NTPC prepares war chest to bid for stressed assets; shortlists 8-9 projects

NTPC prepares war chest to bid for stressed assets; shortlists 8-9 projects
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New Delhi, Oct 18: NTPC, India’s largest power utility, has received support from banks for funding its plan to buy assets landing in insolvency courts. The state-owned power generator is learnt to have evaluated all the 32 stressed coal-based units and shortlisted eight to nine of them, totalling 10 gigawatts (Gw).
The total capacity of the 32 stressed power projects is about 40 Gw, and the amount of loans stuck in them is Rs 2 trillion.
According to NTPC sources, banks are ready to finance the “war chest” that the company will use to bid for projects undergoing resolution in the National Company Law Tribunal (NCLT). The company, they added, had set stringent criteria for choosing such projects.
“We are looking at projects that have a coal supply stream, robust infrastructure built by a noted contractor, and land and allied clearances, in either operational or about-to-be-operated state,” a senior company executive said, requesting anonymity. Lack of power purchase agreements (PPAs) would not be a hindrance as NTPC could facilitate sale of power, the executive said.
NTPC, the executive said, would either pursue states to sign long-term PPAs (up to 25 years) or sell through medium-term contracts through central agencies. “If nothing, we can also use these units for selling power in the merchant or spot market,” he said.
Recently, Power Finance Corporation, along with Power Trading Corporation, launched a pilot scheme for buying power from the stressed units and selling it to states for the medium term (three to four years).
NTPC’s move comes in the wake of rising power demand and failure of several resolution plans for stressed assets in the power sector. NTPC is envisaging a power demand growth rate of 9-10 per cent, and plans to add 20 Gw capacity by 2022. NTPC executives, however, said the energy conglomerate was looking at revising the capacity addition to meet the rising demand.
During the last quarter, the power demand growth was 7.67 per cent and in October, it has crossed 12.6 per cent.
The Central Electricity Authority has revised its projection, saying 6 Gw thermal power is needed during 2017-22. It earlier said India didn’t need any new thermal power. Power Minister R K Singh on Tuesday acknowledged the rising demand and said it was time India built new capacity.
The government-owned power producer earlier issued a tender to purchase stressed assets and received interest from four companies. The tender has not been closed till now due to issues around the “valuation of the project”.
NTPC was also approached by Rural Electrification Corporation (REC) to be the operations and management partner for its Pariwartan scheme, which aimed to be a warehouse for stressed assets. It had also identified close to a dozen assets. NTPC, however, said it had not received any proposal from REC.
The Supreme Court last month directed all cases filed against the Reserve Bank of India’s February 12 circular to itself and ordered the status quo in 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. Of the 32 coal-based stressed projects, there are only six in which any sale progress is going on.