Lenders look to hive off Dabhol assets

NEW DELHI: Saddled with crippled assets of Ratnagiri Gas & Power (earlier Dabhol Power), lenders are hiving off the company's assets and are once again converting their dues into equity to avoid a hit on their exposure of close to Rs 10,000 crore.
Dabhol - which has been a problem child for the government and lenders for close to two decades now - has already turned into a non-performing asset for Power Finance Corporation as the company has not paid its instalments for at least 90 days.But other lenders, including SBI, ICICI Bank, IDBI Bank, Canara Bank and IFCI, had so far avoided making provisions for what is now a sticky asset by deciding to convert the overdues into equity.
Bankers refused to comment on the issue but it is not clear if the plan enjoys the blessings of the Reserve Bank of India. The government has been involved with the exercise and the finance ministry brass discussed the issue last week.
The problem, which has been brewing for over two years, has turned into a full-blown crisis as the Maharashtra State Electricity Distribution Co (MSEDCL) has also issued a notice to terminate the power purchase agreement. Ratnagiri Gas & Power (RGPPL) has been facing acute gas shortage and its supply to MSEDSL has been affected, which had contracted to buy 95% of the electricity generated by it. The Maharashtra government utility has been refusing payment, arguing that supply is irregular and is in the nature of infirm power. Only the fuel cost is paid for infirm power.

Sources told TOI that the dues now added up to over Rs 2,100 crore, which included Rs 115 crore for electricity consumed by MSEDCL and Rs 1,960 as capacity charge. With the state power utility unable to clear its dues to RGPPL - where GAIL and NTPC hold close to 33% each - the power company is finding it tough to clear its dues to the lenders.
Now, the lenders who already hold close to 17% in RGPPL are looking at ways to avert a fresh hit to their already NPA-saddled balance sheets. Sources said lenders are working with Deloitte and GAIL to work out a long-term viability plan, which includes hiving off of the LNG terminal.
The sources, however, cautioned that it will take a while for the plan to be implemented and the immediate focus is on ensuring that banks are not hit by another large NPA. Experts, however, warned that even the plan to convert outstanding amount into equity would only be able to defer the problem till October, which means that they will have to set aside money when they finalize their results for the December quarter.