Adani Power makes Rs 2,600-crore offer for Essar Power MP under IBC

Adani Power has made a Rs 2,600-crore offer to acquire Essar Power MP under the Insolvency and Bankruptcy Code (IBC) rules, according to multiple sources.
The bid sets the stage for the comeback of such bankruptcy resolutions, just weeks ahead of the expiry of a March 25 deadline for the moratorium on filings of insolvency cases.

To be sure, Adani’s offer competes with one from the Vedanta group, though the latter’s offer is said to be priced much lower, according to people in the know, with one of them terming it as a ‘non-serious’ one.

A lender group is negotiating with Adani to sweeten the terms of the deal. The group wants at least Rs 400 crore more, according to the sources.

Adani did not respond to ET’s queries. Vedanta declined to comment.
ICICI Bank had filed an application to initiate insolvency proceedings against Essar Power MP several months prior to the announcement of a moratorium on insolvency cases last year.

The bank had approached the National Company Law Tribunal (NCLT) claiming that the thermal power generation company had defaulted on a Rs 1,300-crore loan.

NCLT appointed Jet Airways administrator Ashish Chhawchharia as the company’s resolution professional and kickstarted its insolvency proceedings on October 3, as per court filings.

A combination of creditors, including public sector lenders such as Punjab National Bank, had loaned Rs 6,000 crore to the Essar group company. With interest, those dues have mounted to Rs 12,000 crore.

Adani’s offer would require the lenders to take a 56% haircut on the principal amount alone and also forego the entire interest.

Essar Power MP, once a major supplier of power to Essar Steel, is among the largest thermal power companies in the country to have run into financial distress.

The company owns and operates two power plants with the capacity to generate a combined 1,200 megawatts. The plants are located in Singrauli district of Madhya Pradesh.

Almost 70-80% of the power generated is contracted for sale through power purchase agreements with state-owned distribution companies. Its contracts with Essar Steel were terminated once Arcelor Mittal took over that company.

According to informed sources, the company ran into financial distress due to the de-allocation of a coal block which was linked to the power plants and on delays in various clearances. The Essar group had invested over Rs 3000 crore as equity in the company.

Essar’s promoters, the Ruia family, have made at least two attempts to settle the company’s loans with the banking consortium, but both those overtures were rejected, according to sources and documents that ET has accessed.

The Ruias first attempted a Rs 2,800 crore loan restructuring package with the banks. They then reportedly offered a one-time settlement in the range of Rs 3,500 crore.

However, the promoters did not pursue their second offer seriously enough, some banking sources said.

“We are in the final stages of completing our deleveraging program and in the next two quarters we intend to repay the balance Rs 10,000 crore which is largely in the power portfolio. With the Rs 140,000 crore deleveraging exercise behind us and now having largely exited the coal-based power portfolio in line with our new ESG strategy, we will concentrate on post-carbon energy space,” an Essar spokesperson said in a statement.

Multiple thermal plants, including KSK Mahanadi Power, Lanco Amarkantak Power and Avantha Jhabua Power, are undergoing bankruptcy proceedings currently.

Industry experts said this was creating a pool of assets for bidders to choose from and was driving down prices.