Upbeat on state reform action; UP to move on tariffs by Sep‐12: The PFC/REC
management was very upbeat on tariff hikes taken by the states (17 of 27
states) in FY13 including large ones like TN. PFC expects tariff hike to be taken
by UP by mid Sep-12 which will be a big relief. These hikes surely bring some
states close to break even but hikes not being implemented in Agri continue to
increase hike requirements for commercial/personal segments. Of all states,
PFC was extremely positive on prospects of a turnaround of SEBs in MP and
believes MP SEBs could turn profitable in due course.
No clarity on FRP; Don't see PFC/REC taking haircut/NPV hits: The restructuring
package (FRP) is still in works and PFC management said there is limited clarity
still on the terms of restructuring (Media sources: 50% debt to be shifted to
state govt. and other 50% to be offered a 3 yr moratorium). PFC/REC have
categorially denied taking any haircut on these loans but transfer of debt to
state governments and getting state government bonds could entail some NPV
loss due to lower yields on state govt. debt in our view.
Fresh sanctions to SEBs ‐ Part of restructuring: Both PFC/REC as part of the
ongoing restructuring will provide Rs170bn each to the SEBs for working capital
requirements. PFC/REC who have largely refrained from funding losses of SEBs
will now do so as some burden gets shifted from banks to PFC/REC but
management believes that these loans remain contingent on going reform
performance and guarantees by each state.
Regulatory provisioning: (1) Usha Thorat committee had recommened
applicability of standard asset provisioning (0.25%) for PFC/REC and according to
the mgt, they intend to provide this over next 4 yrs (0.05% annually) (2) Also, on
providing for risk weight on undisbursed sanction, PFC/REC have asked RBI for
an exemption upto FY17 and is currently under consideration
PFC Private power portfolio ‐ Some reschulements hapenning:
• PFC already has 3 private power projects as NPAs and we continue to have
news flow on JAS Infra/Abhijit power where PFC also has a large exposure.
• PFC has rescheduled ~Rs6bn of exposure in 2 projects in FY13 and there may
be similar reschedulements (payments psuhed by 12mnts) going forward. (1)
Dans Energy: Hydropower project in Sikkim, Rs4bn exposure and (2) Krishna
Godawari Power, 67 MW, Rs1.5bn exposure.
• PFC has ~Rs10bn exposure to Suzlon. Repayments have been timely upto July
with some marginal delays in August.
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