The principal bench of National Company Law Tribunal (NCLT) on Tuesday deferred the hearings of petition filed by ICICI Bank against Essar Power MP Ltd, a subsidiary of Essar Power, operating 2x600 MW Mahan thermal power plant project in Madhya Pradesh, till December 3.
The case was not admitted to NCLT as it will defy the status quo on insolvency proceedings against power companies ordered earlier this month by the Supreme Court.
Mounting debt
ICICI Bank has moved the bankruptcy court seeking initiation of insolvency proceedings against Essar Power MP under Section 7 of Insolvency and Bankruptcy Code as the company owes lenders (apart from ICICI) include State-owned Power Finance Corporation and Rural Electrification Corporation) over ₹5,300 crore. ICICI Bank’s exposure to the stalled project is estimated at ₹1,300 crore.
Essar Power’s Mahan plant is among more than 30 stressed power assets that have been earlier identified by the government.
Industry sources told BusinessLine that the resolution plan for Mahan project was in the works for several months now. The company promoters have been in continuous dialogue with the lenders trying to solve the case outside of NCLT. The proposed resolution plans, including an offer for a one-time settlement (OTS), however, were not taken forward by the lenders, sources added, despite the company claiming it had found an investor for the project.
Set up with an investment of over ₹7,000 crore, Mahan plant is facing issues with coal supply after the Supreme Court 2014 cancelled over 200 of coal block allocations in 2014. Only one unit of the plant is operating at the moment, although Mahan Unit II was completed last year.
More troubles
Earlier this year, ICICI moved NCLT against another project of Essar Power — Essar Power Jharkand Ltd (EPJL), an SPV of Essar Power, developing 1,200 MW thermal power plant in Tori, Jharkand. According to the petition filed by the ICICI Bank, the company has defaulted on a loan of ₹3,468 crore.
NCLT had on September 20 granted an extension period of 90 days starting on October 2 for completing the corporate insolvency resolution process, as was requested by the Resolution Professional appointed for Essar Power Jharkand.
Another flagship power project of Essar, an imported coal-based Salaya plant operated by Essar Power Gujarat Ltd, could potentially face NCLT proceedings as it had last year stopped servicing the company’s outstanding debt of around ₹6,500 crore.
The solution for this project as well as Gujarat-based projects of Adani Power and Tata Power is being worked out by the high-powered committee (HPC) appointed by the Gujarat government in July this year.
As BusinessLine reported earlier, the HPC has recommended a fuel pass-through for these projects, however, the official decision on this is yet to be announced.