Loans for power projects? Banks tight-fisted
Banking consortia are delaying lending decisions for stranded power projects that are close to completion, pushing investment of nearly `2 lakh crore towards becoming non-performing assets (NPAs), industry executives say. At stake are plants with total capacity of 25,000 MW, with nearly complete coal-based projects being the most vulnerable.Gas-fired plants stranded by fuel scarcity have gained from government’s auction of imported gas, the latest beneficiaries being nine fir ms including Ratnagiri, GVK Power and Lanco Infratech, which emerged winners in the fourth phase of auction on Saturday . Bankers say normal lending cannot resume unless various issues are resolved in the sector, which first saw a rush of investment, but was hit by fuel scarcity, policy drift in the previous regime, absence of power purchase pacts and cancellation of coal mines by the Supreme Court. Banks are reluctant to fund infrastructure, particularly the heavily-indebted power sector, as bad loans have eaten into their profits. Power companies complain that many projects that can become profitable are suffering because banks are ambivalent in their response, causing costly delays. “They neither say `yes’ nor `no’. They merely delay,” said an industry insider. He said that at times individual banks block decisions are taken by majority lenders in a consortium. Power producers have taken up the matter with RBI. “It is observed that in many cases, certain banksdo not implement decisions taken by majority of the lenders in the consortium and put additional conditions. This often leads to long delays, which impacts the infrastructure project … Once a decision has been taken in JLFconsortium meeting, all lenders and other nonbank institutions should be made to comply with majority decision,” power producers said in a letter to the RBI. Association of Power Producers, which recently took up the matter, has sought the intervention of RBI in improving the financial condition of stressed power sector projects. “These issues are beyond the control of the developer and are driving the affected projects towards being classified as NPAs. With support from RBI, these can be turned around into profitable assets,” the industry body told RBI. Bankers say they have many concerns. “The power sector has faced peculiar issues with regards to purchase agreements, coal linkages and environmental clearances.Lending to this sector or projects in the sector cannot be resumed unless these issues are resolved,” said KVS Manian, head-corporate, investment banking at Kotak Mahindra Bank. “If developers can resolve these issues then banks will be more than happy to lend more money to these projects,” he said. Industry executives say that on paper, mechanisms for debt restructuring via consortium lending exist, but there are fatal delays inherent in the process. “The message from the government to banks is that you cannot unduly delay these things. If it is not timely, it doesn’t matter if they sanction it or not. They do it after 6-8 months by that time the damage is already done,” a power sector executive said. “Once the lead lender has taken a decision and the Joint Lenders’ Forum has agreed and the lead lender has given his sanction, the rest of the banks have to be time bound,” he said.”There are projects which might need about one and a half years to complete but due to these delays, for six months you are sitting and doing nothing.” Sushil Maroo, executive vice-chairman of Essar Power, spoke of regulatory and policy deficiencies. “Banks and FIs are reluctant to finance power projects, which have been affected by coal block de-allocations and delay in statutory approvals.” Star Lotulelei Authentic Jersey
NHAI awards contract for 4/6 Laning of Kharar-Ludhiana Section of NH-95 (new NH-5) in the state of Punjab
The National Highways Authority of India (NHAI) has issued Letter of Award (LOA) for development of following National Highway section in the state of Punjab under NHDP Phase-V: NH No. Section Length Total Capital Cost (Crore) Concessionaire’s Name 95 (new NH-5) 4/6 laning of Kharar-Ludhiana section 76 km Rs. 2,070 crore M/s Ashoka Concessions Ltd. Development of 76 km long Kharar-Ludhiana section involves 6-laning of 54 km and 4-laning of 22 km of National Highways. The project National Highway-5 starts at Kharar town, passes through Morinda bypass, Khamanno town, proposed Samrala bypass and terminates at Ludhiana. It will improve connectivity and faster movement of traffic from Industrial hub of Ludhiana to Chandigarh and other parts of North India. The project shall also provide alternate connectivity of Chandigarh to NHAI-1, as well as for the traffic from South-West Punjab to the Chandigarh city. The project will have 2 Major Bridges, 6 Minor Bridges, 8 Flyovers, 6 Vehicular Underpasses, 10 Pedestrian Underpasses, 126 Culverts, 46 km long Service Lane, 9 Major Junctions, 253 Minor Junctions and 8 km long bypass at Samrala. Roquan Smith Jersey
