Power Finance Corporation on guard as it chalks out asset resolution plan

Power Finance Corporation (PFC) is looking at resolution of almost half of its total exposure to the power assets (10 out of a total of 23 projects), “hopefully” before November. Along with this, nine projects have already been submitted to the insolvency courts. The key sector lender, however, would be “cautious” of lending to private companies from now on, according to the management.

With an exposure of Rs 255 billion across 23 power projects, the lender is preparing for a haircut of 54 per cent. “There will be no further provisioning towards stressed assets after the current round of resolution,” a PFC official said during a media interaction. 

There are around 11 Gw of assets, with PFC’s exposure at Rs 200 billion, undergoing resolution outside the insolvency route, the official pointed out. This could be concluded soon with the Supreme Court halting any insolvency proceedings till November.

The Supreme Court on Tuesday directed all cases filed against the Reserve Bank of India’s February 12 circular to itself. It ordered status quo in the case of all stressed power assets till the next hearing on November 14. The February 12 circular mandated debt resolution of stressed assets by September 11, else they would land in the NCLT  for insolvency proceedings.

“There are certain projects such as GMR Chhattisgarh, Jhabua Power and KSK Mahanadi where the bidder has been selected. We are hopeful that the deal will be finalised in two months. In the case of KSK, there are 27 lenders and not all are on board so we can just hope that these are all resolved in time,” said PFC Chairman Rajiv K Sharma.

Two projects—RKM Energen and Jhabua Power—have received the power purchase agreement (PPA) through the pilot scheme of PFC and Power Trading Corporation for medium-term PPA, according to Sharma. RKM has secured 550 MW and Jhabua 100 MW for a period of three years. PFC officials said this would help projects which were languishing for want of PPA. The pilot scheme by PTC aims to revive stressed assets by getting states on board for buying power from these projects for three years. The scheme has been able to tie up 1,900 MW through it. 

Sharma said PFC had received a one-time settlement offer from current promoters in Essar Mahan, Essar Transmission, Rattar India Amravati Jhabua Power and RSJ India. Lenders are taking a view on it, he said.

In its latest results, the company said its provision for non-performing assets came down to 5.43 per cent of the total loan book from 7.39 per cent a year ago. 

While stating that PFC would be cautious in lending to the private sector, Sharma said,  “there are anyway hardly any new projects being set up by the private sector. But if they apply to us for financing, we will be extremely cautious.’’ He added that lending to state-owned projects was not at all risky.

PFC said nine projects including Lanco Amarkantak, Maheshwar Hydro, JAL Sikkim, Ind Barath Madras, KVK Nilanchal etc totalling 5 GW were already with the NCLT.  These companies together owe Rs 81 billion to PFC.