State firms may Help Rescue Stressed Pvt Power Plants
GOVT CONSIDERING SETTING UP A HOLDING FIRM WITH PSUS AND LENDERS TO AUCTION OR LEASE SUCH ASSETS
Government companies are poised to play a crucial role in the revival of stressed power plants by acquiring them or enabling their lenders to operate them on contract. Once converted into public assets, the private projects will resolve issues of lack of fuel, funds or even power purchase agreements (PPAS).
The National Tariff Policy, amended in January last year, allows state-run power generation companies to sign PPAS with discoms without tariff bidding.psus are also entitled to coal blocks and coal supplies from Coal India on a nomination basis.
The government is considering setting up a holding company for identified stressed assets with the help of NTPC, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) besides banks, which will auction such plants or lease them on contract basis after the lenders take management control, a senior government official said.
The proposal includes converting debt into equity, bringing last mile equity for under-construction projects, or auctioning the power projects once the lender takes over their management, he said. In most cases, the lender and promoters will have to take a hair cut through debt-equity swap, the official said.
The proposal was made at a meeting by Power, Coal, New & Renewable Energy and Mines Minister Piyush Goyal with bankers, officials from financial institutions, department of financial services and central public sector units (CPSUS).
Estimates show that more than half of the stressed assets in the country are in the power generation sector.
Generation companies of states such as Andhra Pradesh, Tami Nadu and Gujarat are in active talks to take over private power plants that can come for attractive valuations after equity erosion. Andhra Pradesh Power Generation Corporation is in talks with lenders of East Coast Energy Pvt Ltd to acquire a 1,320-mw plant in the state. Neyveli Lignite Corporation and Tamil Nadu Power Generation Corporation are in discussions for buying out GMR Group's 1,370-mw power plant in Raipur.
Lenders to some of the stressed power projects that do not have power purchase agreements or coal supplies are encouraging state power generation companies to acquire private plants rather than setting up new ones to meet electricity demand. “We are asking state generation companies to look at the existing and under-construction plants of private companies that can be acquired, rather than the states setting up additional capacities. Many such deals are actively being pursued,“said a senior PFC official. The stress in the power sector provides a good opportunity to state run generating companies to scale capacities rapidly, the government official said.