A consortium of 20 banks has approved the Uttar Pradesh State Electricity Board?s financial restructuring plan (FRP) for R31,680 crore of short-term liabilities (STLs). Bankers involved in the recast said the interest rate on the loan component, of R15,840 crore, will be levied at 175 basis points over their respective base rates. Borrowers will enjoy a moratorium of three years on the principal. The remaining liabilities, of R15,840 crore, will be converted into bonds issued by the state government at a coupon rate of 8.45%. Given the original interest rate on the debt was 12-12.5%, the estimated hit to the banks from the restructuring is estimated at close to 3% of their total exposure.
The consortium of banks, led by Punjab National Bank, also ratified the eight-year tariff hike plan submitted by Uttar Pradesh, more or less evenly spread out over the eight years starting with a 9% hike in 2014, a 10.38% hike in 2015 and another 8.36% hike in 2016.
On Monday, a consortium of 11 banks, led by Oriental Bank of Commerce, is expected to meet to approve another FRP, submitted by the Haryana discom, to restructure STLs to the tune of R14,000 crore.
The FRPs envisage that 50% of the SEBs? STLs be rescheduled by the lenders and serviced by the discoms, with a moratorium of three years on principal repayments. That means the SEBs will continue to service the interest on the loans. The remaining STLs are to be taken over by the state governments and converted into bonds guaranteed by them.
Of the six SEBs that have so far agreed to the restructuring package, Tamil Nadu Electricity Board?s R12,000-crore loan restructuring was approved in March while the package submitted by Rajasthan discoms to restructure R38,000 crore was approved in May.
The restructuring scheme of R1.9 lakh crore has been approved by the central government. Around 70% of these losses are estimated to have been contributed by SEBs in six states ? Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh.
Bankers have said that the pace of approving the restructuring packages has gained traction and all the FRPs for most SEBs that have opted for them are likely to be approved by the banks by the end of this month. Other SEBs, including those of Madhya Pradesh and Andhra Pradesh, may need to make annual tariff hikes of 11% and 5%, respectively, as part of their restructuring packages. Bankers say that the restructuring of the debt of these two SEBs too will be approved by the end of the month.
The banks do not have to provide for these restructured assets as these assets have been given special dispensation by the Reserve Bank of India and will, therefore, be treated as standard assets.