After Tata Power, Adani Power offered to sell their power plants for free to the Gujarat state electricity board, Bajaj Energy’s project is set to join the list of non-performing asset for the lenders. Bankers said the company has stopped operations after the new Uttar Pradesh government cancelled the power purchase agreement citing high power cost thus effectively shutting down the 450 mw plant.
“The cancellation of the power project in UP could lead to Rs 2,000 crore NPA (non-performing asset) for banks which had lent funds to the company. With the closure of the plant the project would lose close to Rs 600 crore of revenue head straight to bankruptcy,” said a banker. Bajaj Energy is an associate company of Bajaj Hindusthan Sugar.
While cancelling the project, the new UP government led by Yogi Adityanath, the UP electricity board said as the board was buying electricity at the rate of Rs 7.22 a unit as compared to the average cost of Rs 4.11 a unit supplied by other units, it was unviable. Bajaj Energy has moved the court against the UP government’s move even as its 2,000 employees are now staring at the prospects of job loss. The project was supplying power to the state government for the last seven years at its full capacity.
The state has electricity deficit of 3500 mw during the peak hours even as spot price of electricity has shot up to Rs 9.92 a unit. If the state fails to buy electricity from the spot exchanges during peak time, it would lead to power shortfall.
The cancellation of PPAs comes at a time when the Indian Government launched the Sobhagya electrification' scheme at a cost of Rs 16,000 crore to provide electricity connections to 40 million unconnected households by December 2018 just prior to the General elections.
With another project facing bankruptcy the lenders are worried as Indian private power companies are facing a crisis of sorts with over 20,000 mw worth of projects up for sale. This includes L&T’s power projects apart from Tata, Adani and Essar’s power projects. Thanks to a change in coal export policy by Indonesia, all these projects based on imported coal have become sick. Take for example, Tata Power’s Mundra project constitutes almost Rs 18,000 crore of its capital employed with negative returns till date. Similarly, Adani Power’s net worth is Rs 3,000 crore and has almost Rs 49,230 crore of debt on its books.
The Essar group had also invested Rs 2,600 crore in the equity of Salaiya plant and has Rs 5,000 crore of debt, bankers said.
According to Sydney based Institute for Energy Economics and Financial Analysis, Adani Power will have to take a US$1 billion (Rs 6,500 crore) write-down on Mundra on top of the US$954 million net loss it just reported. In June 6th this year, Adani Power board approved the “slump sale” of the Mundra power project into a separate company so as to sell stake in the company to government-owned distribution companies.