The idea of setting up a power asset management company (PMAC) to manage and turn around stressed but viable assets, faces operational challenges as central public sector companies (CPSEs) in the electricity sector are divided on the roles and responsibilities of such an entity. . The Department of Energy has considered creating a PMAC dedicated to resolving non-performing assets (NPAs) of state-run power sector NBFCs – PFCs and RECs. A concept note on the same subject was launched with stakeholders, including CPSEs. The assets under consideration include eight power generation projects and one transmission project. Most production projects are thermal.
How it works?
A senior government official explained that the aim is to take on viable projects and management to maximize the value of the asset. PMAC will take on these projects through a competitive bidding process or change of management. Additionally, it could also acquire such assets through the NCLT route. “Such an entity will engage an operating partner for operations and maintenance (O&M) as well as to complete construction. It will bring together agencies interested in asset management and launch calls for tenders with these agencies. These agencies can also become a partner by acquiring capital with the PMAC,” the official added.
However, CPSEs such as NTPC, Power Grid and NHPC have expressed reservations about establishing a PMAC as their roles and responsibilities could conflict with those of the entity, another official said. They stressed that the PMAC should comply with the capital management guidelines of the Department of Investment and Public Assets Management (DIPAM), which suggested to the CPSEs to invest in greenfield projects and avoid private sector projects fallow. This also increases confusion as DIPAM advises CPSEs to avoid acquiring stressed assets. In addition, the opinion of the department is to be taken both for mergers and acquisitions and for business takeovers. The NTPC does not appear to favor the creation of a PMAC, as O&M is outsourced to expert agencies like itself or NHPC, the same official added. “Instead, NTPC suggested taking over the troubled assets by a consortium of lenders with NTPC, NHPC among others as technical partners with a nominal stake. In addition, AMCs would be subject to regulatory compliances such as the primary investment company test for classification as an NBFC. Another downside is that there will be set-up costs at the holding company level,” he told NHPC, else hand said PMAC bidding for projects in NCLT will create another competitor for hydro generator which is not advisable She suggested that such projects whether thermal or hydro , are taken over by UAPs working in the same field.” Another issue is that there may be a conflict of interest as REC and PFC will be shareholders of PAMC and at the same time lenders of the distressed assets. Also, assurance of success through NCLT cannot be certified,” the official said, explaining NHPC’s comments. Power Grid favored a similar approach to NHPCs, the official said, adding “NHPC has suggested that CPSEs under PAMCs may invest directly in SPVs owned by assets in their domain, as PSUs will be better placed to utilize their expertise in the field to make these SPVs operational. and commercially viable,” he added. THDC India, which manages the Tehri Hydro Power complex, along with North Eastern Electric Power Corporation (NEEPCO) and Satluj Jal Vidyut Nigam (SJVN) favored the proposal. However, NEEPCO suggested creating a PMAC for hydroelectric and thermal projects as well as another for transmission projects.
In March 2017, the Department of Financial Services (DFS) shared a list of troubled projects with the Department of Energy. The 34 non-captive coal power projects on the list are mostly private and have a total installed capacity of 40,130 megawatts (MW). Of these, 17 projects (20,290 MW capacity) have been resolved, while seven projects (9,310 MW capacity) are in various stages of resolution. Another 10 projects (10,530 MW) are at the very beginning of construction and are totally blocked and have either been ordered to be liquidated or are heading towards liquidation.
January 18, 2022