Financially hard-pressed Jaiprakash Associates’ 1,980 MW Bara (Prayagraj) power project became the first stressed power project to find a buyer. Resurgent Power – a joint venture company of Tata Power with ICICI Ventures received Letter of Intent (LoI) from the lenders consortium led by State Bank of India (SBI).
In a statement, Tata Power informed that Resurgent has received Letter of Interest (LoI) for 75.01 per cent stake in Prayagraj Power Generation Company Limited (PPGCL) which operates the Bara project. The deal size is estimated at Rs 60 billion.
The lenders offered 89.47 per cent stake in the company at a face value of Rs 10 each. Among other companies which were in the fray to buy this project was JSW Energy.
Praveer Sinha, CEO & MD, Tata Power said, “After our due diligence, we found that Prayagraj Power fits in our overall scheme of growth. It has all approvals and clearances in place along with long-term PPA and fuel supply agreement. It will be a value-adding asset in Resurgent Power’s portfolio.” The company said the transaction shall be subject to customary approvals and conditions.
PPGCL was awarded by the Uttar Pradesh government to Jaypee group through a competitive bidding. The tariff quoted by Jaypee was Rs 3.02 per unit and 90 per cent of the power was to be procured by the state government and balance to be sold in merchant market.
Two units of the plant totalling 1,320 MW were commissioned February and September 2016, respectively. The third unit supposed to come in 2017 is yet to be constructed. The plant has a coal linkage agreement with Northern Coalfields for 6.95 MTPA of supply, signed in 2013. PPGCL constructed 3 km railway siding from the nearest Shankergarh railway station to the plant site to receive coal through railway siding.
However, land acquisition, increase in interest during construction, civil costs and preliminary expenses posed issues for the company, delaying the project over the years and almost nullifying the chance of the third unit. The cost overruns of the project ran up to Rs 103 billion (Rs 7.85/MW) from Rs 71 billion (Rs 5.44/MW) in five years. PPGCL has a debt exposure of Rs 110.86 billion.
Prayagraj was part of the list of half dozen stressed power projects where the resolution had commenced outside the National Company Law Tribunal (NCLT). Post a February 12 circular, the deadline for resolution ended on 27 August, 2018. Barring those, where the resolution has commenced, close to 30 power projects are slated to land in NCLT.