NCLT relief unlikely for stressed power projects under IBC

More than 24 stressed power projects that could face insolvency proceedings or are facing them will find it hard to get buyers because they are “incomplete”.

In case they do not find one, they will have to face liquidation.

Among the stressed assets undergoing strategic debt resolution (SDR) and whose commissioning is uncertain because of their being “incomplete” are Rattan India Amravati, Athena Chhattisgarh, GMR Vemagiri, three projects of Lanco Infra, Vandana Vidyut and JAL Power. The latest status report by the Central Electricity Authority (CEA) has listed these projects in the “uncertain completion/work held up” category.

The Reserve Bank of India in February mandated banks to classify even one day’s delay in debt servicing as default. The notification mandates resolution proceedings against stressed accounts to be completed in 180 days.

This has added to the woes of power units generating close to 80,000 MW. They are staring at default in debt payment owing to regulatory and systemic issues.

In most cases, commissioning has been held up owing to delays in land allotment, a lack of coal supply, promoters facing financial issues, and, in some cases, no tie-up for power sale. Recently buyers showed an interest, informally, in Visa Power, which is facing insolvency proceedings in the National Company Law Tribunal, but the prospective bidders backed off because the project was incomplete.

An insolvency professional of a power company said consultants were being hired to analyse the viability of the project and its cost of completion.

This professional said the main problem about getting bidders was that they were uncertain about the cost of completion of the project. Among the lenders, Power Finance Corporation has the highest exposure of ~587 billion and is facing the prospect of projects of 14,000 MW landing in the lap of insolvency tribunals. SBI has a debt exposure of around ~297 billion followed by PNB with ~279 billion. Among others likely to face NPA heat from power generation assets are Axis Bank, IDBI Bank and ICICI Bank.

Power generation assets are unable to find buyers owing to regulatory hiccups. There has been no long-term power purchase agreement issued by any state in the past four years, and this has hurt the bottom line of generation projects.