25 June 2019: Lenders to GMR Chhattisgarh Energy have approved the bid by Adani Power, according to source, which said that the SBI-led consortium of lenders has issued Letter of Intent (LoI) to the bidder.
GMR Chhattisgarh Energy’s 1,370 Mw project, which has an outstanding debt of over Rs 5,800 crore, ran into trouble due to the absence of a long-term power purchase agreement (PPA), though it had a short-term agreement with Gujarat. At the group level, GMR would see reduction in debt exposure of equivalent quantum.
This would be the third project to be resolved outside the insolvency route in the power sector. Prayagraj thermal power project of Jaiprakash Associates, the first such, was bought by Resurgent Power, a JV promoted by Tata Power and ICICI Bank. The project currently is in a regulatory tiff with the Uttar Pradesh government, which wants the tariff to be reduced. The other resolved project was SKS Binjkote. Lanco’s Teesta VI power plant found a buyer in the government-owned NHPC under the IBC process.
GMR Chhattisgarh underwent strategic debt restructuring in 2017. Under the SDR scheme, of the total outstanding debt of Rs 8,800 crore, debt to the extent of Rs 2,992 crore was converted into equity due to which the consortium lenders got 52.4 per cent stake, while the balance remained with GMR.
The lenders have been looking to sell the project for a year now, but RBI’s regulations on Insolvency and Bankruptcy Code (IBC) and litigation stalled the process. In a circular issued on February 12, 2018, the RBI allowed 180 days to the lenders for debt resolution of large defaulters, failing which, the asset would have to be taken to NCLT for initiation of insolvency. The deadline got over on August 31, 2018
The power sector, through its representative bodies, Essar Power, GMR Energy, KSK Energy, and Rattan India Power, had moved the Supreme Court challenging the constitutional validity of RBI’s February 12 circular. The Supreme Court quashed the circular this April, and denied all resolution processes arising after it.
The revised circular issued earlier this month has increased the review period of default to 30 days. “During this review period, lenders may decide on the resolution strategy, including the nature of the resolution process, the approach for implementation of the resolution process etc. The lenders may also choose to initiate legal proceedings for insolvency or recovery,” said the circular.
Of the 30 identified stressed projects, a dozen are already with the NCLT for insolvency proceedings. There are seven projects where the resolution process is ongoing outside the IBC. Leading sector lender Power Finance Corporation (PFC) said they have submitted afresh three projects in the NCLT again which includes two thermal power projects of Rattan India.