Reliance Power eyes stressed thermal coal-based assets to boost growth

Mumbai: Reliance Power Chairman Anil Ambani on Tuesday said the company is looking at inorganic growth through acquisition of stressed thermal coal-based projects.

Speaking to shareholders at the company's 24th annual meeting, Ambani said, "going forward, we are looking at key growth opportunities for the company. One of those is inorganic asset acquisition of stressed thermal coal-based assets through resolution process by lenders or under the NCLT regimes."

He said the company will continue to look at opportunities that will bring value and are growth accretive with strong, stable and conservative financial profile.

"Besides acquisition, we are also looking at opportunities in the operation and maintenance (O&M) services for stressed power projects which are under the review petition of the resolution," Ambani said.

Apart from this, he added, mine development operator service is another growth area considering their experience in this field, and the company being the largest private sector coal mining company.

Giving an overview about the coal-based projects in the country, Ambani said, there are 34 projects of nearly 40,000 MW with an investment of nearly Rs 2.5 lakh crore which have either turned NPAs or are on the verge of becoming NPAs.

"The stress in coal-based projects is primarily due to lack of long-term fuel supply agreement and PPA with discoms. Nearly 30 generation companies have already turned into NPAs and are now being referred to the NCLT to follow the IBC route for resolution. If there is no resolution, then a large number of these are headed for bankruptcy and liquidation," Ambani added.

He further said that risk management initiatives taken with respect to 3,960 MW Tilaiya ultra mega power project (UMPP) have paid off well and the company has sold its entire stake in Jharkhand Integrated Power, an SPV created for the development of the project, to the state utility, Jharkhand Urja Vikas Nigam (JUVNL).

"Tilaiya has achieved a key milestone with the transfer SPV along with the bank guarantee. As on the lines of Tilaiya, we are pursuing resolution for 4,000 MW Krishnapattanam UMPP and hope to get fully resolved in the course of this financial year," he said.

Ambani further noted that for grid stability across the country and states as well as for energy security, there is a need for coal-based power as renewables cannot be a complete alternative.

"You need base load power and that can come only from coal or nuclear. Solar is cheaper, but from energy security, grid stability and energy mix, coal-based generation is a must. Also, the government needs to take steps to increase the domestic coal production and reach its target of 1 billion tonne output by 2020," he said.

Speaking about the 2,400 MW gas-based combined cycle Samalkot project in Andhra Pradesh, he said the company has managed to convert the challenge of the stranded asset into an opportunity by diverting one module of equipment procured for this to the Phase-1 project in Bangladesh.

Reliance Power had signed an MoU on June 6, 2015 with the Bangladesh Power Development Board (BPDB) to set up 3,000 MW integrated combined cycle gas-based power project (in phases) and a 500 mmscfd LNG terminal.

Ambani said that currently, the gas-based capacity of around 24,000 MW is shut and financially stressed due to non availability of gas with investments to the tune of nearly RS 1.2 lakh crore at stake.