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Commercial banks favoured a fund with an initial corpus of Rs 5,000 crore to infuse equity into stalled power projects, which are in the last-mile stage of implementation.
The Indian Banks Association, in a plan submitted to the government, said the corpus could be raised from various stakeholders or public sector undertakings such as NTPC, Coal India Ltd, banks and financial institutions such as SBI, IDBI Bank and overseas investors.
A senior public sector bank executive said it was advisable to identify projects, which are in the last-mile stage of implementation. These projects are not likely to face issues other than that of availability of funds on account of cost overruns or inability of promoter to raise matching equity contributions.
The corpus size of Rs 5,000 crore for fund is an indicative amount. It could expand based on requirements of projects. Alternate Investment Fund (AIF), under Securities and Exchange Board of India’s guidelines, appeared to be the best option, which could be set up at the earliest, an IBA executive said.
Various structures for the fund such as non-banking financial company (NBFC), infra fund, mutual fund, debt fund, Infra Investment Trust and Alternate Investment Fund (AIF), were examined. Considering various regulatory processes, AIF appeared to be the ideal. However, AIF can’t be leveraged to raise debts against the capital corpus of the fund.
The coal and power ministry had sought plans to consider the issues faced by stalled power projects and steps needed to complete these projects.
The aim is to ensure that the proposed power generation capacity is fully operationalised and banks can salvage their large value non-performing loans.
According to SBI Capital Markets, investment banking arm of SBI, 30,000 Mw of generation capacity is stalled due to various factors like fuel supply, land acquisition and equity shortfall from project promoters. The last-mile equity fund could provide twin benefits: First, it would help in extending equity support to the stalled power projects, and second, gives an incentive to project lenders to make further debt funds available to these projects.
Implementation of these last mile stalled projects would also help in improving bankers’ sentiments towards the infrastructure projects particularly on the negative list.
POWER DRIVE
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Banks mull setting up a fund with a corpus of Rs 5,000 crore to infuse equity into stalled power projects
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The fund will be used to revive stalled projects, which are in the last-mile of completion
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Indian Banks Association told govt that the corpus could be raised from various stakeholders such as NTPC, Coal India, banks and financial institutions
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Various structures for the fund were considered and banks zeroed in on Alternate Investment Fund model
