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Dabhol project lenders want further conversion of debt into equity to avoid NPA

The lenders of the 1,967 MW Dabhol power project in Maharashtra have asked for early payment of dues (Rs 525 crore as on January 2015) by Ratnagiri Gas & Power Pvt Ltd (RGPPL).

Lenders including IDBI Bank, ICICI Bank, SBI and Canara Bank have proposed further conversion of debt into equity so that the project doesn’t turn into a non-performing asset (NPA).  

However, RGPPL has indicated that conversion of debt into equity may not be possible due to less authorized share capital margin.

A RGPPL official, who did not want to be named, told Business Standard, “RGPPL’s authorized share capital is Rs 3,500 crore. After conversion of debt of Rs 405 crore into equity, the equity has surged to Rs 3,370 crore from Rs 2,965 crore. Therefore, the margin between the authorized share capital and the equity is just Rs 130 crore. It may not be possible to further agree to lender’s proposal to hike equity. RGPPL board will soon meet to take a final call in this regard.” 

Of the total debt of Rs 8,500 crore, RGPPL had so far repaid Rs 4,000 crore to the project lenders. 

The equity holders in RGPPL include NTPC, GAIL India, IDBI Bank, ICICI Bank, State Bank of India, Canara Bank and MSEB Holding Company. RGPPL’s present share holding pattern is: 28.91% each by NTPC, GAIL India and lenders and 15.33% by MSEB Holding Company. 

The project is closed since December 28, 2013 due to the lack of availability of gas.

The official said the Centre needs to step in immediately to save the project.

According to the official, the Maharashtra State Electricity Distribution Company (MahaVitaran) has already served a notice to RGPPL to terminate the power purchase agreement (PPA) citing higher power tariff. This apart, MahaVitaran has also rejected RGPPL’s offer to supply power from the Dabhol power project at Rs 5.50 per unit. As per the PPA, MahaVitaran draws 95% power from Dabhol power project. 

“In view of dip in the prices of RLNG below $ 10 per million British thermal unit, RGPPL had proposed to supply power at Rs 5.50 per unit tariff. However, MahaVitaran reiterated that it wants PPA termination,” he said. 

The official added that RGPPL has been pursuing the recovery of arrears of Rs 2,000 crore from MahaVitaran. However, MahaVitaran has disputed the dues.

The official said even if  RGPPL generates 40% power on RLNG after 24 ships are unloaded annually, it will be able to take care of operation and maintenance (O&M) expenses and monthly interest payment of Rs 60 crore to the project lenders. 

“RGPPL has conveyed that it cannot unilaterally terminate the PPA. Even the union ministry of power upheld RGPPL’s argument in this regard. It is the ministry of power which can decide the diversion or allocation of Dabhol power to other states and it has not taken any decision so far,” the official informed.

Moreover, RGPPL has indicated to the Centre that it has no cash to even preserve the Dabhol power project assets and maintain the power generation plant if immediate assistance is not provided. 

RGPPL has incurred financial and generation loss due to the closure of the project. RGPPL’s financial loss was a record Rs 1,486.47 crore in 2013-14 compared with Rs 375.33 crore in 2012-13, while the generation loss was 14,000 million units.

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