Brokerages eye govt’s next move after AP Shah committee report to guage impact on RIL
Amid the excitement and analysis of Reliance Industries’ rollout of Jio broadband services, analysts are also closely watching the government’s next move after the AP Shah Committee said the company made “unjust” gains by pumping natural gas that flowed from ONGC’s adjoining block in the Krishna-Godavari basin. On August 31, the AP Shah Committee report accepted the consultant’s report on the dispute over migration of gas from ONGC’s blocks to RILs block in the eastern coast. The one-man committee headed by former Chief Justice of Delhi High Court Ajit Prakash Shah states the compensation for the gas that migrated should go to the national exchequer and also made recommendations to avoid such disputes in future. The government’s action is awaited. “This is unprecedented in India so we will have to wait and watch how government reacts to it. Prima facie, it looks like RIL may have to compensate the government for the gas that came from ONGC’s block. But whether the migration of gas was an unforeseen act of nature or whether the two companies allowed it to happen with knowledge of it is yet to be determined,” an energy expert tracking the development closely said. Between April 1, 2009 and March 31, 2015, as much as 11.122 billion cubic meters of gas migrated from ONGC’s Godavari-PML and KGDWN-98/2 blocks to adjoining KG-D6 that are in RIL’s control. At current prices, this gas would be worth around Rs 11,000 crore. The government then set up the AP Shah committee to study the findings of the independent expert DeGolyer & MacNaughton (D&M) that established reservoir continuity between the KGD6 and contiguous ONGC operated blocks. “In our view, quantifying any impact on RIL as of now is difficult and so is trying to freeze a timeframe for final resolution. Broadly, we do not see this entire issue (AP Shah Committee recommendations on gas migration) as having any material impact on RIL,” JP Morgan said in a report. The brokerage said it will watch out for the government’s decision pertaining to monetary claims from RIL and whether it includes any penalty and does it take into account any operating expenses and capital expenses. While RIL head Mukesh Ambani refrained from commenting on the issue at the company’s Annual General Meet, sector experts expect the company to opt for legal route to challenge monetary claims. RIL has invested about Rs 40,000 crore in developing wells in the Krishna-Godaveri basin, where it had expected reserves of 10 trillion cubic feet but it witnessed a steep fall in output. Billy Turner Jersey
Road building in slow lane: Not even one project awarded by NHAI via hybrid annuity route achieves financial closure
With bankers somewhat wary of lending to the roads sector, after a clutch of projects was derailed, not a single project awarded by NHAI (National Highways Authority of India) via the hybrid annuity model route appears to have achieved financial closure. The NHAI is understood to have awarded eleven road projects till March 31, 2016 via the hybrid annuity route, a mechansim where the NHAI assumes the responsibilities of acquiring the land, estimating the traffic and collecting the toll and the concessionaire takes on virtually no risk. NHAI rules stipulate financial closure needs to be achieved within 150 days of signing the concession agreement. However, given their mixed experience with the BOT model, banks and financial institutions are evaluating the applications cautiously, sources said. The concerns of lenders stem from the small equity risk that the concessionaire is taking. Given that 40% of the project cost comes as a grant from NHAI, the concenssionaire’s equity contribution is reduced to just 15% of the remaining 60% of the project cost or effectively 9%. Lenders feel this is too small pointing out the promoter has virtually no skin in the game. A senior public sector bank executive told FE, several large banks have indicated their reluctance to lend to hybrid projects if the promoters’ equity is effectively just 9%. “This is too small a commitment on the part of the promoter and none of the proposals from developers has been closed yet,” the executive added. Indian Infrastructure Finance Company Limited (IIFCL) is among the institutions evaluating the new projects under the hybrid model. “While the requirment for equity from the concessionaire has been