Mon 05/04/2020 07:11 AM
Relevant Document:
Parliamentary panel report
ICRA Report

Investments in stressed Indian power sector projects that were in the final stages of either a one-time settlement or court mandated resolutions are being reassessed, as the Covid-19 lockdown has severely curtailed electricity demand in India, forcing buyers to rework their financials projections, said four sources involved with the negotiations.

The lockdown has resulted in a shutdown of industrial and commercial establishments and stoppage of train services - which constitute about 40% of the total electricity demand in the country, rating agency ICRA said in a report released in March.

Reorg provides a list of impacted projects further down this story.

Sources Reorg spoke to say bids for the projects were based on demand growth assumptions which now have to be reworked. The lockdown has severely curtailed demand in the high tariff industrial and commercial segments, and a delay in cash collections from other consumer segments is also expected, the report said. The decline in cash flows has hit the internal rate of return (IRR) of planned investments in the projects, three of the sources said.

India’s electricity demand is likely to drop by about 20-25% on a year-on-year basis during the period of the lockdown, ICRA said in the report.

Indian power generation companies had overdues outstanding of INR 797.99 billion billion ($10.5 billion) to power distribution and transmission companies at the end of March, according to estimates by the Ministry of Power.

The average monthly all-India thermal plant load factor (PLF) would dip to about 50% in April 2020 against 63% in the same month last year, due to the drop in demand caused by the lockdown, ICRA’s March report said. Plant load factor is a measure of average capacity utilization of a thermal power plant.

All-India thermal PLF is poised to drop below 50% in April, according to ICRA:

Reorg details below individual deals that were still in flux going into the lockdown:

Coastal Energen

The 2x600 MW coal-based thermal power plant in Tuticorin in Tamil Nadu had total debt of INR 87.30 billion ($1.2 billion) as of March 31, 2019.

Deutsche Bank AG (DB) and SSG Capital-backed Asset Care & Reconstruction Enterprise (ACRE) along with company founder Ahmed Buhari emerged as the default winner in a Swiss auction called on June 24 by a consortium of lenders led by State Bank of India, as there were no other bidders after many attempts, as Reorg reported in July 2019. There were further attempts by SBI, with the latest being on Dec. 6, 2019, to find a buyer who could better the offer by the company promoter, as reported.

DB, ACRE and Buhari put in a bid of INR 30 billion under which ACRE and DB will hold 51% of the asset while banks will hold 15% and the Buhari family will own 34% after the deal is completed, as reported.

The deal is yet to be closed. Meanwhile, the project is under investigation by the federal investigative agency, the Enforcement Directorate, for alleged fraud, two sources said.

Read Reorg’s coverage of Coastal HERE.

Jindal India Thermal Power

Lenders to Jindal India Thermal Power Ltd., barring ICICI Bank, had agreed on a one-time settlement (OTS) proposed by the promoter B.C. Jindal Group, along with DB, after a Swiss Challenge auction failed to receive any bids, as reported.

The consortium had proposed an OTS of INR 24.3 billion for Jindal India’s total debt of INR 59 billion as of June 2017, as further reported. Jindal India runs a 2x600MW thermal power project in Odisha state.

The proposed OTS was supposed to close by the end of the financial year on March 31 but is yet to close, two sources said.

GVK Power (Goindwal Sahib)

A 2x270 MW coal-based power plant situated in Punjab’s Goindwal Sahib owned by India’s GVK Group. This project has a 25-year power purchase agreement (PPA) with Punjab State Power Corporation.

GVK, which built the Mumbai International Airport, was in discussion with DB for an OTS of its INR 35.1 billion debt, the Economic Times reported in November, citing Press Trust of India.

Lender Union Bank of India received no bids for the INR 4.44 billion non-performing loans (NPL) of GVK Power Goindwal Sahib put up for auction in January, as Reorg reported. The bank had set a reserve price of INR 2 billion, or 45 cents, on the auction, according to the bid document.

Lender Axis Bank had approached National Company Law Tribunal (NCLT) Hyderabad in December last year for initiation of a corporate insolvency (CIRP) under the Insolvency and Bankruptcy Code, 2016, according to a copy of the court’s order. However, the case is yet to be admitted, according to a lawyer tracking the case and NCLT cause lists.

Lanco Group Companies

Lanco Vidarbha Thermal Power Pvt. Ltd. runs a 2x660 MW thermal power plant in Maharashtra state. It was admitted for a CIRP under the IBC in October 2019 by NCLT Hyderabad on a petition by lender Punjab National Bank for a default of INR 7.9 billion.

The resolution professional of Lanco Vidarbha, Vijay Kumar Garg, invited Expressions of Interest (EoIs) for resolution plans for the power generator in January, as reported. The CIRP process, which was estimated to close by March 31, has not closed due to the Covid-19 lockdown, two sources said.

Lanco Amarkantak was admitted into CIRP in September 2019 by NCLT Hyderabad on a petition by Axis Bank, according to the court’s order.

The resolution professional of Lanco Amarkantak, Saurabh Kumar Tikmani, has invited EoIs for the project and the last date for submitting resolution plans was April 30, according to an advertisement dated April 8.

About 17 financial creditors of Lanco Amarkantak have submitted claims of INR 164.84 billion, of which INR 146 billion has been admitted, according to its website.

Claims of financial creditors of Lanco Amarkantak as of November, according to a company presentation:

Lanco Amarkantak was set up with a planned thermal capacity of 3,240 MW in Chhattisgarh state, according to a company presentation. Of this amount, 600 MW is operational, while 1,320 MW is under construction, and construction is yet to start on the remaining 1,320 MW, according to the presentation.

KSK Mahanadi Power

KSK Mahanadi Power Company Ltd. operates a coal-based power project in Chhattisgarh state. It is a 3,600 MW power project comprising six units of 600 MW each, according to the company’s website.

The company was admitted for a CIRP by NCLT Hyderabad in October 2019 on a petition by Power Finance Corporation, according to the court’s order. The interim resolution professional for KSK Mahanadi, PwC’s Mahender Kumar Khandelwal, has invited EoIs by
May 15, according to an advertisement.

The EoI schedule for KSK Mahanadi is as follows:

About 25 financial creditors of KSK Mahanadi had submitted claims of INR 300 billion as of Feb. 14, of which INR 289.7 billion of claims have been admitted, while INR 10.7 billion is under review and the rest has not been admitted, according to the company’s website.

Details of KSK Mahanadi financial creditors’ claims:

KSK Mahanadi’s capital structure as of March 31, 2018 is shown below.

Given below is the present status of 34 stressed coal-based thermal power plants, as furnished by the Ministry of Finance, according to a Parliamentary report published in August 2018:

Read Reorg’s coverage of Coastal Energen HERE, Lanco Infratech HERE and KSK Energy Ventures HERE.

-Rajhkumar K Shaaw
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