Lenders, burdened with Rs 1 trillion of bad loans in the power sector, are looking forward to a new government scheme, which could salvage stranded thermal power projects and help banks recover their stuck capital.
Senior officials of the power ministry are meeting all stakeholders, including executives of NTPC, distribution companies, and banks, in New Delhi on Friday to take a call on the scheme. Floated by the new and renewable energy ministry, the scheme seeks to bundle supply from renewable power projects with thermal power projects.
“The option being discussed is to bundle renewable power with thermal power, which will help remove difficulties of intermittent power supply by renewable power sources and, at the same time, salvage stalled thermal power plants and our loans,” said a banker privy to the discussions. “The bundling will help all stakeholders including consumers, power generators, distribution, transmission companies, and banks,” he said.
If the scheme takes off, it will help banks to make less provision in the coming quarters for the power sector
According to the new scheme, the unpredictable nature of renewable energy like solar and wind often leads to low capacity utilisation of the transmission system. This often leads to distribution companies buying balancing power for grid stability and meet the shortfall. The scheme will lead to “reverse bundling”, wherein high-cost thermal power will be allowed to be bundled with cheaper renewable energy, and provide round-the-clock electricity to the distribution companies.
The scheme mandates the electricity producer to supply 51 per cent of the annual energy supplied via renewable power and the rest from thermal sources.
Banks, who are already taking steep haircuts on power sector
loans, are hopeful that the scheme will take off. Last week, State Bank of India-led consortium took a 68 per cent haircut on Suzlon’s debt worth Rs 11,460 crore. Banks have also sold stranded projects by GVK in Punjab to Deutsche Bank and GMR Chhattisgarh to the Adani group – at a huge haircut after their previous promoters failed to repay debt. Deutsche Bank is also in race to takeover Jindal India Power by offering Rs 2,400 crore to banks as against its debt of Rs 7,600 crore. At least 34 power projects with 26 GW of electricity producing capacity are currently stranded.
Bidders for the new scheme will be asked to sign fresh 25-year power purchase agreements either with the Solar Energy Corporation of India or NTPC.
They will also sign power supply sale agreements (PSAs) with customers like the distribution companies or bulk consumers.
When contacted, Ashok Khurana, director general of the Association of Power Producers, said the scheme would also help with the utilisation of untied thermal power capacity, considering that the new super critical coal based thermal power plants have quite high ramp rate, which can be effectively utilised to provide combined renewable energy blended 24-hour power.
“The emphasis is not only on the green power but also to ensure that combined power generated improves the safety of the grid and provides clean power to the consumer by optimum utilisation of the grid,” Khurana said. "It’s a win-win deal for all.”