Stressed power companies told to use cash surplus to pare debt

The power ministry has notified that certain stressed power plants would have to use their cash surplus after meeting operating expenses to service debt through a Trust Retention Account (TRA) managed by the lead banker to the project, as part of the stress reduction measure for the thermal power sector.

For developers using coal linkage under the amended Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI), a TRA should be set up, if it is not there already, as per an office memorandum issued on Monday. It said the entire revenue from generators would be deposited to the TRA, which will then be used to pay different stakeholders.

While the mechanism will help in better management of cash, power sector companies said the recommendations of the group of ministers that was constituted to examine the proposals of the high-level empowered committee set up to address the issue of stressed thermal power assets has yet to yield any results.

“The ministry of power is talking about net surplus utilisation and has specified on the mechanism on the cash flow that should be routed through the bank,” Ashok Khurana, director general, Association of Power Producers, told ET. “While this is part of the plan to reduce stress in the power sector, the bigger problem is that the earlier recommendations are yet to be implemented. They were approved in March but we are yet to see any benefits.”

Specifying on TRAs, the ministry said while the lead banker would act as a TRA agent, in case the lead financier is of a non-banking financial company, such as Power Finance Corporation and Rural Electrification Corporation, any lender bank can be appointed as the TRA agent.

From the company’s net surplus generated after operating expenses, the TRA, on behalf of the company, will first pay statutory payment (taxes), then fuel cost, transmission expenses, operation and maintenance expenses, interest on loan and finally principal payments.