The Board of Approval (BoA) for Special Economic Zone in the commerce ministry has deferred Adani Power’s slump sale of 4,600 MW Mundra plant in Gujarat to its subsidiary on the ground that the company first needs to provide the lenders’ approval for such a sale. This is because the proposed deal was being done without transfer of debt, the board noted.
The minutes of BoA meeting noted, “The board has decided to defer the proposal and directed DC Adani Ports and SEZ to ascertain whether no objection of lenders had been taken, as it has been noted the proposed transfer of the Adani Power plant in APSEZ to its subsidiary was being done without transfer of liability of debt.”
An Adani Power spokesperson told FE in reply to a query, “The Adani Power board has approved the demerger of the Mundra Power 4,620 MW undertaking to a subsidiary of the Adani Power with associated assets and liabilities, including bank loans, and is also subject to necessary approval and consent of stock exchanges, lenders, shareholders and NCLT, etc. The BoA for SEZ has deferred the decision with a query. In its meeting held on July 3 it has decided to defer the proposal of approving the demerger until no-objection certificate is received from the banks. We have approached the lenders and once an approval is granted we will take the process forward as required. The NOC from the banks would be taken through a meeting conveyed as per the directions of National Company Law Tribunal. The BoA’s approval is mandatory to make the demerger effective as per the extant SEZ Act and rules.”
The development comes close on the heels of the company offering a 51% equity in the Mundra plant to the Gujarat Urja Vikas Nigam, the state electricity distribution company after the Supreme Court denied compensatory tariff to imported coal-based power plants of Adani Power and Tata Power, making their plants financially unviable.
The SC ruling was seen as a negative to the finances of Adani Power, which will have to write off some of the additional revenues it had booked in anticipation of a favourable verdict. Adani Power has recognised a compensatory tariff of Rs 8,800 crore since FY13.
In a regulatory filing to the BSE on June 6, the company said, the slump sale would not envisage cash consideration. The consideration as determined by independent valuer would be discharged by “way of transfer of assets and liabilities of Mundra undertaking” along with issuance of fully paid equity shares of the transferee company.
As per the BSE filing, Adani Power had approved the slump sale of its Mundra power plant to its subsidiary Adani Power (Mundra) Ltd, for the purpose of efficiently sourcing funds to expand capacity and acquire assets. The transaction “will put Mundra undertaking at par with the other operating subsidiaries of the company, with specific strategic focus as well as specific financial arrangements,” the filing noted.
Commerce ministry’s approval is a pre-requisite for this sale to go through as the plant is located in Adani Ports SEZ. Last month, Adani Power had to discontinue supply of about 1,200 MW power to Gujarat State discom in a phased manner due to the unviability of running the Mundra plant on expensive imported coal.
Adani Power shares on Tuesday closed 1.68% down at Rs 29.30 on the Bombay Stock Exchange.
The shares of Adani Ports and SEZ was down almost 1% at Rs 372.