Ready to help revive Adani, Tata, Essar power projects in Gujarat: Lenders

Lenders will have to take Rs 100-bn haircut, cut rates

Indian lenders, who have filed debt recovery suits under the Insolvency and Bankruptcy Code against 977 companies in the past two years, have said the three Gujarat-based loss-making power projects -- Coastal Gujarat Power in Mundra, Adani Power Mundra and Essar Power -- should be revived with some efforts by all stakeholders and not become insolvent.    

In their submissions before a high-powered committee headed by former Supreme Court judge RK Agarwal, lenders said the net worth of these projects is already wiped off and these projects are primarily managing to survive on additional fund infusion by their promoters. "There is likelihood of further erosion in the credit worthiness of the power generators, and the projects may become a non-performing asset thereby leading to further significant losses to be borne by lenders," the draft report quoted lenders as saying. 

"The lenders further said they are handling various stressed accounts in the power sector due to multiple reasons and therefore it would be desirable to resolve the issues pertaining to these projects with some efforts rather than allow them to become insolvent," the report said, quoting the lenders.

The high-power committee was set up by the Gujarat government in July this year to resolve the high cost of imported coal now facing the power projects set up by these companies after the Indonesian government changed its coal export policy mid-way, which made these projects unviable. The three projects were based on imported coal and the Supreme Court rejected a petition by these companies to seek higher tariff from the electricity distribution companies based in Gujarat, Punjab, Maharashtra, Haryana and Rajasthan, which had signed power purchase agreements.

The report said Adani Power has suffered financial losses of Rs 97.48 billion and its entire equity capital has been wiped off. The promoters infused an additional Rs 90 billion between the financial year 2013 and financial year 2018 as promoters' loans to sustain the operations. APL has been mentioned as a special mention account (SMA 1) under the Reserve Bank of India (RBI) master circular dated February 12, 2018, and had presented a resolution plan to the lenders. "In effect, APL is unable to continue operations with mounting losses year on year and is getting pushed towards liquidation," the report warned.

On the 4,000-Mw Coastal Gujarat Power project, a subsidiary of Tata Power, the report said due to change in Indonesian coal export laws, the foreign project lenders stopped making disbursements to CGPL and the balance funding of the project worth Rs 12.64 billion towards the undisbursed funding was done by its parent, Tata Power Ltd. "As a result of the financial stress, CGPL is in multiple breaches under the loan agreements and repayments are being done by loss funding by Tata Power," the draft report said. The report is not final and might go through changes after discussions with the five state governments and the companies, said a source close to the development. 

On Essar Power, the report said the project has been shut for the past eight months and has suffered a loss of Rs 36 billion. It added that the project was declared an NPA since March 1, 2018. The lenders would be forced to refer the company to the National Company Law Tribunal by August 28 once the RBI's deadline expired, the report had quoted the lenders as saying. 

In order to bail out these three projects, the report recommended that the power purchase tariff signed by the state electricity boards should be reduced by 20 paise per unit and, at the same time, Indian lenders should take a haircut of Rs 100 billion on these projects so that they can be saved from liquidation. 

The project developers, on the other hand, led by Tata and Adani, who own coal mines in Indonesia, have been asked by the committee to share profits, if any, from the mines with the electricity buyers.  

Interestingly, the offers by the three companies made last year to give their 51 per cent stake in the three power project to the electricity distribution company for Re 1 does not figure in the draft recommendations.

Spokespersons of Adani Power and Essar Power declined to comment. An email sent to Tata Power did not elicit any response till the time that the article was published.  

Turnaround plan

• Reduce capacity charge on account of sacrifice by banks
• Banks should reduce debt by Rs 100 billion, cut rates
• Past losses to be borne by developers
• Make resolution plan applicable from a prospective cut-off date
• Extend PPAs by another 10 years after completion of 25 years
• Developers to offer for tie-up of free capacity
• Tata/Adani should share profits, if any, from the Indonesian mines