Global firms line up for buying Power Finance Corp's stressed assets

Bank of America Merrill Lynch, Edelweiss and JM Financial are some of the financing agencies that may bid for the three stressed power projects

Close to a dozen Indian and foreign financial institutions and funds have expressed an interest in buying the stressed thermal power assets of Power Finance Corp (PFC).

Bank of America Merrill Lynch, Edelweiss, JM Financial, KKR, Lonestar-IL&FS, Resurgent Power, SC Lowy, Torrent, Varde Partners, SSG Asia, Worlds Window EXIM and NIIF are some of the financing agencies that may bid for the three stressed power projects that PFC has put up for sale.

The power major has invited expressions of interest (EoIs) for four plants where it has a debt exposure — GMR Raikheda (1,370 megawatt), KSK Mahanadi (2,400 Mw), Essar Mahan (1,200 Mw) and the Avantha group-owned Jhabua Power (600 Mw). For GMR Raikheda, five bidders have submitted binding offers — Adani Power, JSW Energy, NLC India, Torrent Power and Vedanta. 

Adani Power and Vedanta have submitted EoIs for KSK Mahanadi and Jhabua as well. Among others, global financial institutions and PE-backed funding platforms of power companies such as Lone Star and Resurgent Power, which has equity participation from Tata Power, are also in the race. The EoIs for Essar Mahan would be floated soon, PFC executives said.

“There is a heightened interest among financial institutions, independent power producers and integrated utilities for these stressed assets, given the revised fixed charge emerging after possible haircuts. State generation companies and utilities should also explore this opportunity to lock in inexpensive power for SAUBHAGYA customers. It can be also utilised for phasing out old projects,” said Sambitosh Mohapatra, partner, power and utilities, PwC India.

PFC and the other lenders are expecting a haircut (which refers to write-offs) of more than 50 per cent when power assets go through the insolvency route. According to industry experts, after the haircut, most assets would be available for Rs 2.5-3 per unit, an attractive proposition for institutional financers.

Of its total loan book, PFC expects around Rs 300 billion worth of assets totalling 14,000 Mw to land in the National Company Law Tribunal.