Companies & Sectors
India's power sector outlook remains negative: Moody's

Indian power generators' capacity utilisation will be limited by the financial weakness of offtakers

 

The outlook for India's power sector remains negative due to evident structural challenges, Moody's Investors Service said on Thursday, while assigning a stable outlook for the power sector in the Asia Pacific, except Japan.
 
"Moody's Investors Service says that its stable outlook for the power sector in Asia Pacific (ex-Japan) is underpinned by steady demand, low input costs for most countries and transparent tariff mechanisms for some countries," the American agency said in a release here.
 
"However, the outlook for India's power sector remains negative, reflecting structural challenges," it said.
 
"The negative outlook for the Indian power sector reflects the persistent challenges from high, albeit moderating, fuel supply risk, and the limited capacity to pay on the part of financially weak distribution utilities," it added.
 
Indian power generators' capacity utilisation will be limited by the financial weakness of offtakers, in turn constraining off-take electricity demand, despite growing electricity demand and increasing domestic coal production, Moody's said.
 
Some Indian private producers are also locked into power purchase agreements (PPAs) that have become unviable, because they do not allow the high costs of imported fuel to be passed through, said the report titled, "Power Utilities - Asia Pacific ex-Japan: 2016 Outlook - Steady Demand, Low Input Costs Drive Stable Outlook".
 
It said that for state-run generator NTPC, its unfavorable business conditions are offset by India's central and state governments, the Reserve Bank of India's standing agreement to offset high off-taker risk, and the company's well secured fuel supply sources from domestic and overseas markets.
 
"The high off-taker risk in India will not be addressed over at least the outlook period, as the financial profiles of off-takers will remain weak," the report said.
 
Some state governments have also not paid all subsidies that the distribution utilities are entitled to, thereby constraining the utilities' liquidity positions, it added.
 
Moody's said, overall, 70 percent of rated power utilities in Asia Pacific, except Japan, have stable outlooks, reflecting the stable fundamentals and their adequate financial profiles relative to their ratings.
 
"Steady demand for electricity in most countries in the region, and low input costs under stable market structures will allow most power companies to recover capex and maintain adequate financial buffers," said Mic Kang, Moody's vice president.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

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Will LexisNexis Intelligence Exchange help life insurers reduce fraud?
Life insurers focus on better risk segmentation through data, analytics and technology. This new tool will help them predict and manage risk within the underwriting and claims management processes
 
LexisNexis® Risk Solutions has launched a new data platform, Intelligence Exchange that helps life insurance companies predict, assess and manage risk better within the underwriting and claims management processes. A report by Indiaforensic estimates that fraud alone costs the insurance industry $6.25bn per year or around 9% of premiums. Insurers are often challenged with High Underwriting Expenses; Lost Premium Opportunities; Adverse Risk Selection; Not Knowing Sellers 
 
Intelligence Exchange will allow insurers to better mitigate risk by checking an insurance proposal against records in the database to confirm underwriting facts and check for misrepresentations, non-disclosures, policy stacking, declinations, surrenders, lapses and claims histories. Insurers can also review an incoming claim against claims made with other insurers for inconsistencies to ensure faster settlement of genuine claims and coordinated investigations of suspicious claims. The cost for insurers will be around 0.5% of the insurance premium. It would also look at lapse of data and analyse the reasons that, often, involve an insurance fraud:
 
  1. Misrepresentation and non-disclosure of relevant facts in the application 
  2. Collusion between agents / diagnostic centres / investigators and the applicant and/or beneficiaries 
  3. Stacking of policies by insured or the beneficiaries 
  4. Lapsing of a policy in 2nd / 3rd year either due to mis-selling or deliberate churning by an agent 
 
Time will tell if the new tool helps insurers tide the challenges it is facing with amendment to the Section 45 of the new insurance Bill, which states that a policy cannot be called in question after three years of it being issued. Insurers will find it almost impossible to repudiate claims after three policy years due to the amendment. It puts the onus on the insurer to do proper checks at the time of underwriting. There will be need for robust underwriting process so that all issues are flagged before the policy inception. Read - http://www.moneylife.in/article/will-life-insurers-now-bleed-with-fraudulent-claims/42596.html
 
Will a US-based leading provider of data, analytics and technology for insurers be successful in being a step ahead of Indian fraudsters who are out there to hoodwink life insurers? According to a senior insurance official, there are specific locations in India where insurance fraud is prevalent. “We are wary about underwriting policies from these locations. They work in an organised way with full set of forged documents to cover up the fraud. There can be cases of insurance taken in name of dead person with death certificate forged to put a future date after fraudulently buying the policy,” he said. 
 
Intelligence Exchange will also help insurers assess seller performance, patterns of mis-selling, and churning, and identify fraudulent linkages between various stakeholders. The platform will also be a gateway to other data sources that help with KYC/ AML verification, and credit history verification as such data sources become available from LexisNexis.
 
It leverages high-performance computing cluster technology called HPCC Systems®, which is one of the most advanced big data processing technologies available, using proprietary linking algorithms to improve match rates, with a long and successful track record of use in high volume and high response production environments.

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Reliance Group seeks 16 more defence manufacturing licences
Going overdrive in the defence manufacturing space, Anil Ambani-led Reliance Group has applied for as many as 16 more licences in areas ranging from missiles to radar, barely two weeks after it got conditional nod for 12 requests to make aircraft, choppers and more.
 
"We have applied for these industrial licenses to manufacture defence equipment and hardware such as heavy weapons, ammunition, explosives, missiles, small arms, electronic warfare, armoured and amphibious vehicles, radars and unmanned aystems," an informed source said.
 
"The new facilities to come up in Gujrat and Maharashtra in a phased manner," the source added, requesting anonymity, since he was not authorised to speak to the media. "Once these 28 licenses are in place, we will create tens-of-thousands of thousands of highly skilled jobs."
 
Late last month, the government had approved conditionally 12 licences for the Reliance Group in this this area. These were part of approvals for 32 similar applications from other stakeholders, as per the list put up by the Department of Industrial Policy and Promotion.
 
The projects are to be executed by companies floated by Reliance Defence that is a wholly-owned subsidiary of Reliance Infrastructure. These will cover the entire spectrum of land, Naval and air systems, sources said.
 
Reliance Defence also has strategic plans to set up a maintenance, repair, overhaul and upgrades of various platforms. The group is also in the process of acquiring Pipavav Defence an hopes to conclude the deal by the end of this year.
 
Reliance Defence has 11 subsidiaries in niche segments of the sector and chairman Anil Ambani had told shareholders recently that defence manufacturing and smart cities will be the future drivers of growth for the company.
 
The group is also pursuing partnerships with several leading international companies, besides looking at stakes in some existing firms in the country and outside to meet home-grown solutions for the sector.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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