For an incomplete stressed energy project in Odisha, Anil Aggarwal’s Vedanta Resources and Sajjan Jindal-led JSW Energy have placed very small offers of about Rs 1 crore per megawatt, leaving lenders anxious about large haircuts for about 15GW of such non-commissioned assets. Industry insiders said the offers were extremely small owing to the fact that the project had tie-ups to purchase coal and energy. The bids cover only the price of the property and are near to the price of liquidation.
The moves have come in the wake of lenders rushing to close the deal by 27th of August, as the stressed power plant has been pilling up loans and losses. Apart from Vedanta and JSW, players like TATA Power, ICICI bank backed Resurgent Power, Adani Power is quick to take over the plant at half its costs.
It all started when Reserve Bank of India sent a circular asking bank to deem power plants as “stressed” even with one day of default, thereby closing the matter in 180 days ending on 27th of August. Resurgent power has bid 4,600 crores for the dwindling Jaiprakash power ventures. The company has a 26 % share of TATA Power, it has also proposed a 15 % Equity infusion in the project.
For the besieged Jaiprakash Power Ventures, only two out of 11 suitors have submitted final offers. On the block, the firm has attracted non-binding offers from Resurgent Power Ventures Pte and Brookfield Asset Management as part of a strategic debt reorganization (SDR), a person close to the construction said. Of the five companies that posed to the consortium of lenders, only two placed in offers, and both the offers implied banks were going in for immense haircuts.
While insolvency is happening between two Jaypee group enterprises— Jaiprakash Infrastructure and Jaiprakash Associates — Jaiprakash Power Ventures is undergoing SDR. Jaiprakash Power was taken over last year by a group of lenders, including IDBI Bank and State Bank of India, although management continued with the Manoj Gaur-led group. On invocation of SDR, the company had earlier transformed Rs 3,058 crore of its debts into equity. Previously, the promoters had discussions with a 23-member lending consortium to implement a comprehensive resolution plan, which included flexible restructuring of project loans to Bina Thermal Power Plant under the 5/25 system and balancing loans. But that didn’t really work out.
In the past, energy assets were acquired by both Gautam Adani and Sajjan Jindal-led groups. In 2015, JSW Energy acquired two Jaiprakash Power hydropower plants— the 300-megawatt (Mw) Himachal Baspa Power Company and 1,091-Mw Karcham Wangtoo unit— for a Rs 9,575 crore company value. However, Adani and Tata Power are in distress with their Mundra mega-power plants. Tata Power, founded by a consortium of two sovereign funds, a foreign pension fund from Canada, and private equity fund ICICI Ventures, acquired 25 percent equity in Resurgent Power last year.
For the financial year ended March 31, Jaiprakash Power made a loss of Rs 761 crore. The firm has a 4,200 Mw installed power generation capacity, of which 400 Mw is from the Vishnuprayag Hydropower Project, while the remainder is based on coal.
The business was also unable to pay lenders the outstanding debt. The lenders formed a Joint Lenders ‘ Forum (JLF) and created a remedial action plan for the company in order to resolve its financial stress. The business was not able to perform satisfactorily under CAP, however. Finally, on July 25 last year, the JLF decided to invoke the SDR clauses. The lenders are entitled to divest their holding of equity from fresh promoters.
Looking at the ever-changing dynamics of the power sector in the country its safe to say that the money supply is tight and lenders are not ready to compromise their safety. At the slightest hint of default, lenders are running towards the door with all that they have. This is the time for consolidation, where there is no place for second best.
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