战略与国际研究中心-Creating-a-National-Electricity-Market--India-s-Most-Important-Power-Sector-Reform_28页_1mb

Summary of Stressed Assets in the Indian Thermal Power Sector

Core Content

The Indian thermal power sector is currently facing significant stress due to a combination of financial, operational, and regulatory challenges. This summary outlines the key issues, trends, and proposed remedial measures to address the sector's problems.

Main Challenges

• Fuel Supply Issues: Inadequate coal and gas supply is a major cause of stress. Coal India reduced contracted supplies to maintain a PLF of 80%, while gas production from the KG-6 Basin dropped from 56.0 mmscmd in FY2011 to 5.5 mmscmd in FY2018, affecting approximately 15,000 MW of gas-based capacity.

• Project Cost Overruns: Private sector projects have faced significant cost overruns, with many exceeding original estimates by 70-80%. Promoters have struggled to raise additional equity due to macroeconomic conditions and reduced cash flows from existing plants.

• Lack of Long-term PPAs: DISCOMs have not entered into long-term or medium-term power purchase agreements (PPAs), leading to underutilisation of thermal capacity and financial strain on project companies.

• Muted Power Demand: Low growth in industrial and domestic power demand, combined with increased supply, has led to a surplus and delayed payments by DISCOMs, causing liquidity mismatches.

• Captive Coal Mine Cancellations: The summary cancellation of 214 coal blocks allocated to power projects by the Supreme Court has put 24,000 MW of captive coal-based thermal capacity under stress.

• Regulatory and Contractual Delays: Delays in tariff approvals and regulatory clearances have hindered project recovery. Litigations and delayed payments have further exacerbated financial stress.

• Financing Problems: Banks and financial institutions (FIs) have been reluctant to finance projects without PPAs, and interest rate hikes have increased project costs. The RBI's 2018 circular has triggered insolvency processes for large unresolved loans, which are under review in the Supreme Court.

• Insolvency and Bankruptcy Code (IBC) Impact: The IBC has shown promise in resolving large NPA cases in the cement and steel sectors, but its application to the power sector is contentious. As of September 2018, 1,198 corporates were undergoing IBC processes, with only 56% recovery on average.

Key Trends

• Installed Capacity: As of 31 October 2018, India's total installed thermal capacity was about 3,46,000 MW, with coal-based projects accounting for 1,95,993 MW and gas/diesel-based projects for 24,937 MW and 838 MW respectively.

• Private Sector Growth: The private sector's share in installed capacity increased from 29% in 2012 to 46% in 2018, with over 94,000 MW of private capacity added in the last six years.

• PLF Decline: The average PLF of private thermal plants fell from 84% in 2009 to 54% in 2018, with official statistics underestimating the real supply deficit (6-8% vs 1%).

• Stressed Capacity: As of the latest data, 40,130 MW of thermal capacity is under stress, with 60,000-65,000 MW of coal-based projects being particularly affected.

Remedial Measures

1. Feedstock Availability

• Coal Supply: The SHAKTI scheme aims to improve coal supply to stressed projects. Rationalisation of coal linkages and transparent e-auctions can reduce variable costs.

• Domestic Coal Production: Augmenting domestic coal production with expeditious approvals and making it available to stressed projects through forward e-auctions is essential.

• Gas Supply: Reviving the e-bid RLNG Scheme (supported by PSDF) could help address gas supply shortages.

2. Off-take Related Measures

• PPA Aggregation: NTPC and PTC can act as aggregators to procure power through transparent bidding processes, especially for projects without long-term PPAs.

• Grace Period for Uncommissioned Projects: Stressed projects not yet commissioned should not have their existing PPAs cancelled and should be given a grace period of two to three years.

• Flexible Power Supply: Promoters should be allowed to supply power from alternate operational plants under existing PPAs, without altering procurement costs for five years.

• Improved DISCOM Finances: Initiatives like Ujjwal DISCOM Assurance Yojna (UDAY) and the DEEP portal can improve DISCOM viability and facilitate medium-term power procurement.

3. Bringing Stressed Capacity Back on Stream

• Retirement of Old Plants: Prioritising the retirement of old, inefficient, and non-compliant capacity (around 30,000 MW) can create space for stressed assets to be revived.

• Phased Replacement: Replacing coal-based capacity with efficient supercritical plants of 500 MW+ is a viable option.

• NIIF and NTPC Involvement: The National Investment and Infrastructure Fund (NIIF) and NTPC can play a key role in reviving stressed projects, especially those over 90% complete.

• Asset-Specific Strategy: A differentiated approach is necessary, considering the stage of construction and availability of PPAs. Projects under 50% completion may benefit from maintaining the status quo with existing PPAs.

4. Financing Suggestions

• IBC Implementation: The IBC framework is being used to resolve stressed assets, but its effectiveness depends on a tailored approach and stakeholder collaboration.

• Strategic Sale Options: Banks should consider selling stressed assets to ARC, financial/strategic investors, or setting up an AMC for funding via AIFs.

• Stakeholder Collaboration: A multi-pronged strategy involving all stakeholders is essential for effective resolution, including policy changes to support stressed projects.

Conclusion

The Indian thermal power sector is under significant financial and operational stress due to a range of factors, including fuel shortages, inadequate PPAs, cost overruns, and regulatory delays. The IBC has shown potential in resolving these issues, but its application requires a nuanced, stakeholder-driven approach. Key remedial steps include improving fuel supply, enhancing off-take mechanisms, reviving old capacity, and adopting flexible financing strategies. These measures are crucial to ensure the sector's revival and sustainable growth.