Lanco plans to sell 3,000 Mw assets in FY 2018

Company seeks to reduce debt by Rs 18,000 cr through sale of assets with an enterprise value of Rs 25,000 cr

Power and infrastructure major Lanco Group today said it will sell power assets with a combined capacity of 3,000 Mw in the financial year 2018 by when the execution of all the ongoing power projects would be complete, to reduce the debt levels.

"We hope to bring down the debt by Rs 18,000 crore by selling these assets which will have an enterprise value of about Rs 25,000 crore in the year 2018. Our focus in the meanwhile would be to complete the execution of the under construction projects of 4,636 Mw and set right the overall performance of the company," L Madhusudan Rao, executive chairman of Lanco Group told reporters on the side line of the Lanco Infratech annual general meeting.

The group is currently sitting on a pile of around Rs 34,000 crore debt and it will eventually go up to around Rs 45,000 crore by the time it execute the power projects under construction before its plan to sell off the power assets kicks in.

According to Rao, carrying high debt for a couple of more years was the only sensible option since the enterprise value of the power assets is very low at this point in time. The project that would be put for sale will not include gas power assets, he said.

In April this year the company had announced the successful completion of sale of its 1,200 Mw Udupi power project to Adani group.

Stating that the efforts at reviving the performance of the group have been bearing fruit in recent times, Rao said about 1,400 mw of the existing 3,400 mw capacity has now been put to good use partly due to the gas pooling scheme introduced by the Centre from June this year besides putting the stalled power projects back on track.

Recently the company had secured the lenders approval for cost overrun proposals for four of its under construction projects-the coal fired Amarkantak phase 2, Babandh and Vidarbha power projects each of 1,320 Mw capacity and the 76 Mw Mandakini hydro power project with a total investment of around Rs 33,000 crore. In addition the consortium of lenders led by ICICI Bank acquireed 51 per cent controlling in the 500-mw Teesta Hydro power project under the Strategic Debt Restructruring mechanism as an interim measure pending the induction of a strategic investor into the project.

With the commissioning of these plants the company will have a consolidated operating power capacity of around 8,000 mw by FY 2018.

Rao said getting these projects completed was a critical task at this point of time while debt is a natural component of any infrastructure project. Of the 4,500 mw odd capacity, the company expects to complete 2,720 mw, including Mandakini hydro power project, in the financial year 2017 and the another 1,320 Mw of project in the financial year 2018.

Lanco Infratech had received corporate debt restructuring (CDR) package in December 2013 on stand alone basis excluding its subsidiaries and associates. About Rs 2,500 crore priority loans was sanctioned with a moratorium period of 2 years at an interest rate of 12.5 per cent and is re payable in 18 quarterly instalments starting from June, 2015.

Responding to a question the Lanco chairman said almost 85 per cent of the projects in the country have been seeking relief under the joint lenders forum(JLF) mechanism and Lanco also opted for the same mechanism for its projects.

Earlier in his address at the company AGM, Madhusudan Rao said things were expected to change on ground for infrastructure sector in the next 18-24 months time.