Dwindling gas supplies may push independent power producers to the wall and expose their bankers to the risk of payment default.

Unless these plants achieve some minimum power generation, they will find it difficult to service loans, according to sources in the power sector.

While the first set of projects, implemented before 2000, have adequate supplies from GAIL, expansionary moves and new projects implemented after 2004 are faced with reduced or no supplies.

For some of the expansion projects, gas supply is close to 40 per cent and Reliance has indicated it could get worse. The situation is now beyond the control of promoters when it comes to expansion of projects as many new ones have been grounded.

A senior official in the Andhra Pradesh Government summed up the situation to Business Line , “These plants are just like tombs and monuments. There is no gas supply possibility in the near future.”

Tough even for biggies

The gas-based plants are owned by some of the large infrastructure companies such as Reliance ADAG, GVK, GMR and Lanco, among others. While they do get some cushion by being diversified, they would have to tap the lenders to restructure loan terms, according to a spokesperson of a leading infrastructure company. On Sunday last, when Mr Sanjay Reddy, Vice-Chairman of GVK, was asked about gas supplies, he replied, “God knows.”

GVK has put on hold its gas plant expansion projects. A promoter of two major thermal power projects requesting anonymity wanted to know how financial institutions and banks failed to see the writing on the wall and said they failed in the due diligence. While consumers are facing hardships due to a drop in energy generation, the promoters of these IPPs would be hard pressed to meet term-sheet conditions, which may lead to repayment delays and defaults.

> vrishi@thehindu.co.in

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