GVK Power and Infrastructure: Idle power units, high debt adding to woes

GVK Power and Infrastructure’s losses continue to widen due to declining gas supply from Reliance’s KG basin.

In addition, the revenue reversal for one of its power plants has added to the woes of the company. Its losses widened to Rs 406 crore in FY13 from Rs 1 crore in FY12.

In the quarter to March 2013, two of its three operational plants with a combined capacity of 680 MW operated at below 10% plant load factor, or PLF, due to low supply of gas from the KG basin.

The third plant, which has a capacity of 220 MW, operated at 50% capacity utilisation thanks to supply from GAIL. Another investor concern in the quarter was the revenue reversal in one of its power plants.

In the earlier quarters, GVK had recognised revenue for fixed charges based on availability of alternative fuel. However, the Transmission Corporation of Andhra Pradesh, or AP Transco, which is the client, has refuted these charges.

As a prudent measure, the company in the March 2013 quarter reversed Rs 237 crore of revenues which were booked earlier. The company has now filed a petition with the APERC claiming these charges.

GVK’s worsening financials and lack of visibility over earnings revival have heightened concerns over its debt repayment. The company’s gross debt-to-equity ratio is now 5.4, which is one of the highest in the industry. Its consolidated debt rose three fold in the last two years mainly on account of acquiring additional stakes in Mumbai and Bangalore airports.