At least three power projects the 445 MW gas based Konaseema Power Project promoted by the Hyderabad-based VBC Group,the 400 MW Shree Maheshwar Hydel project of MW Corp (previously S Kumar Group) and the Athena Energy-Asian Genco-promoted East Coast Energy are learnt to have defaulted in their dues to state-owned electricity sector lenders Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). The defaults come at a time when a worsening coal availability situation,combined with the drop in domestic gas availability and the precarious financial position of distribution utilities has completely derailed investment sentiment in the power sector. Apart from PFC and REC,lenders such as State Bank of India,ICICI Bank and Punjab National Bank too are among those bracing for defaults by project developers,which could have a cascading impact on the financial sector as well. These three projects have defaulted in their dues. For project other than with captive mines,both PFC and REC are incorporating three pre-disbursement conditions,including the execution of definite fuel supply agreement,execution of back-to-back power purchase agreement for 70 per cent of the power with suitable payment security mechanism and the possession of land, an official involved in the exercise said. Spooked by the unfolding fuel supply uncertainties,since late last year,lenders had already begun to apply the brakes on funding of new private generation projects amid growing signs that developers of projects close to commissioning could default on their loan repayments due to fuel shortage. Apart from generation projects,banks and institutions have already began to pull the plug on working capital loans to cash-strapped power distribution utilities as well. Under watch are utilities that have previously defaulted on payments to generators or lenders,those repeatedly resorting to raising debt to cover past losses and utilities in States that have not bothered to regularly hike electricity tariffs. Payment defaults by distribution utilities have already started,forcing state-owned NTPC Ltd to issue a cautionary letter to a couple of Haryana utilities on pending payments. This comes on the heels of the unpaid bills that NTPC faced on account of the two BSES firms distributing power in Delhi late last year. Transmission major Power Grid Corporation and hydro-electric firm NHPC Ltd. too are faced with pending bills. The situation has now forced central utilities like NHPC,Satluj Jal Vidyut Nigam and NEEPCO to start selling the power bottled up due to payment default by beneficiary states and utilities on day-ahead market of the countrys largest power exchange IEX. Disbursements to the power sector are estimated to have risen close to 50 per cent between 2008-09 and 2010-11,more than double the 21 per cent rise in total bank credit in the period.
