Indian government’s efforts to revive the stranded gas-based power projects will benefit the banks as they have significant exposure to such plants, credit rating agency Moody’s said on Monday.
“The government approved measures to revive and improve the utilisation of stranded gas-based power generation plants in the country. This is credit positive for India’s banks because they have significant credit exposure to such plants,” Moody’s said in a statement.
Among the biggest beneficiaries of these measures are IDBI Bank, State Bank of India and ICICI Bank.
Power generation plants that use regasified liquefied natural gas (RLNG) as their fuel base have been facing significant availability and pricing challenges because the actual domestic production of LNG has been significantly lower than the assumptions made when the plants were set up, Moody’s said.
It added that importing LNG at prevailing prices has proved difficult because it increased generation costs, which, in turn, raised prices beyond the reach of buyers.
Among Moody’s rated banks, IDBI Bank has an especially high exposure to gas-based power plants and would be the key beneficiary of these measures.
SBI and ICICI Bank have exposure to Ratnagiri Power Plant, which is the largest gas-based power plant in India, and would benefit as well.
Last week, the central government approved a financial support to the private companies to help them use costly LNG for generating electricity. The move will revive Rs 60,000 crore of stranded power projects.
As many as 31 power stations with a combined capacity of 14,305 MW, which are languishing because of want of gas, can bid for support from the Power System Development Fund for generating 30 per cent of their installed capacity, called plant load factor, using LNG.