Power Finance Corporation to revamp its lending portfolio

Plans to shift gears from NPA-hit thermal to T&D and renewable energy

Power sector’s key financier Power Finance Corporation (PFC) is looking to shift its focus from conventional energy to other upcoming sectors such as transmission, last-mile distribution infrastructure and renewable energy. Lagging power demand and rising non-performing assets (NPAs) in the thermal power sector has pushed it to revamp its lending portfolio.

“Our funding for last-mile transmission and distribution projects in states is increasing. The ‘24X7 Power for all’ scheme alone envisages an investment of Rs 12 lakh crore. Apart from that, retrofit of existing thermal units for becoming energy efficient, refinancing of old projects would throw up interesting opportunities,” Rajeev Sharma, chairman and managing director, PFC told reporters.

He said power transmission projects, which were awarded to private players through tariff based competitive bidding (TBCB), would also be eligible for loans from PFC. 

“We will design our products and lending in accordance with the increasing focus on T&D. The share of renewable energy is definitely increasing,” Sharma said. PFC’s non-performing assets (NPAs) increased by a massive 300 per cent to Rs 30,718 crore pushing the company in red for the first time, mostly on account of change of RBI norms. “A large number of loans had to be reclassified as bad loans or restructured assets after PFC shifted towards the Reserve Bank of India’s (RBI) prudential norms as the power ministry norms especially for these projects expired this year. The effect was retrospective starting 2015, thereby assets totalling Rs 59,000 crore were realigned as NPAs,” Chinmoy Gangopadhyay, director (projects) at PFC.

PFC reported a quarterly loss of Rs 3,409 crore during Q4FY17. For the fiscal year 2016-17, the profit fell by 65 per cent in a year to Rs 2,126 crore due to extra provisioning for loan.

An indication of the increasing volume of stressed assets in the power sector, the percentage of gross NPAs to total loan assets stands at 12 per cent for PFC in FY17.  In FY16 it was 3.15 per cent.