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MOSL: UTILITIES-Stressed asset resolution: Biding its time

Utilities: Stressed asset resolution: Biding its time

 

Power Finance Corporation (PFC), one of the largest lenders to the power sector, has exposure to financially stressed power generating companies. We met PFC to understand the progress on resolution of these stressed assets.

• According to PFC, the resolution of power assets is dependent on a multitude of factors (viability of FSAs, PPAs, etc.), and thus each asset will take its time to resolve. The IBC-led NCLT process for resolution, albeit positive, is still a learning curve for all participants. Delay in resolution timelines and uncertainties over operational creditors' payout have led to concerns.
• Moreover, from the power assets' perspective, lenders believe that the demand-supply situation is likely to improve, leading to a possible turnaround in these assets. However, competition in the bidding process has been limited, resulting in low acquisition price and even possibilities of liquidation.
• Hence, lenders look at resolution outside the NCLT process with participation from promoters (not allowed to participate through NCLT) as well. Resolution outside the NCLT, though, takes time given the need to discover a fair value of the asset.