Distressed Thermal Power Plants in India:

Acquisition Opportunities

With a myriad of issues and challenges facing the power sector, many power projects in the

country have either been shelved or stalled. Issues ranging from fuel shortage, fuel pricing &

policy changes in exporting countries, land acquisition, environment approvals, power off take,

delay in equipment supply so on and so forth are highlighted as the major reasons for the power

sector slowdown. KG-D6 gas fields which once promised outputs of 80 mmscmd are giving

record lows in gas production, which has adversely affected performance of gas

based plants.

Distressed Thermal Power Projects in India – A Reality Check

Exhibit 1: Ownership-wise Quantum of Under-construction Mega Thermal Power Projects Capacity Facing Delays (in MW)

Source: Infraline Research

Key investors feel India’s medium-long term

growth story is intact & continued investments

in the power sector are inevitable for

sustainable levels of economic growth. In the

given business environment, distressed power

projects offer some attractive investment

opportunities to acquire capacity, rather than

going in for green field investments. It is in this

context we expect significant power assets

sale and ownership changes across the power

generation segment.

News Excerpts

“NTPC is evaluating opportunities to buy distressed

power plants, we are looking at assets which have fuel

linkages and all other approvals that are ready, but

may not have power purchase agreements tied up”

-Dr. Arup Roy Choudhary, CMD, NTPC

“We would like to acquire a project of 500 MW or

above as we are looking at adding scale to our

generation”

- Mr. Sanjay Sagar, Joint MD and CEO, JSW Energy

Analysis of under-construction

thermal power projects highlight that

around 92 GW of thermal power

projects are facing delays due to

myriad issues viz. land acquisition, law

& order, equipment supply, civil work,

fuel supply etc. Further, majority of

the power projects affected are being

developed by the private sector. As

per Cabinet Committee on

investments, around 75 power

projects have been registered with

CCI complaining issues, with over INR

4 lakh crore at stake as per best

estimates.

* Various other reasons causing delays are identified as manpower shortages, heavy monsoons, payment issues etc.

Scope of Research Work

Consider requesting a custom research proposal – Contact piyush.arora@infraline.com

Research Approach and Methodology

Comprehensive view of power generation segment and challenges faced by project developers

Identifying & Profiling of Distressed Thermal Power Projects in India

Phase II

Analysing prospects of asset transfers and systemic challenges for acquirers

Phase IIIPhase I

1

5

4 3

2

Sector Experts

Central/State Govt.

Sources

Literature Review

Industry Interaction

In-house Expertise

Data Sources

Identification of distressed power projects in India would be based on an in-depth assessment of power

project status w.r.t fuel linkages/availability/pricing, project financing, status of clearances, regulatory

approvals, land acquisition status, policy changes by Govt. of fuel exporting countries, bankability of power

purchase agreement and tariffs, currency impacts, EPC problems and social aspects.

Sources of Research

Critical Investigative Points

Assessment of challenges faced by power projectdevelopers in India

Identification and comprehensive profiling ofdistressed power projects in India – Mapping ofparameters

Potential opportunities for asset acquisition byinvestors/power companies

Critical analysis of envisaged systemic challengesassociated with asset transfers & possible remedies

A number of complex inter-wired issues have been

affecting large number of power projects in the

country. This has also led to a situation where the

operational power projects have become financially

less attractive and under-construction power projects

facing huge delays. This situation is creating sub-

optimal utilisation of installed capacity, non-performing

assets and capital inefficiency. The sector therefore is in

need of multiple remedial interventions.

It is with this perspective, InfralineEnergy is coming out

with research study on “Distressed Thermal Power

Plants in India: Acquisition Opportunities”. The major

focus of the work would be on identification of

distressed thermal power projects in India and mapping

of various key issues responsible for such situation.

Besides this, the report would also highlight the

potential opportunities for investors and the systemic

challenges that can arise in case of ownership transfer,

under the current policy, regulatory and legislative

framework in India.

Foreword

Executive Summary

1. Power Generation in India: An Overview

1.1 Key Policies and Regulatory Framework

1.2 Progress of Power Sector Reforms –

Privatisation and Unbundling

1.3 Power Generation Landscape

• Ownership Structure

• Generation Mix

• Power Availability and Performance Review

• Capacity Addition – Historical and Future

Projections

1.4 Demand-Supply Snapshot

• Current Status and Estimates

• End-us pattern: Current & Emerging

1.5 Investment in Power Generation

• Trends and Outlook

• Need for Private Investment

• FDI Trends & Status

2. Power Capacity – Under Implementation

2.1 Power Capacity Addition – Work in Progress

2.2 Challenges faced by Power Projects under

Execution Phase

• Fuel Linkage, Pricing & Availability

• Land Acquisition, R&R

• Clearances & Regulatory Delays

• Project Financing

• Power Purchase Agreement

• Transmission Constraints

• Default in Payment from Distribution Sector

• Bankability of Power Sector Value Chain

3. Mapping of Distressed Thermal Power Plants

3.1 Scrutinizing Distressed Thermal Power Plants

• Commissioned

• Under-construction

3.2 Distressed Thermal Power Plants – Detailed

Assessment

3.3 Idle/Non-performing Capital Investments

4. Recent Policy & Regulatory Developments

4.1 Regulatory – Effect of Land Acquisition,

Resettlement & Rehabilitation Bill on Power

Projects

4.2 Institutional Mechanism by Ministry of Power -

EGoM

4.3 Formation of Cabinet Committee of

Investments (CCI)

4.4 Impact of New Companies Act 2013 on Power

Generation Companies

5. Asset Acquisition, Associated Challenges and

Possible Remedies

5.1 Asset Acquisition – Opportunities Ahead

5.2 Challenges to the New Owners

• PPA Compliance

• Existing Fuel Supply Agreements

• Regulatory Hurdles

• Tariff Concerns

• Financial Obligation/Restructuring

Annexure

Abbreviations

Bibliography

Contents and Coverage

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