Adani Power acquires GMR Infra's 1,370-mw C'garh plant

The debt-laden GMR Infrastructure has signed a definitive agreement with Adani Power to sell its entire 47.62 per cent stake in GMR Chhattisgarh Energy for an undisclosed amount--its second asset sale since May and the third resolution in the troubled power sector outside the bankruptcy process.

This sale will bring down GMR Group's debt pile which stood at Rs 21,000 crore as of March 2019, of which GMR Chhattisgarh Energy had an outstanding debt of Rs 5,926 crore.

This deal is the third resolution in the power segment since the IBC kicked in and of the three two are by the GMR group alone.

With this deal, the installed thermal power capacity of Adani Power will go up to 12,410 mw. Recently it had bought out Korba West Power Company.

GMR Rajahmundry Energy was the first resolution of a gas-based plant after over 30 power units were referred to the IBC by the Reserve Bank under its now-defunct February 12, 2018 circular.

The Raikheda, Raipur-based Chhattisgarh power plant has an installed capacity of 1,370-mw and is a pulverised coal-fired plant, operated by a wholly-owned group subsidiary GMR Generation Assets.

After the deal, Adani Power will own 100 per cent in the unit which involves buying out 52.38 per cent from the lenders led by Axis Bank, and the balance 47.62 per cent from the GMR Group.

The GMR group expects the sale to help significantly deleverage, the company said in a statement on Thursday.

Last month, Power Finance Corporation had said all 17 lenders to GMR Chhattisgarh Energy had approved Adani Power's bid for the 1,370-mw coal plant.

The lenders followed a detailed bidding process and selected Adani Power as the final bidder. The company has received 100 per cent approval from all lenders for the sale, the statement said.

The group expects the deal to boost its profitability as consolidated profit for FY19 was adversely impacted by Rs 516-crore loss on account of the Chhattisgarh plant. In addition, the corporate guarantees to the extent of Rs 892 crore furnished by group companies, including GMR Energy, and GMR Power Corpn shall be released with this deal, it said.

On May 3 this year, the group had agreed to sell another unit-- GMR Rajahmundr Energy.

"These two deals highlight our commitment to deleveraging and de-risking our balance sheet," the group said in the statement.

On June 26, Adani Power had informed the exchanges that it would acquire 100 per cent in GMR Chhattisgarh Energy under which it would buy 52.38 per cent from the lenders, and the balance 47.62 per cent from the GMR Group.

The Chhattisgarh plant consists of two units of 685 mw each, and was commissioned in June 2015 and April 2016 respectively.

The Chhattisgarh plant ran into trouble due to the absence of a long-term power purchase agreement, though it had a short-term agreement with Gujarat.

This is the third project to be resolved outside the insolvency route in the power sector. The first was the sale of Prayagraj thermal power project of Jaiprakash Associates, to Resurgent Power, a joint venture promoted by Tata Power and ICICI Bank.

The project currently is in a regulatory tiff with Uttar Pradesh, which wants the tariff to be reduced. The other resolved project was SKS Binjkote and the other two by the GMR Group.

Lanco's Teesta VI power plant found a buyer in NHPC under the IBC process.

GMR Chhattisgarh had gone through a strategic debt restructuring in 2017 under which of the total debt of Rs 8,800 crore, Rs 2,992 crore was converted into equity due to which the consortium lenders got 52.4 per cent stake, while the balance remained with GMR.

The lenders were looking to sell the project for a year now, but RBI's regulations on Insolvency and Bankruptcy Code and litigation stalled the process.

In May this year, GMR Infrastructure had executed a bilateral resolution plan between its associate company, GMR Rajahmundry Energy and the lenders.

Through the resolution approved by all the lenders led by IDBI Bank, the existing debt of Rs 2,353 crore has been brought down to Rs 1,412 crore against which the GMR Group has already infused Rs 395 crore to meet 20 per cent of principal towards repayment of the sustainable debt and the interest servicing obligations of the plant for the first year.

GMR Rajahmundry Energy operates a 768-mw natural gas- based power plant at Rajahmundry in Andhra since 2015 but has struggled with gas supply since inception, due to the fall in gas production from the KG-D6 basin.

The company went into strategic debt restructuring in 2016, in which lenders converted part of their exposure into 55 per cent equity holding.