Steps taken by the government and lenders to address the stress in the power generation sector are starting to show results, with as many as 11 coal-based projects with combined capacity of 12.7 giga watt (GW) finding resolution and going on stream over the last six months. Another six stuck projects (total capacity 7.8 GW) too, are seen coming out of the abyss soon.
Two government schemes — one to get the stressed projects assured customers through power purchase agreements with state distribution entities (discoms) and the so-called Shakti scheme to provide them with coal linkages — are principally behind the turnaround.
Negotiations outside the Insolvency and Bankruptcy Code framework, enabled by a favourable Supreme Court verdict, also aided the resolution of some units.
The government had earlier identified 34 power plants of 40 GW capacity under the stressed category, including commissioned capacity of 24.4 GW.
According to sources, some of the stressed plants which gained from the Shakti scheme are Adani Tiroda, GMR Kamalanga and Adhunik Power. Electricity generation units, which were helped by the new PPAs from the power ministry’s ‘pilot scheme’ include Essar Mahan, SKS Binjkote, Avantha Korba and Jaypee’s Bina and Nigrie units. These apart, the Anpara C unit of Lanco Infratech has been resolved through the NCLT.
A senior power ministry official told FE on conditions of anonymity that three projects have been bought by financially strong promoters outside NCLT and seven more are likely to be resolved through this route soon. He, however, refused to name these projects.
Union power minister RK Singh had earlier told FE that, “all the (stressed) projects are not complete and are in different stages of completion”, adding that “some of them are in very early stages of development, with only land being bought”.
To address stress in the coal-based power generation sector, the Cabinet Committee on Economic Affairs, on March 7, had approved some recommendations of a high-level empowered committee, mainly relating to coal supply issues, payment discipline and sanctity of contractual agreements. The government has also recently implemented a payment security mechanism under which distribution companies have to issue letters of credit in advance before buying power from generators.
Stressed power assets got partial relief when the Supreme court, on April 2, declared the Reserve Bank of India’s February 12, 2018 fiat on mandatory insolvency and bankruptcy code (IBC) timelines as ‘ultra vires’. RBI’s February 12 circular stated that if a resolution plan wasn’t found for the ‘default’ cases by August 27, 2018, the accounts should be sent to bankruptcy courts. The apex court, on September 11 last year, also asked banks to maintain status quo and not to initiate insolvency proceedings against the defaulting companies under the circular. Following the SC order, RBI issued a new circular on June 7, which relaxed compulsory reference to bankruptcy courts.
