The resolution professional of Essar Power Jharkand Ltd (EPJL), an SPV of Essar Power, developing 1,200 MW thermal power plant in Tori, Jharkand, has invited an expression of interest (EOI) to submit the resolution plans from interested parties. The deadline for submission of EOI is July 10.
The company has been admitted to NCLT on a petition filed by ICICI Bank as it has defaulted on loan of ₹3,468 crore, according to the bank. Huzefa Fakhri Sitabkhan is the IRP.
EPJL was incorporated in 2005 for setting up 2X600 MW coal-based thermal power plant at Tori in Jharkhand. However, the Supreme Court’s August 2014 decision to cancel more than 200 coal-block allocations made the project unviable. Despite having no coal arrangement, EPJL had signed a power purchase agreement (PPA) with the Bihar State Electricity Board for around 900 MW capacity of the Tori plant. .
Essar Power was not able to complete the plant beyond 60 per cent even though it has invested ₹5,500 crore in the project, out of which, ₹2,500 was infused as equity. The company required around ₹4000 crore more to complete the project, KVB Reddy, the then COO of Essar Power, told BusinessLine in November, 2018. According to analysts, finding buyers for such assets as Tori plant will not be easy. Also, investors do not find brownfield assets attractive and there is no clarity on the coal arrangement.
More on the line
The Tori plant is the first of Essar Power’s stranded assets to undergo resolutions. Two other flagship projects of the company, a 1200 MW imported coal-based Salaya plant operated by Essar Power Gujarat Ltd (EPGL) and another 1200 MW Mahan plant in Madhya Pradesh operated by Essar Power MP Ltd, have been facing issues as well.
The Salaya plant that has an outstanding debt of around ₹6,500 crore. Last year, twelve lenders of EGPL led by State Bank of India (SBI) had converted part of the debt into equity. While the company is awaiting resolution from the government, State procurers and lenders, the plant has stopped operations because of the rising prices of imported coal.
Lack of fuel
Mahan plant, set up with an investment of over ₹7,000 crore, is facing issue with fuel supply. While the second unit became operational earlier this year, the plant operated at a low plant load factor (PLF) of around 30 per cent as it had no coal arrangement. “This has resulted in intermittent operations,” Essar Power spokesperson told BusinessLine. Currently the plant is operated on the coal procured from e-auction. In 2015, Essar Power had bagged Tokisud North coal block in Jharkand to provide coal for the Mahan plant.
After a year of delays, the company surrendered the coal block as developing it became unviable with the government deciding to disallow pass-through of the quoted discount on coal cost in the final power tariff.
As lenders are trying to recover around ₹6,000 crore from Essar Power, lead bankers ICICI Bank and Power Finance Corporation have issued the loan recall notice, the sources said. Rural Electrification Corporation and IDFC are among other lenders. The lenders are trying to resolve the case outside IBC. ICICI bank has received the restructuring proposal and has also appointed PWC as the transitional advisor. Lenders are also considering ownership change route for the Mahan plant.
“The company has approached lenders for restructuring of debt to sustainable level and are in discussions for the same. Lenders are examining various options for resolution,” Essar Power spokesperson said.