NTPC changes tactics; PPA no longer priority project acquisition in NCLT

By: | Published: October 28, 2018 3:42 AM

As many as 34 power assets with a capacity of 40,130 MW are seen to be heading to the National Company law Tribunal (NCLT), owing to the RBI’s February 12 circular which had compelled banks to resort to the IBC if defaulting assets did not finalise a resolution plan by August 27.

In what can be seen as a deviation from the standard practise followed by NTPC while taking up new power generation projects, the state-owned company might not prioritise the availability of power purchase agreements (PPAs) while bidding for stressed assets under the Insolvency and Bankruptcy Code route. A senior company official told FE that bankers are ready to sponsor NTPC for brownfield acquisitions and the firm would be looking for operational parameters such as availability of water supply, rail connectivity and transmission infrastructure to assess if they are fit for takeover.

As many as 34 power assets with a capacity of 40,130 MW are seen to be heading to the National Company law Tribunal (NCLT), owing to the RBI’s February 12 circular which had compelled banks to resort to the IBC if defaulting assets did not finalise a resolution plan by August 27. However, the Supreme Court temporarily halted the process by ordering that fresh insolvency proceedings against corporate defaulters under the RBI mandate would not be initiated till it hears the matter on November 14.

In the wake of expected surge in power demand, NTPC would try to sign PPAs with the states for the newly acquired plants. It is also keeping the option of selling electricity in the spot markets — a business policy which the company is resorting to for the first time. Currently, all 40 giga-watt (GW) of NTPC’s operational and 13 GW of under-construction coal-based stations are tied up with assured power off-take agreements. In fact, PPAs for about 73% of the under-construction capacity were signed before 2011. “PPAs can sometimes also be a liability,” the official said.

“Another important issue would be easy spare-part availability, which is related to the equipment manufacturers and suppliers to the project,” the person added. Majority of the stressed power projects run on boilers and other equipment supplied by BHEL. Other major companies which have built the main power generation component are L&T and GE. China-based Harbin Electric and Dongfang Electric also have significant presence in this segment.

Earlier this year, the 1,200 MW Derang plant of Jindal India Thermal Power; the 1,980 MW Bara plant, run by a subsidiary of Jaiprakash Power Ventures (JPVL); and the 1,980 MW Lalitpur plant, operated by Lalitpur Power Generation Company, a unit of the Bajaj Group, was offered to NTPC by their lenders for takeover. Separately, JPVL had also offered its 1,320 MW Nigrie plant to the largest power generator of the country. Except Lalitpur, other plants cited above are part of the 34 stressed power assets identified by the government. NTPC is currently not pursuing any takeover outside IBC.

Stressed power plants already put up for sale by lenders include GMR’s 1,370-MW Chhattisgarh unit, Jaiprakash Associates’ 1,980-MW Bara power plant, Coastal Energen’s 1,200-MW Mutiara plant, KSK Energy’s 3,600-MW Akaltara plant, Avantha Group’s 600-MW Jhabua unit and SKS Power’s 1,200 MW-Binjkote project.

According to sources, JSW, Vedanta, Tata Power and Adani Power are among the bidders competing to acquire stressed power assets outside IBC. “NTPC, which did not participate in bidding, could be the joker in the pack garnering a lion’s share of the distressed assets referred to the NCLT (provided it finds valuations appealing) either as an operator or through O&M services,” Edelweiss had said in a report on the sector on August 27.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition