Lenders initiate action to take 11 stressed power assets to NCLT

Lenders led by SBI are preparing to take 11 stressed power assets to the bankruptcy court next week with the RBI’s deadline for initiating insolvency proceedings fast approaching, sources said.

“SBI has called for a meeting of lenders on Thursday to discuss starting insolvency proceedings against 11 accounts, which were earlier supposed to be resolved outside the NCLT,” said an industry source who did not want to be identified.

He added that lenders arrived at this decision based on advice from legal experts.

The move follows Allahabad High Court last week denying power companies relief from the RBI’s February 12 circular tightening the norms for resolution of stressed assets.

“Even though in many of the cases resolution was almost achieved and buyers were almost finalised, RBI guidelines are very clear on the deadline, and banks have no option but to take those assets to the NCLT,” said another person with knowledge of the development.

An SBI-led consortium of bankers, earlier this year, shortlisted 11 power plants with up to 15,000 MW total capacity for change of management under the scheme of asset management and debt change structure or Samadhan scheme. Projects of Lanco Infratech, Jaypee Power Ventures, KSK Mahandi, Coastal Energy, Avantha Power, SKS Power and Prayagraj Power were among those assets selected for the scheme.

In fact, Prayagraj Power has emerged as one of the first cases where resolution was about to be finalised outside the NCLT. Last week, Tata Power and ICICI Venture-promoted Resurgent Power announced receiving Letter of Intent from the lenders of Prayagraj Power, which was earlier promoted by Jaiprakash Associates. However, JSW Energy, another bidder for the 1,980 MW thermal power plant, revised its bid to ₹6,200 crore from its earlier bid of ₹5,890 crore.

Industry sources suggest that in cases like Prayagraj where the resolution plan is almost finalised but not yet fully implemented or did not yet get a majority vote from the lenders, there is no time left to complete the process and, hence, initiating insolvency proceedings is the only way.

Industry watchers, however, warn there is a risk of power assets further losing value once they are referred to the NCLT.

Experts also note that very few power assets have so far got resolved, indicating the limited number of buyers for these assets as well as the limited opportunity that these assets provide to investors. Only those assets with PPAs and fuel arrangements could possibly be looked at by investors, and there is just a handful of such assets out of around 40 stressed assets identified earlier.

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