GMR sells Chhatisgarh plant to Adani Power in order to pare debt

Deal is part of a debt resolution plan approved by GMR's lenders; The power plant subsidiary ran into financial trouble owing to absence of a long-term PPA

GMR Infrastructure has entered into an agreement with Adani Power to sell its stake in its Chattisgarh power plant, the company said on Thursday. The deal will help the group further deleverage its balance sheet.

“GMR Infrastructure wishes to announce the signing of a definitive share purchase agreement with Adani Power for the sale of the entire stake of 47.62 per cent in GMR Chhattisgarh Energy, held by its wholly-owned subsidiary GMR Generation Assets,” the company said in a statement on Thursday. The deal is part of a debt resolution plan (RP), approved by lenders. 

Lenders to GMR Chhattisgarh Energy last week approved the bid by Adani Power and the Axis Bank-led consortium of lenders issued a Letter of Intent (LoI) to the bidder. The power plant subsidiary ran into financial trouble owing to absence of a long-term power purchase agreement.

“Implementation of RP will lead to a significant deleveraging for the GMR Group. GMR Chattisgarh had an outstanding debt of Rs 5,926 Crore as on March 2019,” the company added in its statement. GMR also expects its profitability to improve owing to resolution of the Chattisgarh plant.  “GMR Infrastructure’s consolidated profit for FY2019 was adversely impacted by Rs 516 crore on account of Chhattisgarh Power Plant. Further Corporate Guarantees to the extent of Rs 892 Crore furnished by GMR Group companies - GMR Energy Ltd, GGAL and GMR Power Corporation shall be released,” the statement said.

The company further added, “Successful resolution of two stressed assets- GMR Rajahmundry Energy and now GMR Chattisgarh highlights GMR’s commitment towards its objective of deleveraging and de-risking the balance sheet.”