5 June 2019: Tata-backed Resurgent Power’s bid to acquire distressed power-generation company Prayagraj is facing hurdles after the UP Power Distribution Company sought lower tariffs from the new owner, arguing that the company’s debt would reduce after the deal.
Bankers are worried that withdrawal by the Tata and ICICI Bank joint venture company could indefinitely delay the resolution process.
If Resurgent pulls out of the deal, bankers would be forced to take the company to the NCLT under the insolvency and bankruptcy code (IBC), leading to more delays.
Resurgent Power is a joint venture between Tata Power, ICICI Bank and international investors Kuwait Investment Authority and the State General Reserve Fund of Oman. It had offered ₹6,000 crore to take a 75 per cent stake in the company in a onetime settlement with lenders. The deal envisages giving lenders 15 per cent in the company while the remaining 10 per cent will remain with the original promoter, Jaiprakash Associates.
Prayagraj operates a 1,980 MW power plant in Uttar Pradesh. The company has a power purchase agreement (PPA) with Uttar Pradesh Power Corp Ltd (UPPCL), the company responsible for transmission and distribution of electricity within that state.
The distribution company has suggested lowering the tariff UPPCL by about 16-20 paise per unit because the company’s total debt will reduce.
Bankers believe otherwise.
“Resurgent’s offer for Prayagraj was based on the tariff agreed by the UPERC earlier. Now, the regulator has turned around and said that since after acquisition the total debt of the company will fall, the tariffs also should fall. The power sector regulator is now interfering in a stressed asset deal. Both the company and banks are not agreeable to this. The next hearing is in July and if the regulator is adamant, we may have to take this case to the NCLT,” said a banker involved in the deal.
Banks, led by SBI, have lent ₹12,500 crore to the company and are keen to secure the one-time settlement because there have been not many buyers for power assets under the IBC. They are also concerned that if the UPERC stuck to its stand, other potential buyers may also back out.