18 February 2019: Steel giant ArcelorMittal has proposed a resolution offer of Rs 4,800 crore to lender of stressed Essar Mahan power project, over 37 percent higher than offered by the promoter Essar Group.
Essar Group has made a resolution offer of Rs 3,500 crore under one time settlement (OTS) scheme for Essar Mahan, which is a 2×600 MW coal based power plant situated in Madhya Pradesh.
“We had earlier received a resolution offer of Rs 3,500 crore from the developer (Essar Group) himself for Essar Mahan under OTS scheme. But, now we have received an offer from ArcelorMittal for about Rs 4,800 crore,” Power Finance Corporation‘s (PFC) chairman and managing director, Rajeev Sharma, told reporters here.
Besides PFC, other lenders to Essar Mahan are ICICI Bank, which is the lead bank, Punjab National Bank (PNB), Rural Electrification Corporation (REC). The total debt of the power plant is of Rs 7,500 crore.
The offer made by ArcelorMittal is at Rs 4 crore per MW, Sharma said adding that the prevailing rate for setting up a new power plant is Rs 6 crore per MW.
He said the lenders led by ICICI Bank will soon meet to take a call on the ArcelorMittal’s offer.
“We are considering the ArcelorMittal proposal because there is a difference of almost Rs 1,300 crore. It is a good offer at Rs 4 crore per MW,” Sharma said.
In October last year, Essar Group commissioned both units of the power plant. However, the project does not have power purchase agreement (PPA) and fuel supply agreement (FSA), Sharma said.
It could be noted that last year in October, a committee of Essar Steel creditors had picked ArcelorMittal to acquire the debt-laden company for over Rs 42,000 crore.
ArcelorMittal’s resolution plan for Essar Steel, included an upfront payment of over Rs 42,000 crore to settle debt and a further Rs 8,000 crore of capital injection into the company to support operational improvement, increase production levels and deliver enhanced levels of profitability.