A motorcyclist rides near a sub-station and electricity transmission pylons in Nandurbar district, Maharashtra, India (Photographer: Dhiraj Singh/Bloomberg)

Adani Power Close To Acquiring GMR Chhattisgarh Power Project Under Samadhan Scheme

Adani Power Ltd is close to acquiring the GMR Chhattisgarh power project under the Samadhan Scheme of State Bank of India, two bankers in the know told BloombergQuint on condition of anonymity. The deal, if closed, will be a small step forward in the slow process for resolving Rs 1.7 lakh crore in stressed power assets.

A majority of the lenders involved have given their approval to sell the asset, the bankers quoted above said. As per its February 2018 restructuring guidelines, the Reserve Bank of India (RBI) requires all lenders to approve a restructuring or resolution scheme before it can be implemented.

The lenders will take a 53 percent haircut to the Rs 8,000 crore worth of dues owed to them.       

Emails sent to Adani Power and State Bank of India on Wednesday went unanswered.

According to the bankers quoted above, the total outstanding dues of GMR Chhattisgarh stood at around Rs 8,000 crore. However, in February 2017, lenders to the power project converted debt worth about Rs 3,000 crore to majority equity. The shares held by the bankers are being sold to Adani Power at a price of Re 1, the two bankers said. Bankers will also have to take some haircut on the remaining loans to the company. Adani will be taking over the loans and has committed to repay the dues over time.

The deal is being struck under the Samadhan scheme, which SBI had created to deal with stressed power assets. Under the scheme, bidders would need to offer a value of at least Rs 3 crore per megawatt and will have to take over at least half the debt in the power asset. The remaining unsustainable debt can either be written off or restructured, depending on each case.

This is now the third sale which has been finalised under Samadhan Scheme.

Earlier, Prayagraj Power Projects Ltd was sold to Tata Power backed Resurgent Power for Rs 6,000 crore. Prayagraj Power’s outstanding debt was over Rs 11,000 crore. Similarly, SKS Power Generation was sold to Singapore-based Agritrade Resources for around Rs 2,000 crore. About 11 power assets were shortlisted for resolution under Samadhan.

Bankers are eager to close deals in the stressed power assets space as they would like to avoid an insolvency proceeding against these companies. According to the RBI’s restructuring guidelines, if an asset is not resolved within 180 days of its first default, it must be admitted under the Insolvency and Bankruptcy Code. But since a number of stressed power projects do not have power purchase agreements and fuel supply arrangements in place, the interest in many of these assets is limited. Analysts also believe that there are few large bidders in the domestic market interested in buying the assets, which will limit the recovery for banks.

The Supreme Court, on January 23, is set to hear a petition by an association of power producers which is seeking relief for the sector from the RBI’s restructuring guidelines. The apex court had placed a status quo order on the case in November 2018, which resulted in bankers getting more time to resolve the stressed cases, without being forced to send them for insolvency.