Government moves RBI to bail out lenders of Dabhol Gas based power plant...

 

Coming to the rescue of the lenders of Ratnagiri Gas and Power Projects Ltd (RGPPL), including SBI and ICICI Bank, and PSU promoters NTPC Ltd and GAIL India Ltd, which have huge exposure in the beleaguered Dabhol project, the finance ministry has asked the Reserve Bank of India (RBI) for a one-time relaxation to save the company and its Rs. 13,000-crore  assets from being classified as a non-performing asset (NPA).

“At a recent meeting chaired by finance secretary Arvind Mayaram it was directed that the department of financial services (DFS) will take up the matter for relaxation of asset classification norms to RGPPL with RBI, with a request for extended forbearance till March 31 2014 as a one-time exception, considering the circumstances and the exposure of PSUs, including PSU banks,” a senior government official told Hindustan Times.

The move would not only provide RGPC a breather, but also give some time to the lenders who would otherwise have had to show fresh slippage in their books.

RGPPL is the company promo­ted by NTPC and GAIL India’s largest gas-based power plant, the 1967 mega watt Dabhol Power project that is currently stranded due to lack of availability of domestic natural gas.

The lenders and PSU promoters of RGPPL have been sounding the alarm over Dabhol’s balance sheets. NTPC, SBI and ICICI Bank had in separate communications to the government warned that the project is on the verge of becoming an NPA, which would have a backlash on its promoters.

The company has a debt exposure of Rs. 8,500 crore, apart from equity ownership by PSU and banks.

“The viability of the plant is in question, and it was clearly pointed out in the meeting that RGPPL has not been able to repay debt to lenders from September 2013, and unless adequate affordable domestic gas is ensured and the beneficiaries commence paying corresponding fixed cost, the plant will be declared an NPA,” the official said.

The meeting also decided that the petroleum ministry would move a note seeking directions from the empowered group of ministers (EGoM), about gas allocation and implementation of priority to RGPPL along with fertiliser units as per its original decision.

Further, Mayaram will write to chief secretary of Maharashtra, indicating that the state government is required to pay outstanding dues to RGPPL for the period when power was supplied to it.

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Indian government to disallow the ecb from china for power projects to protect the domestic market...

 

Indian Government has decided to disallow the cheaper External Commercial Borrowings  from China in terms of Yuan credit for power plants to protect the domestic power equipment manufacturers market.

External Commercial Borrowings (ECB) refers to commercial loans from overseas lenders. It can be in the form of bank loans, buyers’ credit, suppliers’ credit or securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares). The minimum average maturity of such loans is three years. ECB is usually considered cheaper compared with domestic loans.

Currently, Indian companies are allowed to raise such loans up to a limit of $1 billion.

Earlier, to mitigate the high power shortage in the country, the decision was taken to allow ECB in Chinese Currency to facilitate imports of power equipment's such as Boiler, Turbine, Generated and related accessories.

However, post that the share of Chinese Equipment's in the domestic market has been raised to as high as 50% and according to the Reserve Bank of India availability of long-term, low interest export credit from China will further distort the status in favor of Chinese manufacturers adversely affecting the domestic manufacturers.

Meanwhile, domestic companies got some relief last year, when import duty was raised on imported equipment for power projects.

 

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Additional Reading...

• http://www.thehindubusinessline.com/industry-and-economy/to-halt-chinese-imports-govt-to-bar-yuan-borrowings-for-power-sector/article4949460.ece
• http://www.metisbs.com/details/new/38911/to-halt-chinese-imports-govt-to-bar-yuan-borrowings-for-power-sector.html

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RBI to allow treating the loans to the new umpps as secured debt...

 

Reserve Bank of India, has decided to allow the loans to the new Ultra Mega Power Projects (UMPPs) to be considered as secured debt even though the land and other plant assets will be owned by Distribution Utilities not the wining bidder.

As large nos of banks/financial institutions has raised concerns saying loans to the proposed UMPPs would be riskier in the absence of ownership by the borrower.

As per the newly proposed bidding guidelines by Ministry of Power, UMPPs and other such location specific plants will be owned by Distribution Utilities and the bidders will act as contractors for construction the project and operating them for 30 years.

However, the Bidder and Distribution Utilities can jointly mortgage the site and the plant with the banks during the tenure of the loan and post that the same will be transferred to the Distribution Utility for a cost.

Further, the guidelines also sought to make the norms stringent by barring all non-core sector companies from participating in the bidding. Also the Bidder cannot offload more than 51% equity in the project till commissioning of the project against the earlier mandate of 26%.

As per the proposal, bidders with required technical expertise will be asked to submit a fixed charge for the initial year unlike the earlier process of submitting levellised tariff for 25 years. The actual tariff payable to the concessionaire will be revised annually based on a pre-determined index. Fuel cost of the power projects will be passed on to the consumers.

The norms, known as standard bidding documents, will be taken to the cabinet committee on economic affairs for approval and a note has been circulated for consultation. Once approved, the norms will pave way for auction of two ultra mega power projects in Bedhabahal and Surguja in Chhattisgarh that have been put on hold.

The government has so far awarded three ultra mega power projects to Reliance Power and one to Tata Power. Sites for 10 more such projects have been identified in Tamil Nadu, Karnataka,Orissa, Andhra Pradesh, Gujarat, Bihar, Jharkhand and Maharashtra.

 

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Additional Reading...

http://articles.economictimes.indiatimes.com/2013-07-22/news/40727729_1_power-projects-umpps-distribution-utilities

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RBI to issues guidelines to ease the debt burden on Power Companies…

Latest in the series of good news for power sector, recently Reserve Bank of India (RBI) has announced that it will issue guidelines to allow external commercial borrowing (ECB) by power producers to retire their rupee debt with Indian banks in next seven days.

 

This move came from the announcement by Hon’ble Finance Minister Mr. Pranab Mukherjee in the Budget 2012-13 to allow power sector companies refinance their rupee debt with cheaper funding from ECB and thereby opportunity to expand their loan portfolio with banks to muster funds required for their expansion and new projects.

 

Several banks and financial institutions have reached the sectoral exposure limit allowed by RBI for the power sector there putting pressure on power sector companies to mobilise funds from the domestic market.

 

The RBI will also issue guidelines to allow ECB for making capital expenditure on the maintenance and operations of toll systems for roads and highways.

 

The remaining decisions on ECB financing announced in the Budget would be taken up separately by RBI at a later stage.

 

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