diluted, we are satisfied if the funds from either NHAI or the developer are released in keeping with the physical progress of the project. The ministry has agreed to this so we should be able to close out a couple of projects soon,” Sanjeev Kaushik, deputy managing director, (IIFCL) said. “The money is needed in the early stages of construction, ” Kaushik explained. Banks also believe the compensation or termination charges, in the event of the concessionaire’s inability to complete a project, should be 90% of the debt due, as it is in the case of a BOT project. Currently, the rules for hydrid annuity projects stipulate a far lower level of compensation to the lenders which is worrying them. Lenders are also concerned that the interest payable by NHAI, on loans taken by the developers, is too low. The rules stipulate the interest be fixed based on the bank rate plus a spread of 3%. Both IIFCL and bankers have suggested to MORTH, the interest be benchmarked to the the base rate of State Bank of India (SBI) or the average base rate of five banks plus a 3% spread. The ministry, is however, unlikely to agree to this demand. Among the developers who are willing to construct roads via the hybrid route is MEP Infrastructure which successfully bid for three projects. The firm is a first-time developer of roads and Jayant Mhaiskar, VC & MD, MEP Infrastructure, said the company is on track to achieve financial closure for two projects by October. However, Mhaiskar added some lenders were requesting changes to the terms and conditions. “This is taking time and delaying closure,” he said. The hybrid annuity model was introduced by Nitin Gadkari, minister for road transport, highways and shipping, in early 2015 to revive private sector investment in the roads sector by re-allocating risks. Under this model, the governemnt collects the toll and pays the developer a biannual annuity for recovering investment and interest costs and fee for operations and maintenance. In the build-operate-transfer (BOT) model, the developer absorbs most of the risks—financial, operations and maintenance and revenue.The ministry of road transport and highways (MORTH) failed to get any bids for at least 21 projects worth Rs 27,000 crore between fiscal years 2013 and 2014. Lenders were expected to be comfortable with the hybrid model since the toll revenue streams, to service the debt, would be inbuilt into the framework. However, lenders remain wary of developers defaulting on the construction of the roads and want more collateral. Since the onus of collecting the toll — a politically sensitive task — is no longer on the developers and they are also not required to estimate the traffic, hybrid projects were expected to take off quickly. Over the last few years the government has come to the aid of developers by reschedulding the premium payable by them to NHAI so as to ease their cash flows. Moreover, it has also permitted them an early exit through the substitution route to free up capital. Further, it has de-linked environment and forest clearances, making it easier for them to start construction. Tress Way Jersey
10 State highways to be upgraded
An appeal by Minister for Higher Education Basavaraj Rayaraddi to Union Minister for Road Transport and Shipping Nitin Gadkari elicited an instant response from the latter who announced that 10 State highways would be upgraded as national highways, here on Saturday. Speaking at a function here, Mr. Rayaraddi said that the proposed roads of historical importance were in the backward Hyderabad-Karnataka region. They are Adoni to Yelburga-Sudi (200 km), Koppal to Nippani (300 km), Ranebennur to NH 50 (250 km), Lingsugur to Maharashtra border (240 km), Degalur to Mahaboobnagar (250 km), Sindagi to Hyderabad (300 km), Chincholi to Shahpur (170 km), Ilakal to Sirsi (250 km), Torangal to Haveri (250 km), and Afzalpur to Lokapur (170 km). Lerentee McCray Womens Jersey
Stress on aesthetic coastal highway design: NHAI
A coastal highway, around 451-km-long, is proposed to be constructed along the Odisha coastline with an emphasis on designing it in a manner which is “aesthetic and environmentally compatible”, officials said on Sunday. A high-level meeting of the National Highway Authorities of India (NHAI), Odisha region, held under the chairmanship of Development Commissioner and Chief Secretary (in-charge) R Balakrishnan, considered the proposed alignment of the highway on Saturday. Balakrishnan directed the officials concerned to make the road design “aesthetically” and in a way which is “environmentally compatible”, in consultation with the Forest and Coastal Regulation Zone (CRZ) authorities. He also sought steps to plan the alignment in a manner which boosts tourism