SBI fixes plans for six stressed power assets

Other lenders yet to come on board; RBI deadline ends Monday

State Bank of India (SBI) has chalked out resolution plans for about half a dozen stressed power assets. But their future is still uncertain as other lenders are yet to come on board even as the Reserve Bank of India’s deadline for beginning insolvency proceedings ends on August 27. SBI is the lead lender, with an exposure of ~700 billion to these companies.

Lenders are still hoping that the latest amendment to the Insolvency and Bankruptcy Code (IBC) would come to their rescue since they have the option to withdraw an insolvency case referred to the National Company Law Tribunal (NCLT) after obtaining 90 per cent of member vote for it, an SBI executive said.

The projects for which resolutions have been worked out include those of 1,370 Mw Chhattisgarh power plant of GMR and KSK Mahanadi. They are expected to get new buyers under Samadhan — scheme of asset management and debt change structure — framed by lenders for the power sector.

Lenders are fast tracking the cases since the RBI issued a notification on February 12, withdrawing earlier schemes like SDR (strategic debt restructuring) and S4A (scheme for sustainable structuring of stressed assets), for accounts with aggregate exposure of ~20 billion and above, on or after March 1, which is the reference date for the circular. The cases included those where resolution process under the earlier schemes were going on, as well as those classified as restructured standard assets.

Punjab National Bank is likely to take a call on debt resolution for some of the stressed assets on Friday. Lenders had got debt sustainability ratings done for about 10-11 projects of the 12 power plants and they are being bid out to new owners outside of the NCLT process.

A lot would also depend on the Allahabad High Court order that was reserved last week.

The court had, on May 31, put on hold action against the power sector under the RBI’s February circular.

Under the RBI notification, lenders are required to initiate insolvency proceedings within 15 days after the expiry of 180 days from March 1, if the default is triggered on that day.

They are also required to initiate insolvency proceeding if default is triggered 180 days from the date of the first one, if it happened after the reference day. Under directions from the court, the finance ministry met all stakeholders to work out a solution outside of the insolvency law. Following the meetings, the department of financial services prepared a report that sought extension for 12 power plants.

The government is looking at bringing 34 coal-based plants out of stress. These were initially identified by the department of financial services. For 12 of them, the government is seeking an extension window of six more months from August 27, before the RBI’s February 12 notification is applicable.

“Another eight of the 34 plants have been resolved and are standard accounts (with lenders) because of Scheme for Harnessing and Allocating of Koyala (coal) Transparently in India (SHAKTI) and other measures. Fourteen are already or in the process of going to NCLT (for insolvency proceedings),” said an official.

Private producers had filed a case against the RBI circular in the high court. Accepting the view of power producers, the government had submitted before the court that the RBI should give six more months for the resolution of cases where debt restructuring was going on. This was opposed by the RBI.