PFC hopeful of recovering largest Rs 1,100 crore NPA

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Power Finance Corporation (PFC), public sector lender to power companies, is working on modalities to recover Rs 1,100 crore from its biggest non-profitable asset (NPA) till date — the 400 mw Shree Maheshwar Hydel Power Project in Madhya Pradesh. The project was the first hydro project to be awarded to a private player in India (S Kumars Group) in 1990s as part of the Narmada Basin Development.

The 400 mw project, lying in doldrums for the last 15 years, has seen a cost escalation of more than three times. Despite the construction of civil infrastructure and the three turbines ready for operations, rehabilitation and resettlement has not taken place for the people who would be displaced due to the reservoir that would be created on the run-of-the-river project.

A senior PFC official told Financial Chronicle they are in the process of working out a few modalities to recover the money or to see the project becomes operational. "There are two options available to us: first, the promoters can look at some buyers who can buy part or full equity in the project and run it. And second, all the lenders should come together and invoke the securities. If nothing works, we have the option of invoking the securities or the guarantees with us," the PFC official said.

Some of the major lenders to the project include PFC, the lead lender (with Rs 1,100 crore) followed by REC with Rs 250 crore, Hudco (Rs 250 crore), Central Bank of India (Rs 180 crore) and State Bank of India (Rs 200 crore).

PFC in its address to analysts in May said that Shree Maheshwar is their biggest NPA till date with Rs 700 crore exposure along with Rs 400 crore in non-fund-based exposure. “We are getting money from the Madhya Pradesh government because these are all backed by the state government but still we are not getting the full money. We are requesting that it should be taken over by other government firms. Still, it is under negotiation and nothing has been finalised and I hope that things will shape up by September-end,” M K Goel, chairman of PFC, said.

However, there are various issues due to which the MP government firms are not willing to buy the project as they are not aware of the exact liabilities. A senior REC official said we are waiting for PFC, the lead lender, to take some steps in recovering the money.

A K Khunteta, former director finance of REC, in whose tenure the issue snowballed, said we made provisioning of Rs 10 crore every year against the loan. If the project is sold and we get the value, it can be profitable as well. The projected cost at the time of inception was Rs 1,653 crore which has now escalated to almost Rs 4,000 crore due to mismanagement of funds taken from government bodies. The project was envisaged as a run-of-the-river project which would reduce the peak power shortage of the state by more than 25 per cent.

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