KSEB eyes loan swapping to reduce interest burden

Tipson Financial Services appointed as consultant for swapping

THIRUVANANTHAPURAM: Burdened by huge debt, the Kerala State Electricity Board Ltd (KSEB) is exploring the possibility of swapping its existing loans to reduce the interest burden that has been significantly draining the company’s finances.

Swapping of loans could mean lengthening the tenure of loans and thereby reducing the interest burden for the time being or replacing the existing loans with fresh loans charging less interest, etc.

In this connection, KSEB has invited expression of interest (EOI) from advisory firms to help the company carry out swapping efficiently. “Tipson Financial Services Pvt Ltd has been appointed as the consultant to the company for arranging the swapping of high-cost debt,” KSEB has stated as part of an official document.

Though the latest balance sheet shows that the borrowings are to the tune of above Rs15,000 crore as of March 31, 2024, the document is referring to a figure close to Rs9,000 crore as the total debt of the state’s lone power provider.

“However, what concerns me more is the issue of the negative net worth of about Rs35,000 crore that the company is saddled with,” a financial analyst said while discussing on the KSEB finances with businessbenchmark.news.

Deviation from accounting standards

And more seriously, the auditors of KSEB have flagged that the financial information presented by the company has deviated from the Indian Accounting Standards (IAS), while explaining the basis for making a qualified conclusion about the company’s accounts.

All said, KSEB management stated that it’s been doing its level best to keep the company afloat, especially financially. The company has acknowledged that the company does face difficulty in obtaining fresh loans, mainly due to the non-compliance of the Additional Prudential Norms. The non-compliance on the part of KSEB could be mainly attributed to the failure to settle the state government dues.

KSEB stated that though the company currently holds a loan exposure exceeding Rs9,000 crore from banks/financial Institutions (FI), it has been able to ensure zero default in loan servicing.

“Despite operating in a challenging financial landscape, our ability to secure financing from banks/FIs is attributed to our long-standing credit history, characterized by a consistent payment culture,” it stated in the document.

A little growth story

Since its initial installed capacity of just 109 MW, KSEB has grown remarkably, now boasting a total installed capacity of 2482.42 MW. Today, the company operates 42 hydro generating stations and 2 thermal stations, but paradoxically, still KSEB’s internal resources could meet only 30 per cent of the energy requirements of the state.

About 244.34 MW of solar capacity has been added to KSEB grid during the financial year 2023-24 (FY24) alone; in this 56.15 MW plants are owned by KSEB. The cumulative solar capacity as of now has crossed 1 GW, with  KSEB’s share being 224.08 MW or 22.20 per cent.

Stand-off

KSEB has gone through turbulent phase in 2023-24. In the month of May 2023, Kerala State Electricity Regulatory Commission (KSERC), the regulator of KSEB, refused to approve the long-term power purchase agreement (PPA) under design, build, finance, own and operate (DBFOO).

This has generated cascading impact in doing power management as 465 MW power got wiped out. Hectic litigations and different stands taken by the stakeholders landed the company in protracted litigation.

“In spite of these adversities KSEB could manage the power position. Subsequently, Government has invoked Section 108 and KSERC approved the long-term power purchase agreements (PPAs), which were pending since 2015-16,” the document explained.

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