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Home News Power Sector News Banks staring at huge stressed loans of private power cos

Banks staring at huge stressed loans of private power cos

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DebtBanks which recently struggled to complete the restructuring of loans to state electricity boards (SEBs) could get another shock from the power sector in the next three years. Loans to private power producers estimated at Rs 95,000 crore is likely to come under stress and they could seek bailouts, or debt restructuring, by FY 2015. According to Credit Suisse, over the next 12 months, 12,500 MW of thermal power capacity (private sector) is scheduled to get commissioned. It expects 7,600 MW capacity, involving an amount of Rs 25,000 crore, to come under restructuring.

In 2014, out of 17,900 MW capacity addition, 12,100 MW involving an amount of Rs 37,100 crore is likely to come for loan recast.

Further, out of 16,500 MW capacity addition in 2015, 9,500 MW involving a debt of Rs 36,500 crore is set to come restructuring.

As per Credit Suisse estimates, 36 thermal power projects involving a debt of Rs 209,000 crore of private players are now facing potential stress.

Rating agencies have already expressed concern over the credit quality of private power companies in India.

"This is attributed to the large size of their capex programmes compared with their modest cash flow from operations and lack of long-term contracts for fuel supply and volume off-take," rating firm Fitch said.

However, a senior PSU bank official said there was no loan default in the private power sector.

"Two south-based business groups have already approached the CDR cell for loan recast. The Kingfisher episode has made us cautious. Non-performing loans were earlier repackaged into subordinated debt. It then defaulted on its obligations and now this may have to be written off," he said.

The projects facing potential stress include Adani (4 projects with a debt of Rs 24,100 crore), Lanco (five projects with a debt of Rs 22,100 crore), Reliance ADAG (three projects involving a debt of Rs 32,600 crore), Tata Power (one project with a loan of 14,400 crore), IndiaBulls (four projects with a debt of Rs 21,200 crore) and Essar (seven projects with Rs 21,900 crore debt).

Almost all of these projects are under various stages of construction and considerable money is already spent.

On the other hand, it says gas-based capacity of 14,000 MW is likely to be under stress given the lack of fuel availability. It estimates bank debt of Rs 36,500 crore is sunk in these projects. Credit Suisee has listed 15 private projects, including Reliance ADAG (Rs 10,700 crore debt), GVK (Rs 2,640 crore debt), Essar (Rs 3,150 crore debt), Lanco (Rs 2,720 crore debt), Torrent (Rs 3,340 crore debt) and GMR (Rs 2,870 crore debt) as potentially stressed.

The banking sector's short term exposure to state discoms is quite substantial and is estimated at Rs 1,50,000-1,70,000 crore as on March 2012, which is 3-3.6 per cent of banking credit and 45-52 per cent of total power credit. A large part of these loans were taken to fund the cash losses of the discoms.

More bailouts in the offing?

* 7,600 MW capacity, involving an amount of Rs 25,000 crore, to come under restructuring in the next 12 months

* In 2014, out of 17,900 MW capacity addition, 12,100 MW involving an amount of Rs 37,100 crore is likely for loan recast

* Out of 16,500 MW capacity addition in 2015, 9,500 MW involving a debt of Rs 36,500 crore is set to come restructuring

* 36 thermal power projects involving a debt of Rs 2,09,000 crore of private players are now facing potential stress

Source- Indian Express

 

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