­­­Strategic Importance to GoM along with limited offtake risk
MSPGCL is wholly owned by GoM through MSEB Holding Company Limited and hence holds a strategic importance to GoM. The company has the highest overall generation capacity and highest thermal installed capacity amongst all the states within India and is the second highest state owned generation company after NTPC in terms of installed capacity. The company has a total installed capacity of 13,022 MW. Further, the company has a long term PPA of 25 years signed with MSEDCL for supply of its entire generated power with tariffs being regulated by Maharashtra Electricity Regulatory Commission (MERC). MSEDCL is a backbone of the power sector infrastructure in Maharashtra with a consumer base of over 25 million wherein 40% of its power requirement is catered by MSPCL thus limiting the offtake risk to a considerable level. Further being a GoM holding, government has been regularly supporting the company in the form of timely equity infusions. GoM through MSEB Holding has infused an equity to the tune of Rs. 468.05 Cr. during FY2023. and Rs. 91.14 Cr. during FY2024  Acuité believes that MSPGCL, shall continue to reap benefits from timely operational and financial support of GoM.

Operational importance and strategic linkages with key suppliers
MSPCL has an installed Thermal capacity of 9,750 MW accounting to almost 4% of the total Thermal generation capacity (243.21 GW) of India as on March 2023. The Plant load factor (PLF) in the country for 2022-23 for coal-based plants across the sectors was 64.15% and MSPCL recorded a coal-based PLF of 61.34% during the same period. During Fy24, the PLF stood at 65.67%. Further, the tariffs are regulated by MERC and are designed to assure return on equity due to cost-plus nature of PPA under multiyear tariff model wherein tariffs are determined in advance for a period of 4 years on a basis of fuel charges and fixed costs. Further, the company has a long-term fuel supply arrangement (FSA) with companies like Western Coalfield Limited, Mahanadi Coalfields Limited to name a few for supply of annual contracted quantity (ACQ) of ~55.08 million tonnes per annum coal. The company also has a Bridge linkage MoU with Western Coalfield Limited and Singareni Collieries Company Limited for uninterrupted supply of fuel.

Receipt of delayed payments surcharge under the LPS Rule 22 expected to improve the working capital
MSPCL reported an overall increase of around 42% in its total operating income which stood at Rs. 33.072 Cr. in FY2023 against Rs. 23292 Cr. in FY2022. Out of the total income, Rs. 3949 Cr. pertains to the delayed payment surcharge received from MSEDCL. Until FY2018 both MSPCL and MSEDCL were showing same amount of late payment surcharge (LPS). However, since FY2019 MSEDCL had retrospectively revised the amount of LPS by changing the methodology wherein the payment got first adjusted towards principal dues instead of LPS. As a result of the same, there arose a huge difference in the LPS recorded amount. However, Ministry of Power (MoP) introduced LPS Scheme 2022 for clearing of outstanding dues of power generating and transmission licensee companies under which outstanding dues of more than Rs. 10,000 Cr have to be cleared within 48 monthly installments. Accordingly, starting August 2022 MSPCL has been receiving a monthly instalment of Rs. 287.52 Cr. towards the LPS from MSEDCL. In FY2024, the revenues of the Genco are estimated to be ~ Rs. 31000- 32000 Cr. that includes the delayed payment charges of ~Rs.3000 to 3100 Cr.  Acuité believes that introduction of LPS scheme 22 is expected to bring some improvement in the stretched receivables cycle of MSPCL.

­Moderate financial risk profile
The financial risk profile of the company is moderate with declining trend in net worth during last few years,  leveraged gearing ratio and below average coverage indicators. The net worth of the company has declined in FY2023 to Rs 16,397.30 Cr as against Rs 17,314.22 Cr in FY2022. The decline in net worth is due to losses recorded by company from last two years. The capital structure remains leveraged  with the debt-equity ratio of 2.47 times as on March 31, 2023 against 2.47 times as on March 31, 2022, TOL/TNW ratio stood at 3.65 times as on March 31, 2023 against 3.20 times as on March 31, 2022. Total debt of the company stood at Rs. 44,886 Cr. as on March 31, 2023 against Rs. 42,741 Cr. as on March 31, 2022. The debt levels stood at Rs. 41,832 Cr. as on March 31, 2024 comprising of the working capital loans of Rs. 22,793 Cr. and term loans of Rs. 19,039 Cr. In FY2024, the company has taken debt of Rs. 6,319 Cr. consisting majority (Rs. 5088.75 Cr.) of working capital limits and remaining Rs. 1231.01 Cr. towards the capex (includes Rs. 566.41 Cr. interest free debt from government). The Debt-EBIDTA ratio of company has improved at 8.40 times in FY2023 as against 10.17 times in FY2022. The coverage indicators stood below average due to losses been reported, interest-coverage-ratio stood at 1.52 times in FY2023 as against 1.19 times in FY 2022. Debt-service- coverage-ratio stood at 0.78 times in FY2023 as against 0.62 times in FY2022. However, the company has a support from GoM and MSEB wherein every year equity infusion is done.

Revenue concentration and stretched receivables cycle
The company has signed long term PPA (25 Years) to supply its entire power to MSEDCL. Thus, any dispute or weakening of the credit profile of the off-taker puts MSPCL under serious counter party risk. Further, the receivables include the contractual accumulated receivables with respect to Late Payment Surcharge (LPS) until FY2023 of Rs 14,842 Cr. Till FY2018 both MSPCL and MSEDCL were recording same amount of LPS. However, since FY2019 MSEDCL retrospectively revised the amount of the late payment surcharge by changing the methodology wherein the payments were first adjusted towards principal dues instead of LPS. As a result of the same, there is a huge difference between the LPS amount recorded by MSPCL and MSEDCL. However, under LPS scheme 22 MSPCL has been receiving Rs. 287.52 Cr. monthly from MSEDCL towards the LPS. This has although improved company's receivable during FY2023, the same still stood high. The outstanding balance stood at Rs 25,947 Cr as on March 31, 2023 as against Rs 27,231 Cr as on March 31, 2022 and Rs 24,518 Cr. as on March 31, 2021. Receivable days stood at 329 days in FY2023  against 453 days in FY 2022. With timely receipts of payments under LPS rule 22 liquidity of the company is expected to improve to some extent.  Acuité believes timely recovery of the pending LPS along with the recovery of the disputed amount will continue to remain a key rating sensitivity going ahead.