SBI-led consortium of lenders to sell stake in debt-ridden Coastal Energen

The thermal power plant was one of the projects for which the state government signed an MoU in September 2015, claiming an investment of Rs 156.20 billion, during the Global Investors Meet

State Bank of India-led group of lenders have initiated the process to put troubled thermal power company Coastal Energen on sale.

The company had a 1,200 Mw coal-based thermal power plant in Thoothukudi, Tamil Nadu. It had debt of over Rs 60 billion as of December 30, 2016. Lenders have asked SBI Capital Markets to identify an investor to acquire the firm in accordance with the Reserve Bank of India (RBI) circular.

Coastal Energen is part of Coal and Oil Group. Lenders had initiated restructuring under Strategic Debt Restructuring (SDR) on 2015.

The consortium of banks had earlier converted part of the outstanding loan and facilities into equity shares, which constitutes to around 51 per cent of the total equity share of the company.  

SBI holds around 18.54 per cent share and Punjab National Bank holds 5.77 per cent, while the other lenders including Central Bank of India, Indian Overseas Bank, Indian Bank and UCO Bank among others has less than five per cent stake in the company.

The company is currently operating a 2x600 MW imported coal-based thermal power plant at Thoothukudi and in this connection, it has obtained various credit facilities from lenders.

The plant operates on imported coal procured from open market sources. The 558 MW (net power) generated from unit 1 of the Project has been tied up with the Tamil Nadu state-owned discom TANGEDCO at a levelised tariff of Rs 4.69/kWh for 15 years ending 30 September 2028.

The second unit of the Project does not have any long-term power purchase agreements. The company recorded a net revenue of Rs 18.80 billion and EBITDA of Rs 7.26 billion for the financial year ending 31 March 2017. The outstanding term debt as on 30 December 2016 was Rs 61.32 billion and working capital as on 31 March 2017 was Rs 8.31 billion.
 

The first unit was synchronised to the grid on 7 September 2014 and attained a full load of 600 MW on 2 December 2014. The power generated from this unit is tied up with TANGEDCO under a 15-year power purchase agreement. With the declaration of COD, the supply of 600 MW (gross) of power will commence immediately.

"The Company has been facing challenges due to non-availability of power purchase agreements at remunerative tariffs and consequently has not been able to service its obligations under the credit facilities provided by the Lenders," said SBI Capital Markets in its document inviting Expression Of Interest (EOI) from interested investors to acquire the stake.

The company earlier went through a strategic debt restructuring scheme, approved by the RBI, with a resolution to change the management of the company, which is when the lenders took over the majority stake in the company, the document said. 

 

The company is promoted by Coal & Oil Group, through Mutiara Energy Holdings Limited, Mauritius, and Precious Energy Holdings Limited, BVI, which is a Dubai-based energy conglomerate operating as an integrated fuel solution provider with interests in coal trading, technical consultancy for fuel sourcing, handling, shipping, logistics etc. C&O is in turn owned by Ahmed A R Buhari and his family.  
 

The project was planned at a time when power shortage was expected in states like Tamil Nadu. However, the state has become power sufficient in the recent past including through thermal, wind and solar power projects, apart from the nuclear power plant in Kudankulam, Tamil Nadu.