It has been over 12 months since the we have received a payment from our energy consumer, Ajmer DISCOM – owned by BJP led Rajasthan government. The outstanding payments (now) add up to 20% of what we paid for the asset!Luckily my investors paid in full for the asset so there weren’t any loans to repay but not every renewable energy generator was as lucky as me, many took loans, have run from pillar to post to get paid and after exhausting all available options they have finally been forced into looking at other avenues to repay the loans. The gut wrenching stories range from mortgaging familial properties, dipping into their savings or in worst cases selling property to keep the loans current – this is the state of renewable energy investors in India, a population that is dying under the weight of the outstanding dues.
I used to assure my investors that the invoices are with a government entity that has to pay penalty interest of 15% on the past due amounts which is as good as keeping the money in a high yielding bond. My faith was vindicated last year when, under the direct order of the Rajasthan High Court the DISCOMs immediately paid the delayed interest amounts and I (like many others) did get the money!
This year however, the DISCOM is extracting more than it’s pound of the generators flesh by
- Withholding payments to generators even though it has received funds from the Central Government under the UDAY restructuring scheme
- Asking renewable energy generators to back down their substations when they are in the middle of producing their maximum energy
The investors have been living with these issues for years now and most of those risks have been priced into the financial models for these projects. The blow that broke the camels back is the DISCOM newest filthy proposal: sign an undertaking giving the DISCOM a 50% interest discount otherwise wait indefinitely to get paid.
Yes, ladies and gentlemen, you have read it right – the debtor is offering the creditor an amnesty scheme!
The 50% discount would mean that
- The interest paid to the bank (around 10-12%) is higher than the interest received from the DISCOM
- It ss less than the yield of 12 month fixed deposit at a nationalised bank
This leads to a negative IRR situation for the investor!
Does the Narendra Modi government intend on building its 100 GW plan on the carcasses of renewable energy investors? The banks don’t want to lend to this sector, the investors don’t want to invest new capital in this sector and it is easier for me to find people who want to sell their renewable power projects than those that want to buy them.
The PMO and the Ministry of Power is fully aware of what is going on because just last week we received a letter from the Maharashtra DISCOMs offering the Rajasthan amnesty scheme to its creditors… the model is here to stay and will be replicated till all renewable energy investors have been gassed into oblivion.