NEW DELHI: State Bank of India (SBI) is preparing a major debt restructuring and takeover plan for stressed power assets, to improve valuations and attract new owners with incentives and a quick resolution process.

The country’s largest lender has called all power plant lenders in Mumbai on Wednesday for discussing a proposal that has a direct bearing on loans adding up to Rs 1.77 lakh crore in 75,000 MW stressed capacity. It has also asked the power ministry to waive transmission penalties and grant early regulatory approvals to help new promoters, said a senior government official.

The bank proposes to get debt of the stressed assets rated by credit rating agencies. The plants will then be valued as per ratings at a sustainable debt portion, a banking official said. The projects will be offered to the National Investment Fund (NIF).

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The fund will invite bidders with a base price. Otherwise, NIF will take over the projects and hand them to companies such as NTPC or private firms for operations on contract basis, he said. “The proposal is at a very nascent stage. But if it is agreed upon, it will be beneficial to lenders as well as promoters. It will be less time consuming and the assets will get better valuation than if they go into liquidation,” the government official said. “Assets that receive RP4 rating or the debt portion at which they receive the debt portion will be the base of the bidding. However, lenders expect about 50% haircut, though it is better than assets going into liquidation,” an industry insider privy to the development said on condition of anonymity.

Power sector financiers Power Finance Corp had also mooted a proposal to float joint venture with companies like Rural Electrification Corp, NTPC and BHEL to acquire stressed assets.

The proposal has however been shelved due to lack of concurrence and stringent RBI rules. Currently, more than 75,000-mw generating assets, either operating or under construction are severely stressed due to various reasons like lower availability of coal, lack of power purchase agreements and delays in regulatory clearances. The government is reviewing 34 stressed thermal power projects with an estimated debt of about Rs 1.77 lakh crore. Experts are also concerned about the notification issued by RBI on ‘Resolution of Stressed Assets – Revised Framework’ on February 12 that mandates banks to classify even one-day delay in debt servicing as default.

Power minister RK Singh has already written to finance minister Arun Jaitley seeking amendment of RBI’s circular dated February 12. Power secretary Ajay Bhalla has also written to RBI governor Urjit Patel. The power ministry is also trying to hold a meeting with Patel to discuss the concerns.

As per the revised framework, projects with interest or principal overdue starting from 1day to 30 days will be categorised as ‘special mention accounts category -0’ (SMO-0). The most stringent change in the framework is that all the lenders have to agree upon a resolution that has to be reached in 180 days.

“The new guidelines are likely to add further stress to the sector. All lenders reaching one resolution is impossible since there are different types of lenders to a project and consensus is generally not reached among all of them. All efforts being made to revive the sector will go down the drain if the circular is not amended. Starting September projects will start going to NCTL in that case,” said an industry insider.