State-run NTPC will run two stressed coal-fired thermal power plants that are currently under liquidation. The two plants, SKS Power and Meenakshi Energy, would add a cumulative 2,200 megawatt (MW) of power to the grid.
According to sources, the resolution professional will hand over both the plants to NTPC, which will operate them on an operations and maintenance (O&M) basis for a fee.
While the SKS Power Generation is a 1,200-MW thermal plant in Chhattisgarh, which operates on domestic coal, the 1,000-MW Meenakshi Energy plant in Andhra Pradesh is an imported coal-based project. Both the plants are currently under the National Company Law Tribunal (NCLT).
“The resolution professional was of the view that in order to tide over the current scenario of power shortage, NTPC should be handed over both the plants to be run at a fee and lenders would fund them,” said an official, adding that the decision was taken at a meeting organised by the ministry of power, which was attended by various state officials, project developers and lenders.
Lenders, especially the two state-run, dedicated power sector financiers, Power Finance Corp (PFC) and REC, have been seriously considering bidding for the stressed power assets to prevent large haircuts on their loans during resolutions. They had even proposed to float a consortium of lenders and state-run power sector entities (CPSEs) with technical know-how in the sector, to acquire and operate such stressed assets, sources said.
The SKS Power project had entered into a power purchase agreement (PPA) with Chhattisgarh State Power Trading Company to supply 5% of the net energy generated at the plant at energy charges, and had also secured short-term PPAs with a few other discoms.
It had also entered into a medium-term PPA with Noida Power Company, but had failed to enter into any long-term PPA, due to which the plant could not source linkage coal. As a result, it was sourcing coal through e-auction and from the open market, which led to cost escalation and uncertainty. In fact, the lack of PPAs and other structural issues has led to many power projects defaulting on loan repayment obligations.
In the case of Meenakshi Power, the project incurred a cost overrun, followed by a default in servicing the loan, due to which it ended up in the NCLT.