SKS Power Generation (Chhattisgarh) is in talks to bring in a new investor and raise additional debt to keep its 1,200 MW coal-based power project alive.
With private equity (PE) investor Blackstone pulling out from the project and cost escalations crippling its finances, SKS Power Generation (Chhattisgarh) is in talks to bring in a new investor and raise additional debt to keep its 1,200 MW coal-based power project alive, documents assessed by FE and a banker close to the deal revealed.
Sources said the company is inviting private power producers in the country to invest in the project. “It is still in due diligence stage,” a banker said. The subsidiary of the debt-laden SKS Ispat and Power, in its annual report for 2013-14, noted the project costs for the first phase (2×300 MW) of the project had risen to Rs 4,750 crore, whereas the entire project cost (4×300 MW) of the plant was earlier estimated at Rs 5,100 crore. The company has managed to complete 70% of phase-I of the project, its annual report for FY14 noted.
It is not immediately clear how much additional debt and equity the company wants to raise, but it is expected to be in the 3:1 ratio, said a banker. The phase-I of the project was estimated to have achieved commercial operation date (COD) in July 2014 and phase-II by March 2015, but this did not happen. It is uncertain if the revised COD of July 2015 for phase-I and September 2015 for phase-II will be attained either, given that funds have not been tied up so far. SKS Ispat and Power did not respond to emails or calls made by FE.
“In January 2014, Sithe Global/Blackstone stopped funding of the project; their directors on the Board resigned without assigning any reason; and Sithe Global unilaterally terminated the construction and operations oversight agreement,” the annual report dated November 2014 stated.
“After that, the entire project team left India without giving any notice, abandoning the project mid-stream, causing irreparable harm to the project, including all the stakeholders, including lenders, project contractors, the company and shareholders. This has resulted in a setback to the project and the project was on the verge of closure,” the annual report dated November 2014 stated.
In August 2011, Blackstone reportedly invested around $261 million in SKS Ispat and Power for a 49% stake in the power project. This was made through Sithe Global, an international power generation development company, in which Blackstone holds majority stake. On March 26, 2014, two directors of the company, being nominee directors of Asia Power FDI Limited—an affiliate of the Blackstone Group—resigned from the Board of Directors and also as members of the project management committee, the annual report noted.
Blackstone, in an email response, said, “With reference to Blackstone, this information is factually incorrect.” It, however, did not elaborate further. Power development company Sithe Global was unavailable for comment.
SKS Power Generation (Chhattisgarh) had over Rs 2,000 crore of debts on its books as of FY14. The consortium of lenders to the company have an overall loan commitment of Rs 2,840 crore with SBI’s exposure standing at Rs 2,240 crore and L&T Infra at Rs 250 crore. In FY14, the company reported revenues of Rs 80 lakh as compared to Rs 2.4 crore in FY 13. It is also posted net loss of Rs 4.7 crore in FY14 as compared to Rs 89 lakh loss in FY13.
The parent company, SKS Ispat and Power, is not performing very well either, with the company’s loan account being restructured under the CDR cell. An April 2015 report by SMERA Ratings notes that Rs 1,023.35 crore of bank facilities of the company are under the CDR mechanism. In FY14, the company reported a net loss of Rs 121.26 crore in FY 14 and revenues of Rs 797 crore.
The SKS Ispat and Power Ltd website notes that it has signed a fuel supply agreement with South Eastern Coalfields Ltd. The Union power ministry has granted provisional mega power status for the 1200 MW power project.
A July 2015 ICRA report says almost 46% of the installed power generation capacity as on March 2015 was added in the last eight-year period, mainly led by the private sector, with thermal segment dominating the fuel mix at 70%.
However, fuel supply issues and low demand from distribution utilities (constraints in paying capacity) has plagued the power sector, with plant load factors – an indication of power generation efficiency – falling from 75% in FY11 to 65% in FY15.