NHPC Ltd. sees a credit rating action

The arbitral tribunal awarded INR 3,92,31,46,740 plus Euro 15,36,530 to BGS-SGS-SOMA for Lot SSL-1 of the Subansiri Lower HE project. This equates to approximately Rs 392.31 Crores plus Euro 1.54 million. The amount includes principal and interest at 10% for 9 September 2021 to 31 August 2026. ^[1]

Recognition in NHPC’s latest audited financial statements: the disclosure does not quantify any amount already booked as a provision, nor does it state the amount carried as a contingent liability in the latest audited financial statements. Therefore, the extent of accounting recognition cannot be established from this filing; the award quantum should not be treated as equivalent to a provision or contingent-liability balance.

NHPC states that the award is allowable as project cost and recoverable through tariff under the CERC Tariff Regulations, 2024, which may mitigate the eventual economic burden but does not itself establish the accounting treatment already recorded. ^[1]

Yes—under the CERC Tariff Regulations, 2024, NHPC has stated that the arbitral award is allowable as project cost and recoverable through tariff. This supports its treatment as a capitalizable project-cost item in the tariff base, although the disclosure does not separately state the accounting entry or whether the amount has already been included in NHPC’s latest approved cost estimate. ^[1]

Cost impact

The award comprises:

• Rs 392.31 Crores, including principal and 10% interest for 9 September 2021 to 31 August 2026; and
• EUR 1.54 million. ^[1]

The latest official project figure cited for the 2,000 MW Subansiri Lower HE project is an anticipated cost of Rs 27,948 Crores, with commissioning indicated for December 2026. ^[2]

†Derived by adding the INR award component to Rs 27,948 Crores and excluding the EUR component because no exchange rate is provided.

Implication: If the award is incremental to the Rs 27,948 Crores estimate, the project cost would rise to at least Rs 28,340.31 Crores plus the INR-equivalent of EUR 1.54 million, or roughly 1.40% higher before the euro component. Because NHPC says the award is recoverable through tariff, the accounting/project-cost increase should not necessarily translate into an equivalent reduction in project profitability; instead, it would principally increase the regulated cost base and future tariff recovery.

The key uncertainty is whether Rs 27,948 Crores is genuinely the latest CCEA-approved figure and whether it already incorporates this litigation exposure. The cited official release describes it as “anticipated cost,” not expressly as the CCEA-approved cost. Therefore, the Rs 28,340.31 Crores figure is an incremental scenario, not a confirmed revised project estimate.