GMR Warora Energy on verge of defaulting on over Rs 3,000-crore loans

CARE Ratings has downgraded the rating for term loans of GMR Warora Energy from 'BB+' to default grade 'D' | Representative image
GMR Group’s Warora Thermal power project in Maharashtra appears to be on the verge of defaulting on its long-term loans of over Rs 3,000 crore due to deterioration in liquidity. Delays in the realisation of payments from those drawing power, especially distribution entities, have affected the financial profile of the power unit. 

CARE Ratings, too, has downgraded the rating for term loans of GMR Warora Energy (GWEL) from “BB+” to default grade “D”. The revision in rating factors in the deterioration in the liquidity profile of GWEL.

The ratings continue to remain constrained by the under-recovery of capacity charges for which power purchase agreements (PPAs) are in place. The company has signed PPAs with Maharashtra State Electricity Distribution Company Limited (MSEDCL) and Tamil Nadu Generation and Distribution Corporation (TANGEDCO). 

The below average financial risk profile of GWEL is characterised by high overall gearing, marginal debt coverage indicators and relatively weak credit profile of its off-takers, the rating agency said in a statement. 

The ratings continue to derive strength from the experience of promoters in operating power projects, long-term power off-take arrangement for entire capacity and the fuel supply agreement for coal supply with South Eastern Coalfields.

GMR Group had acquired 100 per cent stake in the power project from EMCO group in 2009. After the acquisition, the scope of the project was enhanced from 2x135 Mw to 2x300 Mw in view of the demand for power in western India. The Unit 1 and Unit 2 (each having a capacity of 300 MW) achieved commercial operation date (COD) on March 19, 2013, and September 01, 2013, respectively.

The project cost was initially envisaged at Rs 3,480 crore to be funded in the ratio of 75:25 for debt and equity. During FY15, it was revised to Rs 4,250 crore to meet the increased scope of work.

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