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Dec 08, 2017 12:24 PM IST | Source: Moneycontrol.com

PFC, REC wary but govt explores forming SPV to take over stressed power assets

The government is now exploring the option of forming a special purpose vehicle to ensure those stranded power units are up and running and interests of all stakeholders are taken care of

Dhirendra Tripathi @dtrips
 
 
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As it attempts to resolve an outstanding debt of Rs 1.8 trillion stuck in as many as 34 coal-based power generation projects, the government is now exploring the option of forming a special purpose vehicle to ensure those stranded power units are up and running and interests of all stakeholders are taken care of, according to an official familiar with the development.

“The idea of forming an SPV has been forwarded by Niti Aayog. It will have a broad-based shareholding structure with the government and the two main lenders to the power sector, Power Finance Corporation and Rural Electrification Corporation, also likely to be part of it even as they are currently unsure of the approach."

The Cabinet secretary held a meeting on December 4 on this and the Ministry of Power has sought two months to arrive at a final solution to resolve the issue,” the official said.

The 34 coal-based power projects that are stranded comprise a capacity of 40,130 MW with almost all of it in private sector. Stranded projects are those where no power purchase agreements between the buyer and the generator has been signed nor is there any coal linkage and thus they haven’t been commercially commissioned. Some of these projects may be operational with the developing managing a little short-term supply of coal and selling some power in the market.

“Out of the 34 projects, six are now ‘100 percent resolved’, three ‘almost resolved’ with the ministry claiming 16 are close to resolution. There is total uncertainty on the remaining nine. When there’s a certain finality on the resolution of all, then the idea of an SPV could take shape,” the official told Moneycontrol.

The official said in an ideal situation, the SPV would itself not take over a project since it wouldn’t have the expertise of running a power plant. Instead, he said, the SPV would decide the best options possible to revive a given project. These options could include the state-owned generator NTPC taking over the plant on its own or in a joint venture with the SPV.

Auctioning the plant and then selling it to another private sector entity is also another option that the SPV could explore, the official said.He said PFC and REC were unsure of lending their support to the idea of forming an SPV as that may delay the process of recovery of their dues – a delay would force the lender to classify the loans as NPAs -- but with the Prime Minister’s Office monitoring the process, any eventuality was possible.
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