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Policy For Funding Against Regulatory Assets (Excluding return On Equity Component) Of Power Utilities

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Eligibility

• The funding against the regulatory assets shall be available only to State Electricity Boards, State Power utilities such as DISCOMs, TRANSCOs etc. and Joint Ventures between government and private sector (with government having a minimum 26% share)

Purpose

• To provide financial assistance against the regulatory assets of Power Utilities with identified amortization schedule.

Basis of funding

• The funding shall be available only against the regulatory assets recognized by the respective State Electricity Regulatory Commission (SERC) and recovery schedule included in the tariff order. Funding shall be available only against regulatory assets recognized in previous three years' tariff orders. A time bound recovery plan of the regulatory asset by SERC shall be in place. A plan for recovery of carrying cost of the regulatory assets by SERC shall be in place. A business plan of the utility for turnaround of cash flow shall be in place and made available to REC.

Extent of funding

• The funding against regulatory assets shall be limited to the lowest of the following amounts:
• The funding shall be limited to 50% of the total regulatory assets recognized & recovery plan issued by SERC. The funding shall be available only against regulatory assets not being funded from any other financial institutions, banks etc. Not more than Rs. 5000 Crore shall be funded to a single utility under this policy. In case of joint sector borrowers not more than Rs. 2000Crore shall be funded depending upon the financial health, security provided and Quantum of Government holdings. The extent of funding shall be limited to the exposure available as per the Prudential Norms of REC/maximum permissible exposure as per latest State Grading Circular.

Rate of Interest

• The rate of interest shall be as per applicable REC guidelines. For joint sector borrowers, a risk premium of 0.5% over and above the rate shall be applicable.

Tenor of the funding

• The tenor of the loan for funding of Regulatory Assets shall not exceed the amortization period allowed by the respective SERC subject to a maximum tenor of 10 years.

Repayment Period including Moratorium Period

• Repayment period shall be on quarterly basis or as per the REC policy. Moratorium period of not more than 6 months shall be given to the borrower.