To tackle the problem of financially stressed assets in the power sector the government had set up a Standing Committee under the Ministry of Power to examine the Stressed /Non-Performing Assets (NPA) in the electricity sector.
The Economic Survey 2016-17 highlighted that the NPA in the power sector, especially in thermal, has grown significantly. The survey stated that companies were not gaining enough returns to pay interest on loans from banks thus leading to NPAs. As a result, companies are unwilling to invest in new capacities and banks are resisting to lend loans. This scenario will not only affect the banking sector but will also hinder future investment in the power sector.
The non-availability of regular fuel supply arrangements, lack of Power Purchase Agreements (PPAs), inability of the promoter to invest equity and working capital, regulatory and contractual issues are some of the major topics faced by thermal power projects.
The committee listed 34 stressed coal based thermal power plants entailing an investment of Rs 2,26,377 crore. The total capacity of these stressed projects is 40,130 MW, of these the total commissioned capacity is 24,405 MW, while 15,725 MW is still under construction. The total outstanding debts of these projects amount to Rs 1,74,468 crore.
These thermal power projects are spread across Andhra Pradesh (2 projects), Bihar (1), Chhattisgarh (10), Jharkhand (1), Madhya Pradesh (4), Maharashtra (5), Odisha (6), Punjab (1), Tamil Nadu (1), Uttar Pradesh (2) and West Bengal (1).
Of the 34 projects, a total of 17 are completed; however the projects are affected due to coal linkage, either partial or full non-availability of coal linkage. Of the remaining 17 projects eight are partially completed, seven are under execution and two are deferred.
One of the major thermal power projects to be recognised as stress asset is KSK Mahanadi Power Company’s coal-based power project in Chhattisgarh. The KSK Energy Ventures’ SPV KSK Mahanadi Power Company planned to set up 6×600 MW (3,600 MW) power unit entailing an investment of Rs 27,080 crore has been partially completed.
Another major thermal power project to be listed in stress asset is Bara Thermal Power Project. The project involved setting up a 1,980 MW (3×660 MW) thermal-based power plant at Bara in Allahabad district of Uttar Pradesh. Jaiprakash Power Ventures incorporated an SPV Prayagraj Power Generation Company for developing the project. The entire Rs 13,870 crore Bara Super Critical Thermal Power Project was completed in May 2017.
Apart from this, some of the major projects under-execution to be recognised as stressed assets are:To revive these stressed assets the Ministry of Power is working with public and private financial lenders such as the Power Finance Corporation (PFC), the Rural Electrification Corporation (REC) and other banks along with NTPC to finalise a warehousing model plan. The plan will be finalised by the end of July 2018.
The revival of stressed assets will be undertaken in a couple of years by signing PPAs with CPSUs and later selling them as profitable assets after demand picks up. The majority of the stakes of around 51 percent will be owned by government allowing them to have ownership and give the rights to change the promoter and management hands.
The government will help running these plants, providing finance and help them improve financial position for a couple of years and sell them after demand for power gains momentum.
In the initial phase, there will be around 25,000 MW 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.