Led by State Bank of India (SBI), lenders to Prayagraj Power Generation Company (PPGCL), a subsidiary of Jaiprakash Power Ventures (JPVL), have decided to sell a majority stake in the thermal power project, according to a document seeking bids. The company’s debt stood at Rs 11,086 crore in FY17 and it reported a loss of Rs 546 crore on revenues of Rs 1,692 crore. For the first six months of FY18 (provisional), the company reported a loss of Rs 629 crore on revenues of Rs 956 crore. The document also said PPGCL has not serviced interest on its term loans since February 2017. In July last year, the lenders had decided to convert their debt into equity, using Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) norms. They currently own an 89.47% stake in PPGCL.
The rest of the stake is held by Jaiprakash Associates. Lenders have mandated SBI Capital Markets (SBI Caps) to act as the transaction advisor for the sale on behalf of the lenders’ consortium. The company operates a 1,980 MW (3×660 MW) coal-based super-critical thermal power plant, a project awarded by the Uttar Pradesh Power Corporation. It has a power purchase agreement (PPA) for sale of 90% of power generated to Uttar Pradesh distribution utilities. While the first unit of the plant was commissioned in February 2016, the second and third units were commissioned in September 2016 and May 2017, respectively. Lenders to the company include SBI), Punjab National Bank, Indian Overseas Bank, Bank of India, Life Insurance Corporation of India, Union Bank of India, IDBI Bank and Bank of Baroda. While SBI’s exposure stood at Rs 4,065 crore, PNB’s and IOB’s exposures stood at Rs 860 crore and Rs 653 crore, respectively.
In November, rating agency CARE had reaffirmed the default rating (D) on the long-term bank facilities of Prayagraj’s parent company, JPVL, citing delays in debt servicing due to its stretched liquidity. In its FY17 annual report, JPVL cited unavailability of coal and paucity of working capital as reasons for the ‘unsatisfactory’ performance of Prayagraj Power. “As such the company has not been able to operate all the three units; thus resulting in losses. Therefore, the company has not been able to pay interest regularly from February, 2017 onwards to lenders,” the agency said. With the launch of the Ujwal Discom Assurance Yojna (UDAY) and an increased focus by the Uttar Pradesh government to address the power theft issue, there is an expectation that losses of the state power utility will get addressed and it will be in a stronger financial position to pay for purchase of power from power generation companies. This could spur interest in PPGCL.