Essar Power is in discussions with its lenders, existing and new, to refinance debt. It wants to push back principal repayment by up to two years as projects have got delayed.
The company owes banks and financial institutions such as SBI, ICICI, PFC and REC some Rs 17,000 crore, of which Rs 1,500-2,000 crore comes up for repayment every year. A moratorium of a few years will help it match its debt maturity with cash generation.
K.V.B. Reddy, Executive Director, said commissioning of projects has got delayed “mainly due to delay in receiving regulatory approvals. This causes burden of re-payment and interest cost even before the asset begins to generate cash.”.
The company, with a capacity of 4,000 MW, has asked lenders to push back the deadlines within the current guidelines that allow some relief for such projects. “This is not considered corporate debt restructuring,” Reddy told
The private power producer had targeted generating 6,700 MW by the end of 2013-14.
However, it will now have only 5,000 MW, as clearances have not come for Chakla and Ashok Karkata captive coal blocks for the 1,800 MW Tori power plant in Jharkhand.
Prepaying Debt
Essar Power plans to issue rupee bonds to mop up Rs 5,000 crore for debt servicing.
The company has already tied up Rs 3,000 crore, part of which has been deployed for the refinancing.
“Cash flows from stalled projects have been affected. We are pre-paying some of the loans (through the bond issue) to take care of the debt,” Reddy explained.
Asked if the company will make savings by clearing the loans through advance payments from the money raised through bonds, Reddy said the existing term loans carry interest rates of 13-14 per cent, while the bond market is trading marginally lower than these levels. Hence, more than the saving on interest cost, the real benefit is from pushing back the payment deadline.