There is no reason why SEBs be burdened with unviable power assets
It is indeed unfair that state power agencies be burdened with unviable power assets of Tatas, Essar, Reliance, Adani and other major power generators, whose investments were based on imported coal. This is the first point that needs flagging in the aftermath of Tata’s proposal to sell 51 per cent stake in its Mundra ultra mega power project located on west coast in Gujarat for a token Re 1. Both, Adani and Essar are pursuing the same line to get rid of their stressed assets.
The larger question is whether the state-run banks or state electricity boards (SEBs) are to be burdened with unviable power assets that have reportedly piled up a combined debt of over Rs 100,000 crore. The ultra mega power projects that came into being amidst big fanfare have now become the biggest liability of private power generators seeking to dump them on banks and SEBs. Since no private company would share its profits with a bank, financial institution or the government, why should the government undertake the burden of these companies that have bagged projects based on tariff-based bidding factoring in imported fuel? Before asking the government, power agencies or banks to share the burden, these corporate groups need to learn to make sacrifices. All the big four power projects put on block belong to the most respected companies, which have decent revenues and profits.
The groups will have to leverage their balance sheets to bailout the special purpose vehicles (SPVs) floated for the ultra mega power projects. As in the case of steel projects, whose debt is being restructured or equity sale attempted, RBI’s next target should be to deal with stressed power assets. Here again, there are a variety of options for the RBI and lenders. Handing over these stressed power assets to private or foreign power generators, which can turn them around, need to be explored. If that is not possible, banks and state-run power agencies should work on the possibility of converting the outstanding debt into equity, rejig power purchase agreements and enlist companies like NTPC to run the projects without offering any benefits for existing promoters in the next ten years.
Another option would include retrofitting these projects to be run on domestic coal that can be sourced from CIL and its subsidiaries. The final option is to leverage government-to-government contacts for sourcing coal in global markets for these projects. Fuel agreements can be structured like the Indo-French pact for Rafale jets, without the commercial global tenders. As in steel, the last option that lenders and governments should consider is liquidation of assets ‘as on where is basis’. In the first batch, the RBI and lenders may consider the Tata Power’s Mundra power project. Similarly, Adani Power’s project at the same venue with 1800 mw and Essar Power projects that run on imported fuel may also be clubbed in this strategic debt restructuring plan. The rest will follow.