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By Ateeq Shaikh
Power bills of 30 lakh+ consumers of Adani Electricity set to go down as firm goes for its finance restructuring
Power tariff of more than 30 lakh consumers of Adani Electricity Mumbai Limited (AEML) will be reduced in 2022 once the mid-term review (MTR) of multi-year tariff (MYT) is approved by the Maharashtra Electricity Regulatory Commission (MERC).
The reduction in power tariff may be in the range of 10-20 per cent and the actual benefit to the consumers will be clear when the MYT will be presented to MERC for final true-up.
AEML, to cut down on its interest outgoing on the borrowings had opted for refinancing for its capital expenditure, refinancing of existing term loans and working capital loan, etc. Later, it approached the MERC on the same, who recently approved the refinancing plan.
For its transmission and distribution business, AEML explored the international market to raise funds through foreign currency bonds and external commercial borrowings.
As of March 31, 2021, AEML’s debt level stood at Rs 704.32 crore and Rs 1,994.95 crore for its transmission and distribution businesses, respectively.
“The Commission notes that as per the MYT Orders dated March 30, 2020, passed by the Commission for Generation, Transmission and Distribution Business of AEML, the approved interest rate for FY 2019-20 is 9.05 per cent for all three businesses. Further, the approved interest rate for working capital for FY 2019-20 is 9.55 per cent for generation and transmission businesses and 9.50 per cent for distribution businesses. As against this, a term loan of Rs 7,125 crore has been availed by AEML at an interest rate of 8.31 per cent (as of 31 March 2020), a working capital loan of Rs 950 crore at 4.62 per cent, Capex loans of Rs 503 crore at 8.03 per cent (as of March 31, 2020). The interest rate for new loans includes Hedge premium and With Holding Tax. Thus, in spite of the additional components, the interest rates for the fresh loans are lower than the interest rates approved in the MYT orders,” read the MERC order.
The tenure of the long-term foreign currency borrowings is for 10 years for bonds and three years and more for external commercial borrowings for capital expenditure purposes.
On the subject, Mumbai Mirror reached out to AEML, which explained that “the interest cost on loans is allowed to be recovered by way of tariff by the regulator”.
“Prior to August 2018, the weighted average rate of interest on AEML’s loan portfolio was 10.5 per cent per annum, which AEML brought down to 9.05 per cent through refinancing and reduced interest burden by Rs 26 crore. The benefit of this reduction in interest rates was passed on to consumers through a reduction in tariff between 12.3 per cent and 25.5 per cent (MERC MYT order dated March 31, 2020),” the AEML said.
In February 2020, AEML refinanced rupee loan by foreign currency loan and brought down interest rate further to 8.30 per cent, which brought savings of Rs 18 crore per annum to consumers, the company said. “The actual benefit of this reduction in interest rate will be passed on to consumers by the Honourable MERC through the MTR of MYT in 2022.”