SBI's flagship scheme for resolution of stressed power assets is in a soup

The reluctance of lenders to approve resolution plans, the lack of a consensus over valuing stressed assets, and the paucity of cash-rich buyers are likely to push close to 15 power assets towards insolvency.

Samadhan — the flagship scheme by State Bank of India (SBI) for resolving stressed assets outside the National Company Law Tribunal (NCLT) — is going into a maze. Some lenders, like state-owned Power Finance Corporation (PFC), say most assets should be sent to the NCLT, said official sources.

Sustainable debt is a contentious issue with asset valuation being stuck because lenders disagree over a thumb rule. It was earlier decided to calculate the sustainable debt of a project by keeping the capital cost at Rs 7 crore per Mw.

In the last meeting to discuss Samadhan earlier this month, PFC and other lenders expressed concern regarding the haircut the lenders will take. “In cases where the promoters have given a one-time settlement, the haircut could be more than 50 per cent, which most lenders do not agree on,” said an executive.

In a report released Wednesday, India Ratings said the resolution has been for projects of around 2 Gw so far. “Clearly, buyers remain focused on assets that have significant tie-ups on fuel supply and long-term power purchase agreements. The resolution also remains slow due to significant hair-cuts being suggested, a presence of multiple lenders and issues related to the settlement of past capex dues for the under-construction capacity,” it said.

Recently for Chennai-based Coastal Energen, its promoter Coal and Oil Group has joined the race, giving a one-time offer. Sources said the offer was less than the earlier bid of Adani Power, entailing more haircut for the lenders. 

Coal and Oil group has defaulted on bank payments.

In the case of Essar Mahan and Rattan India Nasik, the promoters have offered one-time settlements, and lenders asked them to revise their offer.  

“SBI is now thinking of resolving two assets (GMR Chhattisgarh and KSK Mahanadi) through SASHAKT, which comes with an Inter-Creditor Agreement (ICA) since it is a becoming headache to bring all lenders on the same page. Lenders have signed the ICA, making the task easier,” said a banker. SASHAKT is a Central government-sponsored scheme to provide subsidised coal to stressed units.

Adani Power and JSW Energy were shortlisted bidders for GMR Chhattisgarh, with bids extended four times, but a final winner is yet to be decided. The same is the case with KSK, where there are 24 lenders and unable to find a consensus.

Lenders this paper spoke to said there was a concern regarding companies not cash-rich bidding for stressed assets. “The lending exposure then remains same. These new players would come to us to borrow for working capital, after we have given a haircut of 40-50 per cent,” said a lender. 

A banking executive said there was an apprehension over investigation into the deals, which is becoming common. “The NCLT route is the safest because the rule of law is followed. Also public sector companies such as NTPC and NHPC are keen on participating for assets when they land in the NCLT,” he said. Pariwartan, of Rural Electrification Corporation (REC), is another stress resolution scheme for companies that land in the NCLT.

The Prayagraj power project, of Jaiprakash Ventures, is the only one resolved to date with Resurgent Power — a joint venture company of Tata Power and ICICI Ventures — buying it. It is awaiting approval from the electricity regulator.