After Uttar Pradesh, Rajasthan and Tamil Nadu, lenders have agreed to restructure the short-term liabilities of Haryana State Electricity Board (HSEB), worth R15,000 crore.
The 11 banks led by Oriental Bank of Commerce decided to charge interest of 200 bps over their respective base rates on R7,500 crore debt. The balance R7,500 crore will be converted to bonds issued by the Haryana government, at a coupon rate of about 8%. Borrowers will enjoy a moratorium of three years on principal.
The lenders also accepted a proposal to finance the losses of HSEB till FY15. They have already given the board R 4,000 crore for covering the losses of 2012-13 and have agreed to fund further 75% and 50% of losses for FY14 and FY15, respectively. The banks estimate that they will have to give the SEB R10,000 crore of support in the two years. The additional loan will be given to the SEB at interest rates prevailing at that time. From FY16, banks will not fund the losses.
Just last Friday, a 20-bank consortium had cleared UPSEB?s R32,000-crore recast. The SEB loan recasts of Tamil Nadu (R12,000 crore) and Rajasthan (R38,000 crore) were approved in March and May, respectively.
?The coupon is decided on a formula given by the Reserve Bank of India and it is benchmarked on government securities so that it is dynamic,? a senior banker said.
?Our books will not be affected as the restructuring has been approved under the special dispensation and will come under standard assets,? the banker added. The original interest rate was around 12.5%. Bankers estimate they might have to take a hit of 1-3% from the restructuring of state discoms.
?The banks’ idea of restructuring these accounts is to stop funding discoms’ losses. We have decided not to fund losses anymore after the restructuring. But we needed to give them time and funds to help them turn healthy,? another banker said.
The consortium also approved the seven-year tariff hike plan submitted by Haryana, which envisages a tariff hike of 7-11% every year.
The central government has approved an SEB restructuring scheme worth around Rs 1.9 lakh crore. Around 70% of losses are estimated to have been contributed by SEBs in six states ? Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh. The restructuring plan envisages 50% of the SEB?s short-term liabilities be rescheduled by the lenders and serviced by the discoms, with a moratorium of three years on principal repayments. That means the SEB 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.
Bankers have said that the pace of approving the restructuring packages has gained traction after the date for the states to join the plan was extended to July 31, 2013 from December, 2012. Recasts for most states which have opted for them are likely to be approved by the end of this month, bankers said.
Other SEBs, including those of Madhya Pradesh and Andhra Pradesh, may need to take annual tariff hikes of 11% and 5%, respectively as part of their restructuring packages. Bankers say restructuring of these two SEBs too will be approved by the month end.
