Despite relaxation in norms, 25 stressed power assets yet to be resolved

The power generation sector, which has the highest load of non-performing assets (NPAs), worth Rs 2 trillion, saw a minimal resolution of stressed projects in the current financial year despite the relaxed norms of the Reserve Bank of India (RBI) in this regard.

Of the 36 identified stressed assets, seven have been resolved through debt-restructuring schemes by lenders. These include Jaypee’s Praygaraj, which was bought by a joint venture of Tata Power and ICICI Bank; the Lanco Teesta Hydropower project, which was taken over by state-owned NHPC; and Rattan India Power’s Amravati power project, which was sold to a consortium led by Goldman Sachs.

Adani Power has bought two stressed assets — GMR’s Chhattisgarh power project and Avantha Group’s Korba West power project. With the RBI’s extended resolution deadline of January 7 getting over, 25 are awaiting favourable debt restructuring.

However, there is a silver lining for 9-12 cases. Their lead lender is Power Finance Corporation, which is a non-banking financial company (NBFC) and exempt from the RBI’s deadlines, which are mandatory for banks.

Of the 25 projects waiting to see resolution despite the pit stop measures taken by the Union government, 14 have been submitted for insolvency proceedings at the National Company Law Tribunal (NCLT). There are four assets — GMR Kamalanga, GMR Warora, Essar Tori, and Rattan India Power Nashik — which are undergoing debt resolution outside the NCLT.

Of the ones not resolved, there are close to 10 assets of 11,000 Megawatt (Mw), which are incomplete and are unlikely to find any takers.

PFC submitted 15 projects worth Rs 14,704 crore to the NCLT in the current financial year. It also initiated a resolution process outside the NCLT, along with other lenders, for 14 assets totalling Rs 14,762 crore. PFC made a provision of Rs 16,275 crore in its account book for its outstanding loans during 2019-20 (as of the second quarter/first half FY20).

“PFC is hopeful of resolution of four projects by January 2020 and one by June. There are nine projects with debt exposure of Rs 2,629 crore which will not be impacted by the RBI’s circular,” said the lender’s investor presentation in September 2019. These are the ones where PFC is the lead lender.

There are a few projects that have received momentary relief through central government schemes of providing a coal- or power-sale agreement.

In the past two years, the Ministries of Coal and Power started two schemes for reviving stressed assets. Under the SHAKTI scheme for supplying coal to stressed projects, eight benefited.

The Union power ministry did one round of bidding for medium-term power purchase agreements for assets that don’t have any sale agreement. There were six projects that received an interest from four states to buy power for three years at Rs 4.24 per unit.

In June last year, the RBI issued a “Prudential Framework for Resolution of Stressed Assets”, replacing all its earlier circulars, including the one in February, which directed banks to treat one-day payment failure as a default and initiate insolvency proceedings. The RBI’s norms direct banks to resolve NPAs through debt restructuring and sales of assets, failing which the assets face insolvency at the NCLT.

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