While the attempts by lenders and promoters to find resolution of some stressed power assets outside the ambit of the National Company Law Tribunal (NCLT) have largely been foiled by non-consenting minority lenders, debt recasts of a couple of projects have been agreed upon by stakeholders. Last week, Renascent Power, a unit of Tata Power’s private equity platform Resurgent Power Ventures, agreed to acquire 75% stake in Prayagraj Power Generation Company’s (formerly of the Jaypee group) 1,980 MW Bara power plant for Rs 6,000 crore.
Earlier, Hong Kong-based Agritrade Resources had vowed to buy 100% stake in SKS Chhattisgarh’s 1,200 MW Binjkote unit for a consideration of Rs 2,170 crore. While the deal for Bara unit involved a 28% haircut by the lenders led by SBI, what the lenders to Binjkote project (again a consortium led by SBI) would get will be 57% less than the loan outstanding.
The amounts on which each lender would lay its hands are not immediately known. According to sources, total outstanding debt of the Bara plant is around Rs 11,000 crore; Binjkote unit owe Rs 5,000 crore to the lenders. The Bara plant has power purchase agreement signed with Uttar Pradesh for 90% of its capacity at a levelised tariff of Rs 3.02/unit. Cost overruns led to debts rising to levels unmanageable by the promoter from the original level of Rs 8,000 crore. Interest rate went up to 14% from 11.5% initially. Shortage of working capital led to coal shortage.
SKS’ Binjokete plant’s phase-I (600MW) is currently under operation and phase II (600 MW) is under construction. Absence of long-term power purchase agreement is seen as the primary reason for its stress, with only 5% capacity having assured buyer. It has also faced cost over-run due to other factors such as non-performance of the EPC contractors and withdrawal of Blackstone as an investor.
There was coal linkage for 5.3 MTPA for 1200 MW; the existing 600 MW requires about 2.55 MTPA. The plant is expected to get some relief as it is one of the seven power plants selected to supply 1,900 MW to discoms for at least three years under a central government scheme.
Lenders are looking to find resolution to their stressed assets before the Supreme Court starts hearing the huge batch of petitions against the RBI’s February 12 circular from November 28. The apex court on September 11 asked the RBI, banks and others to desist from invoking insolvency proceedings against corporate defaulters as per the banking regulator’s February 12 mandate till its orders. This timely relief saved Bara and Binjkote plants from going to NCLT.
Low prices offered for assets in NCLT have made lenders and existing promoters apprehensive that reaching these tribunals may bring down the value of projects.
Speaking on sale of stressed assets, research agency Edelweiss Securities had pointed earlier that since it is a buyers’ market and lenders are under immense stress to complete sales, it expects the haircuts to be heavy, upwards of 50%.
Power minister RK Singh had said that stressed power assets should not be “sold for a song” as these projects would become viable with an upcoming surge in electricity demand.