After ICICI Bank initiated insolvency proceedings against Essar Power MP, the company on Tuesday got relief with the National Company Law Tribunal (NCLT) deciding to post the next hearing for December 3. The company promoters had pleaded that the Supreme Court’s order on the Reserve Bank of India’s February 12 notification ordered status quo and, hence, lenders could not proceed with insolvency.
ICICI Bank had earlier moved the NCLT seeking initiation of insolvency proceedings against Ruia-promoted Essar Power MP, under Section 7 of Insolvency and Bankruptcy Code. A consortium of lenders, including Power Finance Corporation and Rural Electrification Corporation, has an exposure of Rs 53.30 billion to the project, with ICICI dues at Rs 13.7 billion.
This is the third group company after Essar Steel and Essar Power Jharkhand for which lenders have sought insolvency. While the resolution for the two companies under IBC is yet to conclude, the MP project had undergone the resolution process outside of NCLT.Russia’s VTB Bank-led NuMetal and ArcelorMittal are in the fray for acquiring Essar Steel, which owes around Rs 500 billion to lenders.
Sources said the company promoters had even roped in a partner for the project in order to make payment to the lenders. Since December 2016, the company has been in regular contact with the lenders to restructure its debt. In March 2018, it approached the lenders with a one-time settlement but it wasn’t accepted.
A lawyer dealing with insolvency cases said the resolution process under IBC is such that the committee of creditors would always want the maximum bid to come out of the process until there is a finality but that has to depend on the process that has been set out for the bidding. Under the IBC, the offer for restructuring from the promoter is ruled out but a lot would depend on terms and conditions set out for bidding.
The 1,200-Mw Mahan plant had commissioned 600 Mw capacity in February 2013. Though the power plant was linked to a coal block, the company lost it after a Supreme Court ruling in 2014 that de-allocated captive coal blocks. The company later bid and won the Tokisud coal block but it led to a cost overrun leading to an increased cost of Rs 109 billion.
The Essar group has 3,745 Mw of operational power generation capacity. Besides Mahan, it has 1,200 Mw of under construction project at Tori in Jharkhand and 1,200 Mw operational project at Salaya in Gujarat. There are smaller power plants at Hazira, Bhanderand and Paradip which are for captive generation for Essar Steel.
Source : Business Standard , September 25 ‘ 2018