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Industrial Products India, Industrial Manufacturers & Suppliers
 




 
   
 
 
 

Power plants in pause mode........

Power plants in pause mode, lenders press panic button


On July 21, Sajjan Jindal-promoted JSW Energy said it had put its Ratnagiri expansion plans on hold due to costly imported coal. High cost of imported coal had already dented its profit. The company believes it would be wiser to defer the plan until there is some clarity on the issue of imported coal.
JSW is not the only company which has put its project on a pause mode. Reliance Power’s imported coal-based ultra mega power project (UMPP) at Krishnapatnam in Andhra Pradesh is yet to make any drawdowns from the Rs 13,125-crore loan which was tied up last year.
The company, like JSW, is looking for some solution to the imported coal issue, and has not responded to queries regarding the same.
In fact, many power projects have fallen victim to fuel troubles from domestic sources since Coal India, the monopoly producer, is unable to meet demands from the power sector. Captive coal blocks too had their own share of problems with the environment ministry putting sanctions on hold. Mixed with traditional land acquisition problems, loans to the power sector have become a recipe for disaster for many bankers.
M V Nair, the chairman of public sector Union Bank of India, indicated strain and slippages in funds lent to the infrastructure sector. While he said there was no big trouble yet, he did admit that many projects, including some power plants, have overshot execution milestones due to problems in fuel linkages and clearances. “This could turn some of them into non-performing assets,” he said.
The viability of imported coal-based projects, like the Krishnapatnam UMPP, has especially changed drastically after the Indonesian government decided to benchmark exported coal to international prices, making coal costlier. A Reliance Power spokesperson did not respond to an e-mail query on the steps being taken by the company to address lenders’ concerns.
Another imported coal-based UMPP in Mundra, Gujarat, has been able to tide over the lender concerns. Tata Power’s 800-Mw capacity is to be commissioned next month. “There may be changes in regulations but not in contracts in the next few months. These (increase in the price of Indonesian coal) are matters under discussion for more clarity in the coming months,” Tata Power MD Anil Sardana had told Business Standard earlier.
In case of other projects, while loans that had been drawn are yet to cross the red line, some more loans, sanctioned but not drawn, are hanging in the air. “In fact, a lot of power companies have not made any withdrawal from the loans sanctioned to them since last year. As much as 50 per cent of the loans sanctioned are still lying around without any drawdowns. Some of these might even expire very soon,” estimated a private sector banker.
Central Bank of India, another public sector lender, has an exposure of Rs 26,000 crore to the infrastructure sector and half of it is in power projects. “We are conducting a thorough review of our power sector exposure and we are halfway through. A clear picture about risks will emerge in 10 days,” said V R Iyer, executive director of the bank.

Many bankers lament that this has clogged money for banks which have already hit sectoral lending limits. Sources say some of the bigger banks like State Bank of India have even started charging a fee in addition to the commitment fee, to maintain the credit lines.


 
     
 
   
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