 "RBI move on debt recast will boost stranded power projects")
Reserve Bank of India (RBI) Governor Raghuram Rajan's announcement on debt restructuring of stranded projects will improve the projects’ financial health by easing the cash flow situation, according to executives of power generation companies.
Rajan has said that the central bank will soon announce two key decisions — extending the 5-25 rule to loans of existing projects that are categorised as ‘standard’, and allowing banks to take equity in restructuring to a greater extent than the current permissible limit. Rajan said the central bank was in discussions with the Securities and Exchange Board of India (Sebi) on issues such as conversion price.
“Allowing banks to take equity in debt restructuring is a step in the right direction,” said Avantha Group Director (Finance) B Hariharan.
“We welcome the positive indication from RBI to extend the benefit of 5-25 rule to existing projects. This will ease the debt payment profile of power companies from existing 10-12 years and will improve the cash-flow situation,” said Ashok Khurana, director-general of Association of Power Producers (APP).
The association had met RBI governor last month to discuss plans for debt restructuring of stranded power plants awaiting fuel supply and unfulfilled fuel linkages.
The private power producers also requested that in the case of projects stranded for unavailability of fuel, the assets be classified as ‘standard’, defer the interest and capitalise the same, reduce the interest rate to State Bank of India base rate till plants are operational and extend the loan tenure suitably.
The association, which represents power producers from the private sector, is looking at the financiers to provide an additional debt of 10 per cent of project cost, which can be replaced with equity invested by developers / strategic investors within a specific period after commercial operation date.
In its presentation made to the RBI chief, APP said that of the 136 gigawatt stranded power generation capacity with an investment of Rs 6.23 lakh crore, Rs 4.36 lakh crore was feared to convert into non-performing assets. The existing power generation capacity of 16,000 megawatts (Mw) is under stress for want of cheaper domestic gas. Close to 28,000 Mw of power capacity is stranded due to de-allocation of coal blocks. The Supreme Court in its recent judgment cancelled 204 coal blocks of cumulative capacity of 45,000 million tonnes allotted over the past two decades.
Rajan has said that the central bank will soon announce two key decisions — extending the 5-25 rule to loans of existing projects that are categorised as ‘standard’, and allowing banks to take equity in restructuring to a greater extent than the current permissible limit. Rajan said the central bank was in discussions with the Securities and Exchange Board of India (Sebi) on issues such as conversion price.
“Allowing banks to take equity in debt restructuring is a step in the right direction,” said Avantha Group Director (Finance) B Hariharan.
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In the 5/25 structure, a bank could fix longer amortisation period (about 25 years) for loans to projects in infrastructure and core sectors, with periodic refinancing (say every five years).
“We welcome the positive indication from RBI to extend the benefit of 5-25 rule to existing projects. This will ease the debt payment profile of power companies from existing 10-12 years and will improve the cash-flow situation,” said Ashok Khurana, director-general of Association of Power Producers (APP).
The association had met RBI governor last month to discuss plans for debt restructuring of stranded power plants awaiting fuel supply and unfulfilled fuel linkages.
The private power producers also requested that in the case of projects stranded for unavailability of fuel, the assets be classified as ‘standard’, defer the interest and capitalise the same, reduce the interest rate to State Bank of India base rate till plants are operational and extend the loan tenure suitably.
The association, which represents power producers from the private sector, is looking at the financiers to provide an additional debt of 10 per cent of project cost, which can be replaced with equity invested by developers / strategic investors within a specific period after commercial operation date.
In its presentation made to the RBI chief, APP said that of the 136 gigawatt stranded power generation capacity with an investment of Rs 6.23 lakh crore, Rs 4.36 lakh crore was feared to convert into non-performing assets. The existing power generation capacity of 16,000 megawatts (Mw) is under stress for want of cheaper domestic gas. Close to 28,000 Mw of power capacity is stranded due to de-allocation of coal blocks. The Supreme Court in its recent judgment cancelled 204 coal blocks of cumulative capacity of 45,000 million tonnes allotted over the past two decades.