There are 45,000 MW of projects that have recently been commissioned, or are on the verge of getting commissioned.
The Ministry of Power is working with public and private financial lenders along with NTPC to finalise a plan under the “warehousing model” by the end of July to revive 45,000 MW stressed power assets, a senior public sector lender told FE. The ministry is working on a plan where lenders such as PFC, REC and other banks along with NTPC will house stressed power projects under warehouses to revive and revitalise them in a couple of years by signing power purchase agreements (PPAs) with CPSUs and later selling them as profitable assets after the demand picks up, he said.
“We will take majority stake (around 51%) in these projects which will allow us the ownership and give the rights to change the promoter and management hands. Our aim is to run these plants, give them money and time to revive their financial position for couple of years, and then sell them after the demand for power picks up,” the official said. “We expect the plan to be ready by July-end as any resolution failing to meet the August 31 deadline will mandatorily go to IBC for resolution,” the official added.
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Most of these projects were set up when costs were around Rs 4 crore/MW, but now thermal power projects costs have moved to Rs 7-8 crore/MW. If they are sold today, lenders will have to take massive hair cuts. However, revival of these projects under the warehousing model will save lenders the hair cut or at least recover the amount lent. As per industry estimates, valuation of these projects has taken a hit due to which investors are looking at a discount of around 40-50%. Officials said there are two factors that need to be considered for resolution of these projects.
There are 45,000 MW of projects that have recently been commissioned, or are on the verge of getting commissioned. They are operational projects and running with high PLF but have an issue of adequate revenue to service the debt. The projects are good, but there are issues that are systemic and external to these projects. On the other hand, there are projects that are not good operationally but are servicing debt and are branded as standard running project, so there is a dichotomy in the way these projects have been structured.
In the initial phase, there will be around 25,000 MW of projects with no PPAs or fuel linkages that will be housed under the warehousing model. However, the plan will be open for other 20,000 MW projects that have fuel linkages tied up but are facing problems in servicing the debt, he said. “We will look at the customised resolution plan for each of these projects. Also, we are hopeful that we will soon move from this transition phase of high-supply-and low-demand to high-supply-and-high-demand looking at huge latent demand for power in the country. There are around Rs 4 lakh crore worth of investments — Rs 1 lakh crore in equity and Rs 3 lakh crore in debt – that have gone into these projects and need customised revival. Taking them to the NCLT is not a solution,” the official said.