TOP PUBLIC sector companies are in talks to form a joint venture to bid for distressed assets in the power sector that will come up for auction under the insolvency proceedings of the National Company Law Tribunal (NCLT), official sources told The Indian Express.
The equity structure of the JV is currently under discussion, and the companies involved include generation major NTPC Ltd, power sector lenders Power Finance Corporation (PFC) Limited and Rural Electrification Corporation (REC) Limited, and equipment major Bharat Heavy Electricals Limited (BHEL).
According to a government official, approximately 80,000 MW of operational or under-construction power generation assets are currently “severely stressed”.
These projects are likely to end up in insolvency proceedings because of last month’s Reserve Bank of India circular on the “Resolution of Stressed Assets — Revised Framework”, which mandates banks to classify even a day’s delay in debt servicing as default. The notification mandates resolution proceedings against stressed accounts to be completed in 180 days.
“Currently, we are at the preliminary stage of discussions. We hope that such a joint venture can take over these projects at a fair value. The objective of this JV will be to take over distressed projects and execute and operate them till the demand scenario improves. We will sell them out later for better valuations. This JV will be formed after giving due considerations to all RBI guidelines and legal framework,” said a senior PFC official.
The PFC, which is the biggest lender in power sector, has a total loan asset book of around Rs 2.62 lakh crore, as on December 31, 2017. “We are discussing with our legal team and consultants if we can bid for assets where we are lenders, too. Our legal team has told us that we can bid for distressed power assets as a joint venture. Right now, we are not sure what will be the equity participation of each of the power sector players that will participate in this JV,” the PFC official said.
Govt sector loans are roughly 83 per cent of PFC’s loan book and are being serviced regularly. PFC has a private sector exposure of around Rs 44,000 crore, which is the remaining share of 17 per cent.
According to another PFC official, Rs 14,000 crore of the company’s private sector loans are getting serviced regularly. “Restructured standard assets are about Rs 15,500 crore and standard assets are about Rs 6,000 crore. The non-performing assets (NPAs) are roughly around Rs 8,500 crore,” the official said.
“Seven projects worth Rs 4250 crore, which have a total capacity of 3335 MW, are being resolved through NCLT under IBC (Insolvency and Bankruptcy Code). These seven projects are already in NPA category. The resolution process is already under way in NCLT in case of one project. We have filed a petition with NCLT in case of two projects. In remaining four projects, we are in the process of filing with the NCLT,” the official said.
The PFC is expecting the resolution of distressed power projects, where they have invested, to be done within 2018-19.