ICICI Bank has moved the National Company Law Tribunal (NCLT) seeking initiation of insolvency proceedings against Ruias-promoted Essar Power MP that runs the 1,200-MW Mahan plant.
ICICI Bank has moved the National Company Law Tribunal (NCLT) seeking initiation of insolvency proceedings against Ruias-promoted Essar Power MP that runs the 1,200-MW Mahan plant. The matter will come up for hearing on Tuesday.
The lender’s move is under Section 7 of the Insolvency and Bankruptcy Code (IBC). A consortium of lenders, led by ICICI Bank, has an exposure of Rs 5,330 crore to the Mahan project, including Rs 1,370 crore by the lead lender. The other lenders with exposure of more than `500 crore each in the project are PFC, REC, PNB and IDFC.
Essar Power MP, a unit of Essar Energy, had commissioned 600 MW capacity in February 2013.
The Supreme Court ruling in 2014 led to the plant losing the Mahan coal block allocated to it earlier.
Subsequently, the company won Tokisud coal block under auction at a negative bid of `1,110/tonne. Sources said this resulted in an increase in the project cost to `10,900 crore on account of rise in interest expenses. The other 600 MW capacity is yet to be commissioned.
The Mahan project is one of the stressed assets in the power sector where an out-of-court resolution was attempted but that yielded no result. Sources said the company had offered a one-time settlement with the lenders, but that did not break the ice.
Once a petition is admitted in the NCLT, the company’s board stands suspended. NCLT will appoint a resolution professional (RP), who becomes responsible for the management of affairs of the company. The RP needs to come up with a plan on how the asset of the company will be tackled along with a committee of creditors (CoC).
If the committee is unable to find a solution within 180 days — this can be extended to 270 days — the borrowing entity will go into liquidation.
The corporate insolvency resolution process for another Essar group firm, Essar Steel, is underway. NRI billionaire LN Mittal-led ArcelorMittal and Russia’s VTB Bank-led NuMetal are in the fray for acquiring Essar Steel, which owes around `50,000 crore to lenders.