In a recent initiative to accelerate the turnaround of stressed power assets, the Ministry of Power (MoP) has issued an advisory to state gencos and power departments, urging them to participate in the ongoing insolvency proceedings of these stressed assets. The move is aimed at facilitating quicker resolution of stressed assets and enhancing power generation in the country. The latest advisory highlights that stressed projects face challenges, such as inadequate capital investment, shortage/disruption in coal supplies and prolonged recovery under power purchase agreements, and the participation of gencos will help promptly address these issues. The operational and implementation expertise of the genco will help in reducing turnaround time and rapidly bringing these stressed assets to the operation stage.
To recall, in 2018, 34 thermal projects with a capacity of over 40 GW were categorised as non-performing assets by the Parliamentary Standing Committee on Energy. Combined, these plants had an outstanding debt of Rs 1.7 trillion ($23 billion). Of those, 11 have been resolved through debt restructuring schemes by lenders, and several others are at various stages of resolution. In the recent advisory, the MoP has listed four assets that are either ready to operate or are already operational. The assets are Rattan India Power (0.5 GW), Coastal Energen (1.2 GW), KSK Mahanadi (1.8 GW) and Shri Maheshwar Hydro (0.4 GW).
The advisory notes that the implementation of the Insolvency and Bankruptcy Code (IBC) has been 
instrumental in reviving stalled thermal power assets. Central PSUs such as NTPC Limited, NHPC Limited, SJVN Limited, Power Finance Corporation Limited and REC Limited have actively participated in reviving various distressed power assets through the IBC. They have done so by directly participating in the corporate insolvency resolution process (CIRP) as resolution applicants or by supporting resolution plans as lenders. The involvement of central PSUs has played a key role in resolving and reviving stressed power assets, ensuring the release of substantial public investments and national resources stuck in these projects. This approach has resulted in significant capacity additions with definite cost and time savings as compared to initiating new projects. Importantly, it has facilitated the availability of competitively priced power to end-consumers from stalled power projects that would otherwise have faced losses or been scrapped due to devaluation or liquidation.
The advisory encourages state-owned power gencos to actively participate in the CIRP for stressed power assets that hold strategic and commercial significance for the capacity expansion plans of their respective states. The National Company Law Tribunal (NCLT) route offers the advantage of the “clean slate” principle embedded in the IBC, 2016. This principle safeguards gencos from unforeseen liabilities related to issues or claims from periods preceding admission under the IBC, 2016.
The resolution plan, once approved, will become binding on all stakeholders, including statutory claimants. Only claims included in the approved resolution plan, sanctioned by the Committee of Creditors and the adjudicating authority (NCLT) will be considered, while all other creditors’ claims will be extinguished. This unique feature gives the acquirer a clean slate. Such protections are not available in the case of resolutions or acquisitions outside the purview of the IBC, 2016.
In the advisory, the MoP has attached an indicative list of stressed power assets that can be acquired by state-owned gencos. The list includes projects totalling 6.55 GW – Rattan India Power Limited’s 5×270 MW thermal power plant (TPP) (Maharashtra), Coastal Energen Private Limited’s 2×600 MW imported coal-based TPP (Tamil Nadu), KSK Mahanadi Power Company Limited’s 6×600 MW TPP (Chhattisgarh) and Shri Maheshwar Hydel Power Corporation Limited’s 10×400 MW hydropower plant (Madhya Pradesh).
To conclude, the participation of state gencos can facilitate the resolution of stressed power assets. The state gencos are poised to address the issues and challenges facing power plants more expeditiously, thereby accelerating the revival of assets.
Akanksha Chandrakar
