Insolvency process: Banks put 4 mega power projects on the block

Several ARCs, the Tatas, JSW and the Adani group expected to bid for these

Indian lenders have put several large electricity generation and transmission projects — including KSK Mahanadi, Lanco Anpara Power, Lanco Amarkantak Power and South East UP Power Transmission — up for sale. This is because the March-end deadline to close the sale of these projects under the insolvency process is not far away.

Several asset reconstruction companies (ARCs), the Tatas, JSW and the Adani group are expected to bid for these projects and lenders are hopeful of finding a buyer in the current round.

The replacement cost of power projects is around Rs 5 crore per megawatt (Mw). However, lenders said, in the past, they had received very poor bids, including below Rs 1 crore a Mw. This led to yet another round of bidding.

IDBI Bank is leading the sale of Lanco Anpara Power, which is a subsidiary of Lanco Infratech that is currently under liquidation. The bank has put an enterprise valuation of Rs 819 crore for the 1,200 Mw power project in Uttar Pradesh. “We are expecting to close the transaction by March this year and have already invited fresh bids,” said a source.

Lanco’s another project in Korba, Chhattisgarh — Lanco Amarkantak Power — of 1,320 Mw — has also been put on sale with a bid deadline of March 26.

 group and its subsidiaries were among the first batch of companies which were sent to the bankruptcy court for debt resolution under the IBC 2016. This was after the group defaulted on Rs 50,000 crore of bank loans.

Earlier this month, State Bank of India (SBI) temporarily put off the sale of its non-performing assets (NPAs) on KSK Mahanadi Power scheduled for December 31. This was after the income tax department raised queries on ARCs participating in the bids of defaulting companies and asked the bank to delay the sale till its investigations are over.

A source said the sale will resume soon after all the questions raised by the IT department are answered.

KSK Mahanadi defaulted on loans worth Rs 21,760 crore as on March 2018 and lenders are staring at a significant write-off in the account.

Of this, SBI has an exposure of Rs 4,100 crore in KSK Mahanadi. The bank had earlier set a reserve price of Rs 1,423 crore for selling the NPA to any bidders from ARCs, banks, non-banking financial companies (NBFCs) to financial institutions.

KSK Mahanadi has a partly-operational thermal power plant in Chhattisgarh. The 3,135 Mw power generated by KSK is supplied to distribution utilities in Andhra Pradesh, Tamil Nadu, Chhattisgarh, Gujarat and Uttar Pradesh. The project became unviable after UP decided to reduce power tariff for purchases made from the company.

Among the transmission projects, lenders said they recently rejected a bid by Tata Power for South East UP Transmission Company, citing it was a conditional bid. They have called for bids again.

The final bids are expected by the end of January with both Tatas and Adani group planning to bid. Lenders are expecting full recovery of their Rs 3,700-crore dues.

Incorporated in September 2009, South East UP Power Transmission Company had signed a transmission service agreement with four distribution companies in Uttar Pradesh. It was to erect, commission and operate the Mainpuri-Bara line.

The transmission network is around 1,600 kilometers and the set-up included five substations split into two phases. The project has been undertaken to evacuate power from a few thermal plants and improve the reliability and quality of supply in UP.

The company fell into financial problems after its Spanish promoter, Isolux Corson, filed for bankruptcy.