NHPC to get Rs 4,500-cr loan from PFC, REC to revive Lanco Teesta project

NHPC is taking a loan of Rs 4,500 crore from state-owned lenders, Power Finance Corporation (PFC) and Rural Electricity Corporation (REC), for reviving the Lanco Teesta project in Sikkim. 

With the signing of an agreement with a committee of creditors on Friday, the Union government-owned hydropower major has become the first public sector unit (PSU) to take over a stressed asset through a resolution process in the National Company Law Tribunal (NCLT). 

The company has also put in an expression of interest for Jal Power, another insolvent hydropower unit with a capacity of 120 Mw in Sikkim, said Balraj Joshi, chairman and managing director, NHPC.

NHPC would pay Rs 907 crore for the 500-MW Teesta project. Besides NHPC, Sutlej Jal Vikas Nigam had also put in bid for the project.

According to the summary of claims from creditors, 35 per cent of dues will be settled. 

This is also a unique case with operational creditors getting claims in same proportion as financial creditors. 

Financial creditors will get Rs 876.77 crore out of Rs 2,499 crore claims made by them. Another Rs 11 crore is going to operational creditors and Rs 18 lakh to workmen and employees. 

The project will be implemented at an estimated project cost of Rs 5,748 crore, which includes the bid amount. 

Thirty per cent of this cost, amounting to Rs 1,724 crore at July 2018 price, would be put in as equity by NHPC, 100 per cent owner of Lanco Teesta Hydropower. The remaining Rs 4,024 crore would be debt.

The final takeover of the company would be on October 9 after the entire sum is deposited and fresh shares issued to NHPC.  “We are not only adding 500 MW to our portfolio but have become the first PSU to take over a company through the NCLT,” said Joshi. 

The project, however, does not have a power-purchase agreement (PPA) after Lanco decided to cancel sale of power to Maharashtra. The project had experienced cost escalation because of an earthquake in the state which made sale of power at Rs 2.3 a unit (kilowatt hour) unviable. 

Since the PPA had a clause allowing termination of the contract if the project did not come up and earthquake was a force majeure event, Lanco could cancel the agreement. 

The NCLT allowed the sale to proceed and turned down a Maharashtra government plea to stall the process. 

“We are now looking at a levelised tariff of Rs 4.2 in the first year with 1-2 per cent escalation over a period of 20 years,” said Mahesh Kumar Mittal, director, finance, NHPC.

The EPC contractor had suspended work on the project in July 2017. Seventy per cent  of civil works for barrage has been completed. 

The NCLT Hyderabad had approved the resolution plan of NHPC on July 26, 2019. In March, the Cabinet Committee on Economic Affairs had approved the proposal for acquisition of the Teesta project. NHPC plans to complete the construction of project in five years.