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Categorisation Mechanism for State Sector Entities
CATEGORISATION MECHANISM FOR STATE SECTOR ENTITIES
‘We currently provide financial assistance to state power utilities (SPUs) based on entity appraisal and project appraisal. As part of Entity appraisal, we categorize SPUs into four categories viz. Category A+, A, B and C. The categorisation is based on the information provided by the utilities, information available in the public domain and PFC’s own data base. For the purpose of categorisation, parameters have been broadly identified as external and internal factors. These parameters cover financial and operational efficiency, progress made towards implementing the government’s reform program in the state power sector and activities in the regulatory framework (such as filing of tariff petitions with the SERC, determination of tariff, etc.). New successor SPUs formed as a result of restructuring of State Power Utility retain the scores derived from the parent entity up to 30 months starting with the commercial operations of the successor entity or till its annual accounts for one year are available, whichever is earlier. State-owned special purpose vehicles incorporated to construct new projects are categorised keeping in view their ownership pattern, which is subject to review after availability of annual accounts after one full year of operation or 18 months after project CoD, whichever is earlier.
These categories are used to determine credit exposure limits, security requirements and pricing of loans given to the SPUs.’