Gujarat govt, lenders discuss ways of saving mega power projects

The Gujarat government has called a meeting of lenders to high-stake thermal power projects in the state after a spike in prices of imported coal made import-dependent ultra mega power projects non-performing assets for lenders.

The hike in coal prices by Indonesia, the main supplier, has caused heavy losses to Tata Power's Coastal Gujarat Power Ltd (CGPL) at Mundra, which was forced to sell power at huge discounts as per power purchase agreement with state power distributor.

Besides Tata Power, Adani Power and Essar Power have sought a change in ownership of their projects, awarded through tariff-based bidding, allowing new owners to seek suitable tariff from regulators under 'cost-plus' formula, which allows any rise in fuel costs to be passed on, and make them viable.

The meeting of state government officials and lenders represented by State Bank of India has been convened in Gandhinagar to discuss with lenders a future course for the Tata and Adani groups' imported coal-fired power plants that have fallen into dire straits.

The state-level meeting follows a brainstorming session at the union power ministry last month that discussed ways of preventing these projects, with a collective capacity of over 8,000 MW, from turning into bad assets.

The situation is so bad that with no way of increasing power tariffs, Tata Power had last month offered to sell a majority 51 per cent stake in its power project to the state government.

The Tatas and the Adanis have offered to transfer majority holding to state government after failing to secure adequate tariff to make up for higher fuel cost due to changes in the coal pricing policy of Indonesia, where both have their captive mines.

The power ministry has taken the stand that it was a matter to be decided by the stakeholders, including the state government, but it could do some hand-holding to prevent further power sector NPAs for lenders.

One of the options discussed at the June meeting envisaged lenders taking over the projects and transferring it to the state government for operation. The Gujarat government suggested lenders taking 100 per cent equity for Re1, instead of the 51 per cent offered by the promoters.

It is not yet clear whether Gujarat alone will take control of the ownership or share it with other states that have 25-year power purchase agreements with the projects.

But there is still a glitch as lenders will not let the promoters off the hook as they want the corporate guarantees given by the groups should continue even after change in ownership of the plants.