AM/NS buys Essar Steel's CPP under Sarfaesi, says lenders will recover 85%

ArcelorMittal Nippon Steel India (AM/NS India) has acquired a captive power plant of Essar Steel, Essar Power Orissa Limited (EPORL), under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (Sarfaesi) Act.

The acquisition of EPORL was completed on Saturday. The move is yet another effort to make AM/NS India’s operations self-reliant. 

Last year, AM/NS acquired Bhander power plant, a natural gas-based thermal plant at Hazira, with an installed capacity of 500 Mw through a bidding process from Edelweiss Asset Reconstruction Company. 

All put, the total consideration for the two plants – Bhander and EPORL – is in the range of Rs 1,000 crore. AM/NS said that the acquisition resulted in a recovery of about 85 per cent for the lenders. EPORL was acquired from SBI and Edelweiss. 

AM/NS paid the upfront to banks, which shows its commitment in restructuring the distress assets needed for AM/NS to become self-sufficient for its power requirements, the company said.

Both Bhander and EPORL were part of Ruia-controlled Essar Power. However, lenders had invoked the Sarfaesi Act.

An Essar official claimed, “Lenders have recovered 100 per cent of their outstanding from these two assets in a difficult power environment.”

“We are in the final stages of completing our deleveraging program and in the next two quarters, we intend to repay the balance Rs 10,000 crore which is largely in the power portfolio,” the official added.

Essar is largely exiting its coal-based power portfolio keeping in mind green energy requirements and will concentrate its efforts on building a renewable power and storage portfolio, the Essar official added.
 

EPORL is a coal-based 120-Mw captive power plant at Paradip in Odisha, of which 60 Mw was operational; remaining 60 Mw was under construction when insolvency proceedings started against Essar Steel. The asset has been an NPA since 2017.

AM/NS said that it would complete the balance 60 Mw at the earliest and make it fully functional. The second phase of the power plant will feed the 12-million-tonne revamped pellet plant.

AM/NS plans to revive the plants through design capacity, with competitive sourcing of natural gas from global markets. “This will save livelihood of 250 families as AMNS commitment and governance will ensure they become part of the larger family,” the company said.

Essar Steel was acquired jointly by ArcelorMittal and Nippon Steel in December 2019 under the insolvency law and since then, there have been efforts to make operations self-sufficient. 

The acquisition of Bhander power plant – which is captive to AM/NS India’s steel manufacturing operations at Hazira in Gujarat – was an effort in that direction; Bhander is for captive requirements of the steel plant at Hazira in Gujarat. 

Ancillary units – like power, slurry pipeline and captive port – were not part of Essar Steel’s insolvency process. 

ArcelorMittal got the National Company Law Tribunal (NCLT) nod for the acquisition of the slurry pipeline sometime last year; a case, however, is pending before the National Company Law Appellate Tribunal (NCLAT). The 253-km pipeline is a key asset, connecting AM/NS India’s iron ore beneficiation plant in Dabuna to its pellet plant in Paradip.

For the Hazira port, AM/NS has sought a transfer of licence from the Ruias; the case is in Gujarat High Court.

On the raw material side, ArcelorMittal bagged a captive iron ore block, Thakurani, last year. It will meet 75 per cent of AM/NS India’s current requirements for its Odisha manufacturing facilities.

For Essar, the transaction is part of an overall debt reduction programme. “Essar has been working relentlessly towards its debt reduction programme of Rs 1.5 trilliion to banks and financial institutions, of which we have already repaid Rs 1.4 trillion.

Making AM/NS India self-reliant:
 

. Acquired captive power plants, Bhander and Essar Power Orissa Limited

. Got NCLT nod for slurry pipeline

, Bagged Thankurani iron ore block at Keonjhar, Odisha