PFC in The Red as NPAs Rise 300%

Financier reported a quarterly loss of Rs 3,409 Cr; FY17 profits fell by 65% to Rs 2,126 Cr

 

The stressed assets of the power sector’s key financier, Power Finance Corporation (PFC), increased by 300 per cent to Rs 30,718 crore, pushing the company in the red for the first time.

The PFC reported a quarterly loss of Rs 3,409 crore in the fourth quarter of the previous financial year (2016-17). For FY17, its profit fell by 65 per cent in a year to Rs 2,126 crore.

The percentage of gross non-performing assets (NPAs) to total loan assets stood at 12 per cent in FY17. In FY16, it was 3.15 per cent. In its annual report, the company said its profit was muted because of higher provisioning on account of bad loans and a rise in restructured assets.

Thermal power projects constitute the largest pie of NPAs, of which most are state power generating companies, classified as bad debt by the PFC owing to delays in commissioning of projects and unrealised income, said officials.

Six assets worth Rs 18,234 crore were classified as NPAs, stated the company. “The profit-before-tax for the year ended March 2017 decreased by Rs 3,954 crore on account of these NPAs.”

The company, however, told its investors, it expected 80 per cent of NPAs to get upgraded in 2018.

With power distribution companies under restructuring, the slow repayment of loans has also hit the PFC. Of Rs 48,693 crore of loan repayment to be made by discoms, Rs 10,574 crore was pending as of March 2017.

At Rs 1.33 lakh crore, the PFC along with state-owned Rural Electrification Corporation (REC) is the largest lender to state electricity boards, which are now cumulatively battling debt exposure of Rs 4 lakh crore. The new-fangled Ujwal DISCON Assurance Yojana (UDAY) aims to restructure this debt by floating sovereign guaranteed bonds at market rates. It also restricts future borrowings by the states from these lenders and banks till their respective discoms turn around financials and operations.

Sector experts said the loans given to discoms were under restructuring. At the same time, there were no big-ticket projects for the PFC. “It is now a discounted fact that the PFC would continue to reel under poor paybacks till the discoms turn around. As for the generation projects, there are no takers for the stalled units and growth in conventional generation is more or less stagnant,” said a Delhi-based analyst.

In FY17, the PFC sanctioned loans for three government sector coal-based project totalling Rs 11,000 crore and three solar power projects worth Rs 1,121 crore.

As for the portfolio of independent power projects based on conventional fuel, close to 18-20 GW capacity is without any power purchase agreement. In the past five years, no generation project has achieved financial closure, according to market data. The PFC said in its concall that the new coal allocation policy would help improve the situation for private sector generation projects.

 

Reference - http://www.business-standard.com/article/companies/pfc-in-the-red-as-npas-rise-300-117053001801_1.html