Avantha Power lenders ink Jhabua Plant deal with NTPC

Mumbai: Lenders to the Avantha Group’s 600 MW distressed Jhabua power plant have come to an agreement with the state-owned National Thermal Power Corporation (NTPC) to complete the sale of the asset, more than two years after the case was taken to bankruptcy courts.

Under the renegotiated agreement, lenders have agreed to take an equity stake in the company and share in the monthly operating profit or earnings before interest tax depreciation and amortisation (Ebitda). That has allowed some of the payments to be delayed, three people familiar with the deal said.

“We have come to an agreement whereby NTPC will invest Rs 300 crore cash and will also get a Rs 600-crore equity stake. Banks have agreed to take the remaining 50% equity stake for Rs 600 crore which will give us future upside and another Rs 300 crore on deferred payments from the monthly Ebitda generation of the company, which is presently at Rs 25 crore per month,” said one of the persons cited above.

The company was taken to the National Company Law Tribunal (NCLT) in May 2019 due to a lack of working capital, despite it being an operational plant.

The total value of the deal at Rs 1,800 crore is slightly lower than the Rs 1,900-crore cash deal agreed by lenders in early 2020 when NTPC was shortlisted before the pandemic struck. It is at a 64% haircut to the ₹5,000-crore dues owed to lenders by the Avantha Group company.

Subsequently, NTPC renegotiated the bid on concerns over power demand due to the economic downturn caused by the Covid-19 pandemic. After more than a year of talks, the lenders and NTPC have finally come to an agreement.

“Lenders had to agree on some deferred payments because NTPC had second thoughts after the pandemic; it offered to pay almost double of what the Adanis had offered earlier. Then there was an issue of a power purchase agreement with the Kerala discom expiring. But all these issues have been sorted out now and we are awaiting NCLT approval,” said the person cited above.

NTPC’s bid had valued the power unit at Rs 3.2 crore per MW against the then construction cost of Rs 6 crore per MW for new projects. Adani Power had valued it at about Rs 750 crore, or Rs 1.25 crore per MW.

Jhabua was one of the handful of operational power plants, and it had fuel and environmental clearances in place. It was taken to NCLT after a restructuring effort by a group of lenders did not work out in FY19.

It is the first and only plant that India’s largest power producer has acquired through the bankruptcy mechanism.