The government’s diktat to public sector banks to rein in their non-performing assets (NPAs) has brought the focus sharply back on the Ratnagiri power project in Maharashtra (the erstwhile Dabhol plant).
The finance ministry is faced with the unenviable task of balancing the concerns of lenders — SBI, ICICI Bank, IDBI bank, Canara Bank and IFCI Ltd — and the promoters, NTPC Ltd and GAIL (India) Ltd of the 1,967-MW power project, which also has a 5 million tonnes-per-annum LNG (liquefied natural gas) terminal.
The lenders, who have an exposure of Rs 8,500 to Rs 9,000 crore in this project, are insisting on hiving off the LNG terminal in order to recover their dues. GAIL and NTPC are strongly opposed to the move, saying it will be “value destructive” at this stage.The joint venture company of NTPC and GAIL — Ratnagiri Gas and Power Projects Ltd (RGPPL) — owns the project and have contributed close to `1,000 crore each since 2005 as part of the Centre’s plan to revive it. NTPC and GAIL own 32.86% equity each in RGPPL while Maharashtra State Electricity Board holds 17.4%. The balance is held by the consortium of lenders.
Most lending banks told HT they are looking to recover some chunk of the money through sale of non-core assets of companies that have been defaulting.
“We are looking to push companies into hiving off their non-core assets as there has to be some recovery for banks,” a senior State Bank of India executive said on the condition of anonymity.
Gross NPAs —loans that do not yield returns — have risen to over 4%, which is a cause for concern for the Indian banking system. The finance ministry and RBI have directed banks to focus on recovery and chalk out ways that can help them in the exercise.
“Hiving off the Dabhol LNG terminal is contemplated as one of the options to provide immediate relief to lenders of RGPPL…the proposed option may provide some respite, nevertheless the capacity utilisation and viability issues of the power block shall continue to nag stakeholders, promoters and lenders in the future,” GAIL CMD BC Tripathi said in a recent letter to finance secretary Arvind Mayaram.
NTPC CMD Arup Roy Choudhury also confirmed that the sale of the LNG terminal was not a viable option and has been opposed by NTPC.
GAIL and NTPC executives told HT that a final decision is awaited from the finance ministry. “Based on our internal assessment, the hive-off does not appear to provide a sustainable solution ... at this stage, the distress sale shall only be a value eroding proposition,” GAIL has told the government.
Further, the hive-off is likely to result in higher capital costs under the new ownership structure as banks would reconsider the loan position to the new entity, it added.