Banks agree to extend lending, soon shut down power units to resume production

Lenders, including State Bank of India, Punjab National Bank and Bank of Baroda, have agreed to extend new working capital loans to six power projects that have been inactive for many years, including four imported coal-based units. Also, sector-specific lenders Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) have started negotiations with a number of units that are either closed or operating at very low plant load factor.

Lenders’ steps follow instructions from the Union Ministry of Power to help stalled power plants resume production with effective capital assistance. The government believes that the country’s power shortage will not decrease in the next few weeks due to high demand in the scorching heat.

According to sources, as the majority lender, SBI and PFC will extend new credit lines to the 300 MW Meenakshi Power Plant unit in Andhra Pradesh, while Bank of Baroda will lend to SKS Energy (600 MW) in Chhattisgarh. Also, the resolution professionals for these two projects have agreed to allow NTPC to take over the operation and maintenance (O&M) of the plant. The state-run power generation company will also meet the coal requirements of the two plants. The SKS Energy unit is said to have only 10 days of coal reserves. NTPC’s technical experts have already visited the SKS site and the plant resumption deadline will be finalized soon.

Sources added that the 1200 MW Essar Power Salaya project is awaiting payment of Rs 150 crore from Gujarat Discom GUVNL and a letter of credit from the lenders for resumption of the project. GUVNL has also agreed to pay Rs 150 crore while the promoters will bring in Rs 25 crore equity. It was also decided as part of a tripartite agreement that the balance of working capital with the lenders would come through a letter of credit issued by the lenders against a margin of Rs 100 crore.

The Ministry of Power announced on May 5 that all imported coal-based plants would have to run at full capacity under Section 11 of the Electricity Act to meet the growing demand for electricity. Many power generators expressed their inability to start operations due to arrears from DISCOM or lack of working capital for the plant. Similarly, for IL&FS, Punjab National Bank, the main lender, has agreed to start operations at the Cuddalore plant in Tamil Nadu. State Discom TANGEDCO has agreed to make a weekly repayment of `75 crore to lenders for the next five months under the restructuring plan, which will have to repay the next two quarters in addition to the current 2,000 crore arrears in addition to the current arrears.

“PFC has also provided Rs 369 crore under liquidation infusion project at IL&FS plant. The company was instructed that the payment should be used for the operation of the plant and all proceeds should be deposited in an escrow account, ”the source said. Plans for other domestic coal-based plants, such as the Ratan India Sinnar plant in Nashik and Reliance Power’s Vidarbha power plant, are also being worked on and work may begin soon. “We have to look at each project based on their needs and if the existing lenders are not willing to fund. Some project lenders have already agreed to provide working capital for the resumption of projects. We need to look at all of this before we can crystallize the plan, “the source said. The power ministry on May 11 directed PFC and REC to take necessary steps to arrange short-term loans for six months with adequate protection, for imported coal-based plants that are under pressure or under NCLT.