Lenders To Ratnagiri Power Agree On Debt Resolution Plan

Lenders to Ratnagiri Gas and Power Pvt. Ltd. have agreed to move ahead with a resolution plan, which includes a conversion of part of the company’s debt into cumulative redeemable preference shares, two bankers familiar with the plan told BloombergQuint, on condition of anonymity.

As part of the Ratnagiri Power debt resolution plan agreed upon last week, lenders will convert Rs 3,600 crore of unsustainable debt into CRPS and hold it in their investment books for a 15-year period. The power plant’s total debt stands at around Rs 9,000 crore, the people quoted earlier said.

Power sector assets, such as Ratnagiri Power, are among the largest contributors to stressed assets across the Indian banking system. Lenders have been struggling to restructure nearly Rs 1.45 lakh crore in power sector loans, which are now being resolved under Reserve Bank of India’s new stressed asset framework released in June.

For Ratnagiri Power, the inter-creditor agreement has been signed and contours of the resolution plan agreed upon.

Apart from the conversion of a part of the debt, the resolution plan sets a 10-year repayment period for the remaining debt at a reduced interest rate of 10 percent compared to about 13 percent earlier. This would help bring down the interest outgo of the power company, the bankers quoted earlier said.

RGPPL is owned by two large public sector entities—NTPC Ltd. and GAIL (India) Ltd.—and holds the assets of the controversial Dabhol Power Company Ltd., which has been a stressed asset for nearly two decades. The public sector entities own 22.5 percent stake each in Ratnagiri power, while the Maharashtra government and financial institutions own the rest.

RGPPL has an installed capacity of 1,967 megawatts. About 95 percent of this goes to Maharashtra State Electricity Distribution Company Ltd.

In the quarter ended June 30, public sector lenders including State Bank of India and IDBI Bank Ltd. were forced to downgrade the account and tag it as non-performing. This happened after restructuring talks were derailed as one of the lenders failed to sign-off on the debt resolution plan, prompting RBI to ask lenders to treat Ratnagiri Power as an NPA.

The hiccups have now been resolved and all lenders have agreed to the resolution plan, said the bankers quoted above.

One of the reasons for the stress in RGPPL is unpaid dues from the state discom.

In a reply to Central Electricity Regulatory Commission's draft guidelines on Tariff Regulations 2019 in February 2019, RGPPL said that the state utility owes it nearly Rs 3,300 crore in dues. RGPPL said that it had been classified as a stressed asset as it could not repay its lenders without receiving payment for the power it supplies.

According to one of the bankers quoted above, the downgrade of RGPPL to NPA was due to technical reasons. With the current restructuring plan, the company’s debt will reduce making repayments easier, the banker said.

Emails sent to lead lenders SBI, IDBI Bank, NTPC and GAIL (India) on Monday afternoon were not answered.