The stress in the power industry that is evident both in the distribution and generation sides of the business has left the State Bank of India, the country’s largest bank, with a 30 per cent share of the stressed assets of private power producers. Punjab National Bank
(PNB) has the second largest chunk of the total debt exposure to these projects, which totals Rs 1.44 lakh crore.
Private players said with rising under-recovery in thermal power projects, if corrective steps are not taken in time, almost of all of the debt might be converted into non-performing assets (NPAs). Thirty projects are either already classified as NPA or face the Reserve Bank of India’s statutory debt restructuring or Scheme for Sustainable Structuring of Stressed Assets (S4A).
“Increasing surcharges for coal, delay in tariff petitions and revision of power rates due to changes in laws at various units, coupled with poor offtake, has increased the under-recovery for private coal-based capacity to Rs 4,500 crore,” said a senior power sector
These assets totalling 18,000-Mw operational and 16,000-Mw under construction are owned by noted power sector
players, including GMR, GVK, Jaypee, Lanco, Adani Power, Essar, RattanIndia Power and Monet. Most of their power units have been reeling under low demand for power, with no state coming forward with power purchase agreements (PPAs).
has a debt exposure of around Rs 30,000 crore, followed by PNB
with Rs 27,000 crore, and the sector’s key lender Power Finance Corporation with Rs 23,000 crore. Among others which are likely to face the NPA heat from power generation assets are AXIS Bank, IDBI Bank and ICICI Bank.
The government has been in discussions with the banks and state-owned NTPC to look for a possible resolution. It is, however, learnt that NTPC has pulled out from the process of taking over the operations of the stressed power assets. In meetings that were held three months ago, it was proposed that NTPC would manage the operations of projects which were taken over by banks.
A senior official said NTPC was earlier looking at taking over some equity along with operations in assets that the banks intended to take over, but had now expressed its inability.
“Stagnant power demand continues to hurt the generation assets. Most of the private players have PPAs for less than half their capacity. NTPC has most likely put the idea on the back-burner, waiting for a turnaround in the distribution sector,” he said.
In company’s annual general meeting speech, NTPC Chairman and Managing Director Gurdeep Singh said the company was looking at an aggregate capital investment of more than Rs 1.3 lakh crore in its own projects which were under construction across 22 locations and had a total capacity of almost 21,000 Mw.
In July, a study conducted by rating agency CRISIL for 13 Gw of thermal power projects suggested a moderate haircut of 20 per cent.
“If the demand doesn’t pick up at a faster pace, these untied and upcoming plants could further add to the NPA ratio pertaining to electricity generation, which is currently around 5.9 per cent of total advances (outstanding) of Rs 4,73,815 crore. Higher NPAs
will lead to lesser capacity of banks to fund new investments in large infrastructure projects, including the power sector.
Overall, investment climate in the energy sector will get a hit,” said Vivek Sharma, senior director, CRISIL Infrastructure Advisory.
Singh, however, said the country’s GDP grew at 7.1 per cent in FY17, translating into power generation growth of close to 5 per cent. “Power demand is expected to pick up, which is reflected in the rise in merchant tariffs.”