With a host of promoters unable to finish projects for one reason or another, banks have started roping in large firms to help complete them, reports Shayan Ghosh in Mumbai. Tata Power is already working on two 600 MW units of SKS Power Generation in Chhattisgarh and lenders are talking to SAIL to hep them run Electrosteel Steels. An operations and maintenance (O&M) contract could also be signed soon with NTPC, senior bankers told FE.
Bankers said several promoters were financially stressed and unable to complete projects they had started. They explained they were seeking out large corporations with expertise to help finish these and run them. “Since fairly large investments have been made, we would like these assets to be built,” one official said.
Once the plants are up and running and start generating sustainable cash flows, these assets are likely to attract buyers at good valuations. “We could then sell them and perhaps offer the companies running them the right of first refusal,” the official said, pointing out that these firms may be more comfortable buying them after the projects are proved to be viable.
The priority right now, however, is to protect the assets and ensure these are in competent hands. O&M contracts are typically given for a period of two to three years.
Anil Sardana, CEO and managing director, Tata Power, confirmed his company was working to complete the two units at Chhattisgarh. The first unit should be up and running by December and the next one by July,” Sardana said.
With private equity (PE) investor Blackstone pulling out of the project and cost escalations crippling its finances, SKS Power Generation (Chhattisgarh) had been looking to bring in a new investor. The subsidiary of the debt-laden SKS Ispat and Power had hoped to raise additional funds to set up the two power units. In its annual report for 2013-14 the company noted the project cost for just 600 MW had risen to Rs 4,750 crore against the original estimate for 1,200 MW of Rs 5,100 crore. It had completed about 70% of the work for a capacity of 600 MW.
Lenders are keen to close out an O&M for Electrosteel; they had decided to convert Rs 2,507.57 crore of the company’s debt into equity via the strategic debt restructuring route. They have restructured term loans worth Rs 5,768 crore via the corporate debt restructuring cell.
The company reported a net loss of Rs 325 crore in 2015-16 on the back of Rs 2,598 crore in revenues. Interest expenses rose to Rs 525 crore.