and port-based industrial activities in the state. The NHAI was also advised to share the plan with the respective departments and collectors for their considered inputs, an official statement said. Dharmanada Sarangi, Chief General Manager (CGM), NHAI, who made a PowerPoint presentation on the proposal, said the proposed highway currently proceeds through Chhatraput-Satapada-Konark-Astaranga-Nuagaon-Paradeep–Ratanpur -Satabhaya-Dhamara-Basudevpur-Talapada-Chandipur-Chandaneswar– Digha. Of the total length of 451 km, around 29 km come under Ganjam district, 153 km under Puri district, 54 km under Jagatsinghpur, 49 km under Kendrapara, 61 km under Bhadrak, 99 km under Balasore district and six km connecting East Midnapore district in West Bengal, he said, adding that over 178 villages would be connected by the highway. It would also have bridges over several rivers including the Rushikulya, Kushabhadra, Mahanadi, Brahmani, Baitarani and Subarnarekha, besides Chilika lake, the statement said. The road, which would boost tourism and industrial activities in the region, would also serve as a highway linkage to all the ports in the state. Available data shows that so far, two expert consultants have been engaged for carrying out the preliminary survey and preparing the Detailed Project Report (DPR). While the preliminary survey has been done and the preliminary alignment of the road suggested, the DPR is expected to be prepared by February, 2017, the statement said. Seattle Seahawks Jersey
Roads ministry lags in awards, construction of highways in ongoing fiscal
The highways ministry is lagging behind its ambitious target of both award and construction of national highways. While the achievement in award of projects in this financial year is only 36% against the monthly target that the ministry had set for itself, the accomplishment in construction is only 60% against the monthly targets till August 26. TOI has learnt that 2,823 km of highway stretches were awarded for widening against the target of 7,875 km in this financial year. Similarly, construction on 2,625 km has been completed against the target of 4,400 km. In April, the highways ministry had set an ambitious target of constructing 15,000 km and awarding 25,000 km during this financial year. This seems to be tough to meet despite the ministry doing better than what previous governments were able to achieve. During the last financial year, a maximum of 6,000 km was constructed, the highest ever. Similarly, 10,000 km of highway stretches were awarded for expansion during 2015-16, which was the second highest since the government took up highway expansion in a big way. The record construction and widening of highways had marked a year-over-year increase of nearly 36%. Admitting that the target for this year is hard to achieve, ministry officials said they expect the pace of rolling out of projects to accelerate in the next few months. “Meeting are taking place regularly and monitoring is being done to push the award of works and also to expedite construction. Both have to go hand-in-hand. Systemic issues that often hold up projects have been addressed to a large extent,” a source said. Officials claimed that the pace of construction will also gain pace after monsoon. They said the speed of construction slows down during rainy season and picks up subsequently. Winter and summer are the most favourable periods of road construction and widening works. Realizing that the pace of construction needs to be pushed to maintain his record, highways minister Nitin Gadkari has asked NHAI and his ministry to adopt new technology, including the use of precast slabs. Earlier,he had told TOI that he had kept a higher target intentionally so that maximum work could be undertaken and completed. Danny Etling Jersey
‘India likely to add 4.8 GW solar power capacity this year’
Solar power generation capacity of 4.8 GW is likely to be added this year in the country as installations are picking up, says a report. The report by Mercom Capital Group also said that power distribution companies continue to be a “drag” since they are showing reluctance to buy solar energy amid low electricity prices. “India has reached 2.8 GW in solar installations year-to-date and cumulative installations have reached 8.1 GW as of August 2016,” it said in a release. As per its forecast, about 4.8 GW of solar energy capacity is expected to be installed in 2016. According to the global clean energy communications and research firm, the solar project pipeline in India is now approximately 21 GW, with 14 GW under development and 7 GW scheduled to be auctioned. One GW (Giga Watt) is equal to 1,000 MW (Mega Watt). “Solar installations and its share of energy generation has picked up speed but distribution companies continue to be a drag on the sector and are showing reluctance to purchase solar in light of low power demand and cheap power availability on the exchanges,” Mercom Capital Group CEO and Co-Founder Raj Prabhu said. This is an alarming development that the central government should address immediately to restore confidence among developers and investors, he added. Terrance Williams Womens Jersey
