New ARC may take a load of power NPAs

Our Bureau New Delhi | Updated on September 05, 2018 Published on September 05, 2018

Surge The per capita utilisation of power in Telangana is 33 per cent higher than the national average   -  V_V_Krishnan

Lenders can move stressed power assets from NCLT to Pariwartan scheme

Lenders weighed down by exposure to stressed assets in the power sector may soon find relief. An asset restructuring company (ARC) under the Power Asset Revival through the Warehousing and Rehabilitation (Pariwartan) scheme is to be incorporated by October.

The ARC will allow lenders to park stressed power assets facing liquidation proceedings under the National Company Law Tribunal (NCLT) route.

A decision to incorporate the ARC was taken at a meeting of the Power Minister with lenders here on Wednesday. An official present at the meeting said: “REC (Rural Electrification Corporation Ltd) made a presentation on the Pariwartan scheme before the lenders to address the issue of stressed assets. The scheme is for projects that do not have power purchase or fuel supply agreements — some are commissioned, while some are likely to be commissioned. The scheme is meant to bail out these projects for four-five years.”

The process

“Pariwartan needs to be registered with the RBI as an ARC,” explained the official. “Once registered, lenders will be allowed to take out stressed assets from the liquidation route under NCLT and bring them under the asset reconstruction route. The ARC will be registered in three-four weeks.”

“The ARC will comprise borrowers, power PSUs and banks, and NTPC will also be a partner. They may hold stakes in the ARC and conduct operations and maintenance (O&M),” he added.

Pariwartan is one of many solutions proposed to rescue ₹1.74-lakh-crore power sector assets facing liquidation, since they failed to service debt beyond 180 days. According to the proposal, once a stressed asset is identified, it will be transferred to the Pariwartan ARC at net book value (NBV), for which the latter will issue a warehousing receipt. The asset will continue to be listed as an NPA in the lenders’ books, which will make a provision as per the RBI’s norms for ARCs.

The asset will be managed by a professional O&M agency, preferably NTPC. The Centre will support coal supply. This will ensure value preservation of the asset and cash flow to the ARC, with a potential for full or partial debt servicing.

The asset will be auctioned once demand becomes visible. However, no asset will be held by the Pariwartan ARC for more than 60 months, the proposal noted.

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Published on September 05, 2018
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