Terming the Indian government's decision last week to allow gas-based power units lying idle to import feed stock through e-auctions as "credit positive", rating agency Moody's on Monday said the move will benefit banks as they have significant exposure to such plants.
"The government approved measures to revive and improve the utilisation of stranded gas-based power generation plants in the country. This is credit positive for India's banks because they have significant credit exposure to such plants," the agency said in a statement here.
Power plants that use liquefied natural gas (LNG) as fuel have been facing significant availability and pricing challenges because actual domestic production of LNG has been significantly lower than the assumptions made when the plants were set up, Moody's said.
According to the government, out of 24,150 MW gas-grid-connected power generation capacity in the country, 14,305 MW of capacity has currently no supply of domestic gas and may be considered as stranded.
A meeting of the Cabinet Committee on Economic Affairs last week gave the go ahead that will immediately lead to the resumption of power generation to the extent of 14,000 MW.
Among the biggest beneficiaries of these measures are IDBI Bank, the State Bank of India and ICICI Bank.
Moody's said that importing LNG at prevailing prices has increased generation costs, which has raised prices beyond the reach of buyers.
Among Moody's rated banks, IDBI Bank has an especially high exposure to gas-based power plants and would be the key beneficiary of these measures.
SBI and ICICI Bank have exposure to the Ratnagiri Power Plant, which is the largest gas-based power plant in the country.