Top lenders to power projects including State Bank of India, Punjab National BankNSE 0.69 %, Power Finance Corp and others have agreed to decide the fate of a dozen stressed assets totalling about 13,000 MW by October 10.
At a meeting between lenders and top government officials late on Thursday, large lenders explained risks of moving power projects to insolvency court to disagreeing banks, most of which have smaller exposures, and sought to arrive upon a decision before the set deadline, sources said.
The meeting was attended by top executives of most banks with exposure to power sector, power secretary Ajay Bhalla and other senior officials of power and finance ministries, they said.
Lenders were informed about rising electricity demand and measures being proposed by the high level empowered committee that is working to address issues related to fuel, discom payment delays and regulatory approvals.
“Banks with lesser exposure to stressed assets in power sector have been asked to come together and decide either to agree with the resolution plan or refer the projects to bankruptcy court rather than dilly-dallying,” said a senior official who attended the meeting. “The disagreeing lenders were also informed about the risk of getting lower valuations in the insolvency court.”
None of the resolution plans for the power projects under bidding have so far received 100% lenders nod. Projects like GMR Chhattisgarh Energy, KSK Mahanadi, Prayagraj Power Generation Corp, Essar Mahan, RKM Powergen, RattanIndia Amravati and Nashik are awaiting 100% lenders’ nod to complete resolutions.
In most resolution proceedings, banks finalised bidders but not deals due to resistance from 15-20% lenders even as the offers are better than expected requiring lenders to take 60% haircut, the sources said.
Banks will not be able to transfer the power projects to new promotors even if they agree to finalise the deals because of the status quo verdict of the Supreme Court. “However, if the resolution plans are decided, it can create a favourable ground before the court to salvage at least some of these good operational assets from insolvency proceedings,” another official said.
Banks and power producers got an interim relief from the Reserve Bank circular’s mandate referring the projects to insolvency court due to Supreme Court’s status quo order. Power companies had moved courts after the RBI refused extension of deadline for completing resolutions of stressed power plants. The Allahabad High Court ruled in favour of RBI, the Supreme Court had on September 11 ordered status quo on the projects and transferred all cases on the circular to itself.
RBI’s February 12 circular mandated the banks to resolve stressed assets by August 27 or move them to bankruptcy court.
Source: Economic Times