3 April 2019: The Power Finance Corporation (PFC) plans fresh resolution of eight stressed power projects, including Essar Mahan’s 600 MW plant and GMR Raikheda’s 1,370 MW plant following the Supreme Court decision annulling an earlier RBI circular.
The top brass of the power sector lender held a meeting on Tuesday to assess the situation arising from the apex court’s order. Sources said that the issue of re-starting work on finalizing a resolution plan for few stressed assets was also discussed.
The eight stressed power assets have a total generating capacity of close to 9,000 MW and banks, including the PFC, have a total exposure of about Rs 22,000 crore. The projects also include the 1350 MW RattanIndia Nashik, 550 MW RKM Powergen, 700 MW Bharat Utkal, 2,400 MW KSK Mahanadi, 600 MW Jhabua Power, and 120 MW Jal Power.
The PFC had initiated the resolution process for these assets last year but sources said the matter got stuck over delays and the RBI circular hanging over these resolutions. The PFC was in advanced of negotiation with promoters of these entities to resolve the assets by November last year.
Sources said that in several of these cases, the promoters have offered to make a one-time settlement of loans. The proposals in this regard came from companies such as Essar to resolve the asset through a settlement offered by the promoters.
In few other cases such as KSK Mahanadi, RattanIndia Nashik, and Jhabua too, one-time settlement offers were given to the PFC by the promoters. However, with confusion over the RBI circular remaining, the matter faced delays and some of the projects sources said got referred to the National Company Law Tribunal (NCLT).
“We were in final stages of resolution for several of these cases and this will now be explored all over again with banks now being armed to take a call on resolution of stressed assets. The matter will however, need to be discussed with other banks before a fresh resolution plan is finalized,” said a source in the power sector lender.
Apart from one-time settlement, the resolution plan for some of the stressed power assets would be finalized by bringing in a strategic partner. In cases like Jal Power, the project could be considered for transfer to the Sikkim government, if the state is willing to take over the debt.
In March 2017, the Union government had classified 34 power plants as “stressed assets” with total bank exposure in these to the tune of Rs 1.8 lakh crore. The eight projects fall among this group of power projects. The RBI’s February 12 circular meant that most of these stressed land up in the bankruptcy court due to short time frame available for a bank-led resolution.