Adani Group may pick 51% lenders' stake in TN's power firm Coastal Energen

The Adani Group has joined the race to buy the 51 per cent stake in Coastal Energen owned by Indian lenders.

The lenders took majority control in the Tamil Nadu-based company after it failed to repay its Rs 6,000 crore debt. Apart from Adani, the Coal & Oil group, former promoter of the company, is also expected to put in a bid, said a source close to the development. The Coal & Oil group still holds around 40 per cent stake in the company.

A consortium of lenders led by State Bank of India has mandated SBI Caps to invite fresh bids for the company after its earlier bids were unsuccessful. 

The Adani group had recently withdrawn its application to take over Ruchi Soya, a company sent to the National Company Law Tribunal for debt resolution under the Insolvency and Bankruptcy Code. In the last five years, the group has taken over troubled power projects of Lanco in Udupi and is close to buying GMR’s Chhattisgarh plant. In 2014, it had taken over Avantha’ group’s Korba West power project.

When contacted, a spokesperson from the Adani Group declined to comment. If the lenders succeed in selling their stake, then it would be one of the first few power projects whose debt will be resolved outside the courts. The Indian lenders are sitting on an exposure worth Rs 2.2 trillion to the power sector following the February 12, 2018, circular of the Reserve Bank of India which had banned debt resolution outside the IBC. Power companies have moved Supreme Court against the circular and it is expected to be heard soon. 

The consortium of banks issued loan to Coastal Energen. The company had earlier converted a part of the outstanding loan and facilities into equity shares, which constitute 51 per cent of the total equity shares of the company. Of this, SBI holds around 18.54 per cent share and Punjab National Bank has 5.77 per cent. Other lenders, including Central Bank of India, Indian Overseas Bank, Indian Bank and UCO Bank, among others, have less than 5 per cent stake in the company.

The company is currently operating a 1,200 MW imported coal-based thermal power plant at Thoothukudi and had obtained various credit facilities from the lenders. The plant operates on imported coal procured from open market sources.

The 558 MW power generated from unit one of the project has been tied with Tamil Nadu-owned discom TANGEDCO at a levelised tariff of Rs 4.69/kWh for 15 years ending September 30, 2028. The second unit of the project does not have any long-term power purchase agreement (PPA). 

“The company has been facing challenges due to non-availability of PPAs at remunerative tariffs and has not been able to service its obligations under the credit facilities provided by the lenders,” SBI Capital Markets had said earlier in its offer document.

The company was earlier promoted by Coal & Oil group, through Mutiara Energy, Mauritius, and Precious Energy, BVI. The project was planned at a time when power shortage was expected in states like Tamil Nadu, but the state has become power sufficient in the recent past. It has thermal, wind and solar power projects besides the nuclear power plant in Kudankulam.