Damodar Valley Corporation (DVC), a three-way joint venture of the West Bengal, Jharkhand and Union governments, has decided to approach the Reserve Bank of India (RBI) for a debt recast, since its debt servicing capacity has come under severe pressure with low returns on investment.
“We have approached for a debt restructure through the RBI window. The restructuring could involve getting more time to repay and lower interest rates,” DVC chairman and managing director Andrew WK Langstieh said.
He said debt now stood at around R30,000 crore with projects funded in a debt-equity ratio of 70:30. That means the power generator has to fork out R1,200 crore every year to service the debt, even as its income from power sales is being hit with 1,500 MW out of its total capacity of 6,300 MW lying idle. “There have been no power purchase agreements (PPAs) in the last one year. All power sales have been short-term from the spot market,” the CMD said, explaining why cash flows have taken a hit. The Delhi government’s move to surrender 2,500 MW capacity, of which 400 MW is of DVC, could strain revenues further, he added.
DVC had actually aimed at becoming a 10,000 MW company with the 3,200 MW Raghunathpur project coming up.
But with no avenues of selling its power, the Raghunathpur project is threatening to become a burden to the company.
The power ministry has already proposed that NTPC take over Raghunathpur and NTPC CMD Arup Roychoudhury said the company would soon start talks with the DVC on this issue and examine its feasibility. However, Langstieh said there was no proposal at the moment and the project work was on track.
“We expect the market to rectify in two-three years and so there was no threat of an excessive capacity even with the Raghunathpur project coming into operation,” Langstieh said, adding that DVC, which incurred a loss of R1,050 crore on total sales of R11,500 crore in FY14, has already formed a marketing team for selling power and have been so far able to push a 75 MW PPA with the Assam government.
“This is a success in itself for a first of the kind of initiative,” Langstieh said.
For now the company is expecting an improved cash flow from increased tariff rate, which will generate additional revenue worth R3,960 crore. The company is also looking for an additional Rs 3,600 crore per annum from evacuating 700 MW of power to the southern states. Another additional Rs 360 crore a year would come from increased tariff in West Bengal. “All these put together and with the debt restructured, the company’s finances are expected to come to an order by the start of next fiscal,” Langstieh said.
DVC’s unrealised dues from Jharkhand amounting to R4,300 crore at present excluding delayed payment surcharge is another area from which it would get cash. Jharkhand, Langstieh said, has started paying its current bill, which is to the tune of R700 crore per month. Jharkhand accounts for 20% of its power sales and so with the bills getting cleared, there is at least no mismatch between the sales figure and the realised amount.
The company and the state have started working on a package so that all dues are liquidated at the earliest. But the package would require the Centre’s nod, Langstieh said.