No power cuts even if NTPC cuts supply over dues: BSES
As the state-run NTPC Ltd plans to cut supply to BSES discoms in eastern and central Delhi from Sunday midnight over non-payment of Rs 961.58 crore dues, power companies today said the move will not impact supply quantity as they have enough electricity at their disposal. “The discoms have power storing arrangements. They will also purchase short-term power in case there emerges unforeseen situation at economical rates. Residents need not face power cuts. Meanwhile, we are making all the efforts to see the dues are cleared,” a BSES official said. The official further stated the power company is under “financial strain” due to non-liquidation of regulatory assets estimated to be over Rs 16,000 crore as on March 31. On the other hand, he said, the dues to be paid to the NTPC’s Aravali Power Company Private Limited (APCL), which supplies the power to the discoms, are to the tune of Rs 961.58 crore. “A matter to this regard is pending before Supreme Court and we are awaiting its judgment. The judgment shall pave the way for liquidation of the assets and thereby, clear the dues,” he added. The NTPC Ltd had yesterday said a notice for regulation of power supply was served on Anil Ambani-led Reliance Group’s BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL), which will deprive Delhi of 445 MW of power with effect from 00:00 hrs of September 5. “Despite clear directions of the Supreme Court, the dues continued to accumulate. Today, the outstanding amounts are Rs 961.58 crore (Rs.695.25 crore of BRPL & Rs.266.33 crore of (BYPL),” it had said. APCPL, Jhajjar has been supplying power to BRPL and BYPL since March 5, 2011. It has allocated 445 MW power to the discoms, 372 MW to BRPL and 73 MW to BYPL and average monthly energy bill is about Rs 87 crore (Rs 73 crore to BRPL and Rs 14 crore to BYPL) for the current financial year. The company had said the payments by the BSES discoms (power distribution companies) had become irregular for quite sometime. The matter was brought before the apex court, which in its judgement dated March 26, 2014 directed the BSES discoms to ensure payments of all current energy bills from January 1, 2014. However, the company said that despite clear directions of the Court, the dues continued to accumulate. MORE SBR ENM dues continued to accumulate. Brandon Marshall Womens Jersey
Looking to bring down cost of borrowings: PFS
PTC India Financial Services Ltd (PFS) is looking to bring down its cost of borrowings and is in discussions with various entities for competitive costs, the company said in its annual report. “PFS is working towards lowering its cost of borrowings and is in discussions with various multi-lateral/bilateral financing institutions for arranging funds at competitive costs/terms,” the company said in its annual report 2015-16. The company said it wishes to explore opportunities across the infrastructure sector. In 2015-16, the company’s total sanctioned debt assistance crossed Rs 15,000 crore mark. “The disbursements have been robust during FY16. PFS continues to focus its energies on lending outside coal-based power projects for infrastructure facilities such as power transmission, coal mining, private railway sidings and will continue to evaluate niche opportunities across energy value chain,” it said. Government is committed to provide everyone with access to electricity and has identified power sector as a key sector to focus on so as to promote sustained industrial growth, it added. “The development activities and the interest in the renewable area offers good potential to PFS. PFS continues to evaluate business proposals for these projects in line with the developments taking place in the sector and the initiatives undertaken at the governmental level,” says the report. This apart, PFS’ board has also recommended dividend of 12 per cent or Rs 1.2 per equity share of Rs 10 each for 2015-16. A subsidiary of PTC India, PFS is a registered NBFC with the Reserve Bank. The company provides financing solutions to the energy value chain which includes investing in equity or extending debt to power projects in generation, transmission, distribution, fuel resources and fuel-related infrastructure. Kevin Zeitler Authentic Jersey