The Supreme Court order halting the insolvency and bankruptcy process under the Reserve Bank of India’s (RBI) February circular could allow seven coal-based stressed power projects with generation capacities of 10,190 MW not to use the National Company Law Tribunal (NCLT) route for resolution.
The Supreme Court order halting the insolvency and bankruptcy process under the Reserve Bank of India’s (RBI) February circular could allow seven coal-based stressed power projects with generation capacities of 10,190 MW not to use the National Company Law Tribunal (NCLT) route for resolution. These projects have already made significant progress towards resolution, Power Finance Corporation (PFC) officials said on Wednesday.
As per the RBI’s February 12 circular, lenders had to identify projects with even a day’s default and come out with a resolution plan within 180 days from the reference date of March 1, 2018 (that is, by August 27, 2018), and had to file for insolvency proceedings in the NCLT by September 11.
The SC on Tuesday asked the lenders to desist from invoking insolvency proceedings against corporate defaulters as per RBI’s mandate till its further orders. The power plants in question are GMR Raikheda (1,370 MW), Avantha Group’s Jhabua unit (600 MW), KSK Energy’s Akaltara plant (3,600 MW), Essar Mahan (600 MW), RKM Powergen’s Ucchipinda plant (720 MW) and RattanIndia’s Amravati and Nasik units (1,350 MW each).
According to sources, JSW, Vedanta, Tata Power and Adani Power are among the bidders competing to acquire stressed power assets outside NCLT. PFC chairman and managing director Rajeev Sharma said discussions with the highest bidders are underway for the GMR Raikheda, Avantha Jhabua and KSK Akaltara power plants. PFC is the lead lender for the Akaltara project, and 22 out of the 27 in the bankers’ consortium are already on board for the bid offered.
Essar Power has submitted a one-time settlement offer for the Mahan plant and the proposal is under finalisation. While Rattan India has also offered a one-time settlement offer for the Amravati plant, lenders are pursuing the option of the Maharashtra government taking over the company’s Nasik unit.
Resolution outside the NCLT is seen to fetch better value for power projects, leading to lenders taking lower haircuts against their loans. For the nine projects in NCLTs, in which PFC has an exposure of `8,100 crore, the state-owned lender has made provisions for as much as 73%.
On the other hand, provisions for the seven stressed projects, with PFC’s exposure of Rs 16,410 crore, to be resolved outside IBC is in the range of 41%-48%. PFC’s 23 projects with an exposure of Rs 25,500 crore under various stages of resolution already have a provision coverage of 54%.With the total provisioning reaching Rs 17,238 crore at the end of June, 2018, “we believe that the worst is behind us now in terms of provisioning of stressed assets”, PFC’s Sharma added.