Idle and debt-laden thermal power plants, may get a lease of life with some of the assets being transferred for a special stress resolution. Thermal power plants promoted by the Lanco Jaypee, KSK, SKS are some of the plants that may be transferred to a new fund for a special resolution.
Thermal power plants with a debt of Rs 2 lakh crore are likely to get housed in a special National Infrastructure Investment Fund that is being planned to be set up as part of the project, which will have an asset management company (AMC) with a private sector participation. SBI Caps will steer the rehabilitation project in consultation with the banks. NTPC may be roped in to run the plants until they are turned around and sold to investors. The Ministry of Power is meeting in Delhi today to work out the modalities for transferring completed, but stagnating state-of-the-art thermal power plants to Project Sashakt, the new five-pronged strategy to tackle bad loans.
The unsustainable part of the debt will be converted into long-term bonds or debentures, while the sustainable portion of the debt will be rated and showcased to investors. These are some of the broad parameters of the rehabilitation plan.
A senior banker said, "Thermal power plants came up in 2008-09 when the economy was projected to grow at close to double digits. When the economy started slowing down the projects got delayed, increasing the cost overruns. For a project of Rs 10,000 crore, one year of delay means a cost overrun of Rs 1,000 crore, which increases losses for both banks and the company. The major problem for the power sector is evacuation of power. The demand is poor and prices too low."
Power loans form around 12% of the total gross non-performing assets (NPAs) of the banking sector. The gross NPAs crossed Rs 10 lakh crore at the end of the fourth quarter ended March 2018. Defaults are expected to rise and bloat this figure further in the first half of this fiscal.
REC also had a plan of rehabilitating some of the power plants under a special fund, but now it will all get consolidated under one umbrella of project Sashakt.
Ankur Agarwal, senior analyst, India Ratings Research, said, "Many of the big players in the thermal power sector are stressed as capacities got built, but demand lagged and they were unable to sign long-term PPAs with state distributing companies (discoms). Uday scheme is having only a mixed response, so one of the solutions that was sought was setting up of a national power distribution company that can sign power purchase agreements directly with generators and supply power to central entities like Railways to start with and later on expand to compete with state discoms. Of the estimated Rs 3 to 3.5 lakh crore of bank debt to the thermal power plants, at least Rs 1.20 lakh crore is stressed."
According to the government estimates, about 65% of India's electricity generation capacity comes from thermal plants. About 85% of the thermal power plants in the country run on coal. With the Supreme Court cancelling the coal licences, many of the thermal power plants were forced to remain idle. With the state government finances in bad shape many of these companies were also unable to sign long-term PPPs with the discoms.
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