Essar Power approaches ICICI, lenders to recast Rs 6564 cr debt

Dhirendra TripathiMoneycontrolEssar Power Ltd has approached ICICI Bank-led consortium for a strategic restructuring of Rs. 6,564-crore debt of the 1,200 MW Mahan power project set up by a subsidiary. The proposal entails the lenders converting most of their debt into equity, an official with one of the lenders told Moneycontrol.At least one lender has already classified the loan as a non-performing asset in its books. The project, set up by Essar Power MP Ltd in Madhya Pradesh’s Singrauli district, also counts Punjab National Bank, Power Finance Corp Ltd, Rural Electrification Ltd and IDFC as it lenders.“Essar wants to give up majority stake in the unit. It is classified as a non-performing asset in our books now. ICICI Bank, being the lead lender, has to now call for a joint lenders forum meeting,” the official said.ICICI has lent Rs. 1,632 crores to the project with PFC and REC each lending Rs. 1,345 crores.  The rest was contributed by PNB and IDFC. The project has an equity of Rs. 3,200 crores.“The company submitted a comprehensive financing plan to the lenders, which included financing for development of Tokisud coal block. However, there has been considerable delay in sanction of loans by the consortium of lenders, which has resulted in delay in completion of the project,” Essar said in an email response to a Moneycontrol query.The company said it had become imperative for it to optimize the debt in line with the cash-flow, in order to sustain the project. “The company has submitted a proposal for restructuring of the debt. The company has been in discussion with the lenders for early approval of its proposal,” Essar said.The project currently has one unit of 600 MW functioning while another unit of the same capacity is under construction. The second unit should take another 8 to 10 months for commissioning, the official quoted above said.A spokesperson for ICICI Bank said it did not comment on client-specific information. Essar’s Mahan power project has had its share of troubles from the beginning, the first unit that began operations in April 2013 lying shut most of this period due to nonavailability of coal. The company first lost the coal block allotted to the project as a result of the Supreme Court judgement in 2014 that cancelled allocations of 214 coal blocks. It then participated in last year’s auctions and won the Tokisud North coal block in Jharkhand but almost lost it due to non-payment of dues it owed to the government. The company managed to salvage the situation and has since paid those dues.