NCLT relief unlikely for two dozen stressed power projects under IBC

More than two dozen stressed power projects which could or are facing insolvency proceedings will find hard to get buyers as they are ‘incomplete’. In case these companies do not find a bidder, they will have to face liquidation.

Among the stressed assets which are undergoing strategic debt restructuring (SDR), which are incomplete and the commissioning is also uncertain 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 under the ‘uncertain completion/work held up’ category.

The RBI in February mandated banks to classify even one-day 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 close to 80,000 MW of power units which are staring at default in debt payment due to several regulatory and systemic issues.

Most of the units whose commissioning has been held up is due to delay land allotment, lack of coal supply, financial issues of the promoter and in some cases no tie-up for power sale.

Recently, informal interest from buyers came for Visa Power, which is facing insolvency proceedings in NCLT, but the prospective bidders backed out as the project was incomplete. 

An insolvency professional for one of the power companies said consultants are being hired to analyse the viability of the project and the cost of completion of the project. This professional states that the main problem with getting bidders is that they are uncertain about the cost of completion of the project. 

Among the lenders, PFC has the highest exposure of Rs 587 billion and is already staring at 14,000 MW of projects to land under the insolvency proceedings. SBI has debt exposure of around Rs 297 billion followed by PNB with Rs 279 billion. Among others which are likely to face NPA heat from power generation assets are AXIS Bank, IDBI, ICICI etc.

Power generation assets are unable to find buyers due to several regulatory hiccups involved. There has been no long-term power purchase agreement issued by any state in the past 4 years, hurting the bottom line of generation projects. At the same time, coal supply has been eased through several government schemes but is yet to uplift languishing power generation. Several years of cases filed in regulatory commissions and courts are also a hurdle for the potential buyers. 

Unlike the steel sector where promoters have been reluctant to sell their assets and even wanted to bid for their own companies till the Ordinance barred them, about 25,000-MW stressed capacity in thermal power is on sale outside of Insolvency and Bankruptcy Code (IBC). Business Standard reported recently that these assets are not finding buyers. Most promoter companies of the projects — some operational and others still under development — want to exit to lighten their debt.