insurance companies and infra finance companies.
“As many as 22 entities had invested in the first tranche of the bonds in March including Credit Suisse, Barclays, Morgan Stanley, Nippon, Aseem Infra, Star Health, Tipsons Group, Trust Group, AK Capital, etc,” an official told FE on condition of anonymity, adding that the Uttar Pradesh government has provided an unconditional and irrevocable guarantee for all payment obligations of these bonds.
UPPCL’s accumulated losses till FY21 stand at Rs 70,454 crore, while its outstanding liabilities to gencos are around Rs 23,000 crore, which includes dues to the central generating and transmission companies, independent power producers and state generating stations.
Delays in the release of subsidies by the state government and the high aggregate technical and commercial losses (AT&C) losses — 27.5% in 2020-21 — have resulted in a rise in the discoms’ losses in 2020-21. Under the UDAY scheme for discoms’ revival, a target was set to reduce AT&C losses (pilferage) to 15% by 2018-19 and while many state discoms have been able to meet the target, UPPCL discoms have been among the laggards. A decline in the rate of growth of revenue due to the pandemic in 2020-21, too, caused the losses to rise, after a decline witnessed in the previous year.
According to the annual revenue requirement (ARR) for 2022-23 filed by the Corporation, while the annual revenue requirement is Rs 84,505 crore, the revenue expected from tariff would be Rs 63,315 crore only, leaving a net revenue gap of Rs 66,88 crore.