After coal-based power plants with a capacity of close to 30 gigawatt (Gw) landed in insolvency
courts, there is a fresh list of cases that could fall in the stressed assets category if issues are not resolved. The list includes stranded gas power projects
not receiving fuel supply, stuck hydropower projects, and privately-owned operation coal projects to which banks have refused to lend further.
According to industry calculations, the future is uncertain for power projects of close to 25 Gw, across energy sources, owing to several regulations. The first in line are gas-based power projects. Of the 24-Gw gas-based capacity in the country, 14 Gw is not receiving domestic gas supply. Last year, under the government scheme for providing subsidised gas supply to plants, plants of 8 Gw received gas supply and are running at a 40 per cent load factor.
Numerical, a data aggregation platform, estimates gas-based projects of 7.5 Gw will be stranded with a cumulative debt exposure of Rs 480 billion. As against the daily supply of 13.5 million cubic metres of gas under the government scheme, the gas power plants’ demand is 117 million cubic metres daily. The Centre discontinued the scheme after two rounds.
“The ones running are also operating at below optimal rate to recover their fixed cost and serve their interest amount. The others which don’t have any supply will end up in debt spiral soon. Some gas projects are already under strategic debt restructuring and/or landed in the National Company Law Tribunal (NCLT). There are more in line,” said a senior executive of a leading power company.
Operationally and financially robust privately-owned coal-based power projects of around 15 Gw are in a quandary. According to new emission norms set for thermal power units, these projects have to install flue-gas desulfurisation (FGD) or emission control technology by 2020. Banks, however, have refused to fund this.
Power industry executives say bankers have turned down the request of future lending, citing the exposure limit to the power sector
and the record of stressed assets.
“Due to regulatory changes, which impact the payment to them, banks have refused to lend further to the thermal power industry. This could create a precarious situation. While the cost is pass-through, fresh lending is needed,” said an executive.
The Association of Power Producers
(APP), the representative body of the thermal power sector, in its letter to banks said the FGD cost was around Rs4 million per megawatt (Mw).
Considering the case of a 1,000-Mw thermal power plant, roughly Rs4 billion would be required for FGD, where the loan required would be around Rs3 billion. “It would be unfortunate that a project with investments of around Rs70 billion would be exposed to a major risk of becoming a non-performing asset due to non-availability of financing of Rs3 billion,” the APP said in its letter to the Indian Banks’ Association.
The third, small in amount but with a large impact, are hydropower projects
which have been languishing for several reasons — mostly delays due to protests, environment norms, change in regulations, etc. According to the data available publicly, hydropower projects
of close to 5 Gw, mostly state-owned and private, are stranded. No new hydro capacity has been added in the past six years, with the sector’s share being 13 per cent in the energy mix.
Sector experts point out with the rising solar and wind capacity — now a 15 per cent share in the energy pie — the need for balancing hydropower is more than needed.
Numerical says 15 projects are stranded. They include Ratle (850 Mw) of GVK, Maheshwar (400 Mw) in Madhya Pradesh, Koyna (80 Mw) in Maharashtra, and Teesta-IV (500 Mw) of Lanco. The last is in the NCLT
and state-owned NHPC is expected to bid for it.
Sector executives said this put pressure on the work of the High Power Empowered Committee, set up with the Cabinet secretary as chairman. The committee is supposed to suggest ways to prevent further stress in the sector. The committee had its first meeting two weeks ago and has to submit its report by September 29.
WIRED FOR STRESS
32 Gw Total coal-based stressed assets
20-28 Gw Expected to land in the National Company Law Tribunal from Monday
16 Gw Coal-based capacity which will face financing issues
7 Gw Gas-based stranded capacity
5 Gw Hydro-based stranded capacity
Sources: Ministry of Power, industry data