Despite various measures taken by the government and lenders, the resolution of stressed thermal assets remains slow, research firm Icra said on Wednesday. “Only about 10% of the 40 GW stressed coal-based capacity (is) achieving resolution, mainly through acquisition by a new sponsor,” Icra noted.
Regulatory delays, limited progress in signing new power purchase agreements and subdued thermal capacity utilisation levels have been attributed to the slow progress. Regulators directing new owners to reduce existing tariffs for electricity generated from power plants has also been cited as a roadblock to stress resolution.
Recently, the energy regulator of Uttar Pradesh had asked Tata Power-backed Resurgent Power— which had acquired 75% in Jaiprakash Associates’ 1,980-MW Bara power plant — to reduce tariffs by 40 paise/unit. However, the order was set aside by the Appellate Tribunal for Electricity.
Power minister RK Singh recently said out of the 34 stressed power projects worth Rs 1.75 lakh crore, 13 projects worth Rs 59,000 crore have been resolved. Three plants worth Rs 27,000 crore are in final stages of resolution and another 10 projects worth Rs 38,000 crore have been admitted in the NCLT. As many as eight projects, valued at Rs 49,000 crore, have been referred to the NCLT, but not admitted as yet.
“All of these projects are not complete and are in different stages of completion, Singh said, adding that “some of them are in very early stages of development, with only land being bought”.
The utilisation level of coal power plants touched an all-time low in September, with their average plant load factor (PLF) recording 51.1% amid falling demand for electricity. However, Icra believes that thermal PLFs are expected to “show modest improvement to about 62-63% in FY21, driven by limited capacity addition in thermal segment, renewable capacity addition of about 10-12 GW per year and annual energy demand growth of about 5%”.
The Cabinet Committee on Economic Affairs on March 7 had approved certain recommendations of a group of ministers and a high-level empowered committee on stressed power assets. The recommendations were mainly related to coal supply issues, payment discipline and sanctity of contractual agreements.
Stressed power assets were partially relieved after the Supreme Court on April 2 declared the Reserve Bank of India’s February 12, 2018 fiat as ‘ultra vires’. The central bank’s February 12 circular stated that if a resolution plan wasn’t found for the ‘default’ cases by August 27, 2018, the accounts should be sent to bankruptcy courts. The apex court, on September 11 last year, has also asked banks to maintain status quo and not to initiate insolvency proceedings against the defaulting companies under the circular.
Following the SC order, RBI issued a new circular on June 7, which relaxed compulsory referral to the bankruptcy court.
Source: Financial Express, October 31, 2019