Finance ministry petitioned to bail out gas-starved power projects

Written by Noor Mohammad | Noor Mohammad | New Delhi | Updated: Jan 25 2014, 10:03am hrs
The power sectors woes dont seem to end. While a Centre-assisted R1.9-lakh-crore financial restructuring plan (FRP) for state-run power utilities have just gotten off the ground, a slew of private power companies fear that they might soon begin faltering on the repayment of another R30,000 crore outstanding domestic loans.

The companies that could face problems in meeting the repayment schedules include Reliance Power, GVK Power, Lanco Power and Torrent, whose gas-fired plants havent got the fuel linkage in time, resulting in project delays.

Power minister Jyotiraditya Scindia has written to finance minister P Chidambaram on behalf of these companies, seeking his intervention to direct public sector lenders to relax the repayment schedules. Scindia also sought the Reserve Bank of Indias leniency for refinancing of a major portion of these loans as against 40% allowed now through external commercial borrowings, so that domestic lenders can extend fresh loans.

As per existing RBI guidelines, a loan for infrastructure projects can be restructured two years from the commercial operation date (COD), which could be extended by another year if a project has been delayed for reasons beyond the control of the developer. The power minister has supported these companies demand that the COD of these stuck projects be extended by three years, enabling them to get a waiver of 1% penal interest that comes with restructuring.

In addition to the gas-fired plants, the domestic loan exposure of which is R30,000 crore, a clutch of other col-based projects with outstanding loans of R1 lakh crore are also looking for relief, as evidenced by a petition to the power minister by the Association of Power Producers. These include projects of Adani Power, Essar Power, Tata Power, Reliance Power and Indiabulls, among others. However, sources said, the power minister hasnt endorsed their demand for now.

These projects are likely to miss commissioning schedules for reasons beyond developers control, such as environmental hurdles, land acquisition problems and fuel shortages, according to AAP. Besides, big power companies are facing difficulties in accessing loans for new projects as majority of domestic lenders have hit the RBIs group- and sector-specific exposure ceilings.

Significantly, delays in infrastructure projects have been a key factor behind domestic banks rising non-performing assets. Latest RBI data show the share of infra sector in banks total stressed assets have risen from 8.4% in 2010-11 to 21.2% in 2011-12 and further to 30.3% by September 2013. Gross NPAs of banks increased to 4.2% at the end of September 2013 from 3.4% in March 2013 and less than 3% a few years ago.

Environment restrictions of go/no go areas and delays in clearances have led to significant slowdown in developmental activities of many projects resulting in cost overruns and mismatch between mine development plan and end-use project commissioning. On account of these delays, many end-use projects are ready but they do not have coal for power production. On the other hand, discoms are unable to buy adequate power due to their poor financial health. Therefore, the immediate need of the hour is to provide a restructuring package to the power generators, similar to the financial restructuring plan offered to the ailing discoms, Ashok Khurana, director general, APP, wrote to Scindia, to impress upon him the urgency for action.

Debasish Mishra, a senior consultant with Deloitte, told FE: "There is significant slowdown in growth of electricity demand in last two years. Hence, not many utilities are coming up with long-term power procurement tenders resulting in almost 30,000 MW of capacity almost ready to be commissioned but not having a power purchase agreement and hence not getting fuel supply agreement. Such projects would need benefit of moratorium in debt repayment.