8 February 2019: Adani Group may have to revisit its plan to acquire the troubled KSK Mahandi Power Company as the state-owned Uttar Pradeshpower distribution company is considering committed cash payments to the company in exchange of a discount on price of power purchased. While the cash commitment can be a big boost to KSK Mahanadi, the discount on price of power could be a roadblock for the deal.
The Gautam Adani-led group had emerged as the best bidder to acquire three stressed power projects, including KSK Mahanadi, out of the seven projects that were considered for resolution outside of the insolvency code.
But in a new development, UPPCL, which buys a third of the power generated from KSK Mahanadi is considering committed cash flow to the company which will help the latter meet its financial commitments, in lieu of a 32 paise per unit discount from February 1. The discount on power price could impact Adani’s acquisition plan and may need some recalculation of valuation, experts said.
Emails sent to Adani Group and KSK remained unanswered.
UPPCL management had expressed concerns as low supplies from KSK Mahanadi, which runs a power plant in Chhattisgarh, had resulted into higher final power price. In response to this, the management of the beleaguered power company said that the short supply has led to high penalties for the unit which has translated into higher delivered cost.