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40-50% debt haircut can help boost stressed coal plants: CRISIL report

If haircuts are also supported with elongated repayment structures, lower interest rates, comfortable liquidity and adequate working capital, CRISIL says will make these projects financially viable

Advait Rao Palepu 

power, electricity

Banks will have to take a 40-50 per cent haircut on stressed coal-based projects in order to safeguard and enhance the viability on a sustained basis, says ratings agency These projects account for Rs 1 trillion in outstanding debt, and are currently ‘non-performing’ assets, incapable of servicing their existing liabilities. said that debt haircuts for these plants can improve the cost of electricity generation in the near term.

If the haircuts are also supported with elongated repayment structures, lower interest rates, comfortable liquidity and adequate working capital, says will make these projects financially viable.

Subodh Rai, senior director at CRISIL Ratings, says, “The haircuts and safeguards, if implemented, would ease debt servicing for these capacities and will, in turn, lower their cost of generation by 30 per cent to Rs 3.7 per unit for the next five years. That would be well below the current average cost of procurement for state distribution ” Advait Rao Palepu

First Published: Wed, October 10 2018. 01:17 IST
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