i: As power demand increases and old thermal plants are phased out, even stranded power projects with coal linkages will see a turnaround, a top official at Power Finance Corp. Ltd said.
At the end of FY18, only about 11% of Power Finance Corp.’s loan book was exposed to stressed projects, Rajeev Sharma, chairman and managing director, Power Finance Corp. said. This made up ?31,000 crore of the company’s ?2.79 lakh crore loan book.
“You have to warehouse stressed assets; in two-three years, they will become gold mines,” Sharma said.
Even among stressed projects, over half—10GW of the 18.4GW Power Finance Corp. is exposed to—were commissioned projects with coal linkages or functioning fuel supply agreements.
“Power demand continues to increase in India every year. Once the old thermal projects are phased out, these newer projects in the private sector will become viable again,” he said.
Power Finance Corp. refinanced loans for stressed assets of ?13,750 crore in FY19, primarily NTPC’s Meja thermal project in Uttar Pradesh (with loans for ?3,700 crore, where it replaced 16 banks) and the Raichur Yermarus thermal project operated by Karnataka Power Corporation (with loans for ?1,700 crore, where it replaced 7 banks).
Besides, Power Finance Corp. has stressed loans of ?4,300 crore that are under advanced stages of resolution, where the firm doesn’t expect to take a haircut, Sharma said. Four other projects are under bidding for a change in management. Power Finance Corp. will soon invite expressions of interest for Essar Steel Ltd’s stressed coal-fired Mahan power plant as well.
Projects with exposure totalling ?8,100 crore are under resolution at the National Company Law Tribunal, while resolution plans are being finalized for three other projects where its exposure is ?8,700 crore.
Power Finance Corp. wants to increase its lending operations to renewable power projects to ?9,000 crore in FY19, from ?2,500 crore in FY18. The state agency that lends to several large power projects wants its loan book exposure to renewables to hit 20% from the current 2-3%.
Sharma said the company wants to increase its exposure to the renewable energy sector. In FY18, Power Finance Corp. disbursed loans totalling ?9,000 crore to this sector, accounting for 7% of the year’s disbursements. Power Finance Corp. wants to increase this in a few years to 15-20%.
In FY18, Power Finance Corp. reported a net profit of ?5,844.11 crore against ?2,236.10 crore the previous year, up 161%. For the fourth quarter, the net profit was ?935.60 crore, against ?3,409.49 crore it had reported in Q4FY17.
Provisions for Q4FY18 stood at ?307 crore. The quarter saw a reversal of ?1,747.6 crore in provisions on restructured standard assets and an increase of ?2,049 crore in non-performing assets.