The share of power transmission and distribution (T&D) projects in the overall loan book of Power Finance Corporation Ltd (PFC) has risen to 28 per cent as of March 31, 2019 from 24 per cent as of March 31, 2018. Rajeev Sharma, Chairman & Managing Director, PFC, highlighted this point during a press conference in Mumbai on May 29, 2019, held to discuss the company’s audited financial results for the fiscal year 2018-19.
Sharma noted that the national mission of “24×7 Power for All” will drive PFC’s loan portfolio in the power T&D sector. Some states are already supplying round-the-clock power but there are several other that have yet to cross this milestone. “There is need to strengthen the sub-transmission network in several states,” the CMD observed, adding that such infrastructure will be needed at both the rural and urban levels. Some government estimates suggest that around Rs.3.5 trillion worth of investment will be needed in the power T&D sector, between now and fiscal year 2021-22.
PFC, being a dominant player in the power financing business will be a big beneficiary in this regard, Sharma felt.
Quality of loan book
Rajeev Sharma stated that PFC’s overall loan book, as of March 31, 2019, stood at Rs.3.15 trillion. Out of this, 83 per cent represented loans to the government sector and the remaining 17 per cent to private sector entities. The loan book to government entities did not have any non-performing assets (NPA), Sharma stressed. This means that 83 per cent of the entire loan book was NPA-free, as of March 31, 2019.
Of the private sector loan assets, roughly half were “good” while the rest were “stressed” and were declared as NPAs. The total stressed loan book worked out to around Rs.29,000 crore and came from 29 projects. Of these, 15 have been referred to the National Company Law Tribunal (NCLT), Sharma explained.
In the power transmission domain, PFC was expecting 100 per cent recovery of principal from Essar Transmission. PFC is learnt to have received an OTS (one time settlement) proposal and lenders are obtaining approval on the same. On the other hand, an intrastate independent intrastate power transmission scheme in Uttar Pradesh, being developed by South East UP Power Transmission Company Ltd, promoted by Spanish entity Isolux Corsan, represented a stressed loan asset. This asset turned “non-performing” after the parent company filed for bankruptcy in its home country. This case has now been referred to NCLT.
Nodal agency
PFC is the nodal agency for developing independent power transmission lines using the tariff-based competitive bidding (TBCB) route. Rajeev Sharma mentioned that the Union ministry of power has assigned six such projects to PFC and have to be bid out during fiscal year 2019-20. Sharma noted that five out of the six projects were progressing well and were at various stages of RfQ (request for qualification) and RfP (request for proposal.) Most of these projects (though details were not specified) involved setting up of mega transmission schemes for evacuating power from renewable energy projects. In the case of one project, PFC anticipates delay as the ultimate beneficiaries of this transmission scheme have yet to be defined. Union ministry of new & renewable energy (MNRE) has approached Central Electricity Regulatory Commission (CER) in this regard, and a resolution was awaited, Sharma said.
Need for intrastate transmission
Interacting with T&D India the sidelines of the PFC conference, Dr Arun Kumar Verma, Joint Secretary, Ministry of Power, Government of India who is also the Government nominated director on PFC’s board, observed that intrastate power transmission was expected to pick up in the coming years.
Dr Verma also expressed optimism that the TBCB philosophy that is actively used the Union ministry of power in bidding out large power transmission schemes, will also be adopted by state power transmission utilities. “Some of the challenges that developers of power transmission lines face is high capital cost and delays in securing right of way,” Dr Verma observed.
Acquisition of REC
One of the most significant developments during fiscal year 2018-19 was the completion of acquisition of Rural Electrification Corporation Ltd (REC). PFC now holds 52.63 per cent in REC and has become its holding company. It may be recalled that on December 6, 2018, the Cabinet Committee on Economic Affairs (CCEA) gave its in-principal approval for strategic sale in REC along with transfer of management control, to PFC. Rajeev Sharma, CMD, PFC, explained that a consultant has been appointed to look into the possible merger of REC with PFC, without elaborating.
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