• Ratnagiri Power on revival path as lenders sign inter-creditor pact

    Ratnagiri Gas and Power Pvt Ltd, which had turned a non-performing asset (NPA) for banks in the fiscal first quarter ended June after Reserve Bank of India (RBI) insisted to downgrade the account, is now on course for a resolution. Canara Bank, which had taken a dissenting approach from the other lenders and moved the National Company Law Tribunal (NCLT) against the resolution plan of Ratnagiri Gas and Power (RGPPL), has come on board.

    All the ten lenders in the consortium have buried their differences and signed the inter-creditor agreement that gives RGPPL, which owns an integrated power generation and regassified liquefied natural gas (LNG) facility, a deep restructuring of its Rs 90 billion loan for a repayment cycle of 10 years. The banks have submitted the resolution plan to RBI and are awaiting approval.

    “Canara Bank was the only one which was yet to sign the agreement. As a result, RBI asked all the banks to downgrade the account and classify it as an NPA in the June quarter. Now with all the banks in agreement, we have submitted the proposal to RBI for its final approval. We will abide by whatever the regulator tells us,” said a banker who is involved in the restructuring process.

    The Plan
    Power plant loans will be restructured by the banks
    LNG business would be demerged into a new company, Konkan LNG Pvt Ltd
    The demerged entity will be given a loan of Rs 15 billion for a breakwater facility
    The sustainable part of RGPPL’s loan of Rs 90 billion would be serviced by the company
    The unsustainable part will be converted into cumulative redeemable preference shares
    The sustainable loan will be repaid over a 10-year period at a rate of 10%

    The restructuring will involve bifurcating RGPPL’s business into two parts –Power plant whose loans will be restructured by the banks, and demerger of the LNG business into a new company, Konkan LNG Pvt Ltd (KLPL). This demerged entity will be given an additional loan of Rs 15 billion for a breakwater facility. In March 2018, National Company Law Appellate Tribunal (NCLAT) had approved the demerger of RGPPL’s LNG business into KLPL.

    The debt restructuring will involve dividing RGPPL’s existing loan of Rs 90 billion into sustainable, which the company will service, and unsustainable, which will be converted into cumulative redeemable preference shares (CRPS). The sustainable loan will be repaid over a 10-year period with an interest rate of 10%, down from the earlier 13%. Canara Bank, which had an exposure of Rs 4 billion, had filed two separate cases against RGPPL and KLPL under Section 7 of the Insolvency and Bankruptcy Code (IBC), which had taken the other banks in the consortium by surprise and delayed the resolution plan.

    The Dabhol Power company, which is now called RGPPL, was set up in 1992 as a joint venture between Enron as a majority shareholder while GE and Bechtel were minority shareholders. But the construction and operation of the plant were in news for corruption involving political parties, both in India and the US. The central point of the controversy was over the pricing of power, which fixed at Rs 8 per unit was exorbitant compared to the hydroelectricity power, which was at just Rs 0.35 a unit.

    The power purchase agreement was signed with the Maharashtra State Electricity Board (MSEB). In 1999, the plant began producing energy, but by 2001 MSEB stopped paying for the power and sought to cancel the power purchase agreement. After Enron ran into scandals in the US and finally filed for bankruptcy there, the Dhabhol plant stopped production. In 2005, it was taken over and revived by converting it into RGPPL, a company owned by the government. The loans and equity were later bought by a consortium of lenders and MSEB, GAIL and NTPC in 2005.

    The Konkan-based power plant ran into trouble in 2013 after lower natural gas output from Reliance Industries’ KG D6 basin hit production. Current shareholders of the RGPPL is National Thermal Power Corporation (25.51% stake), GAIL (25.51%) , MSEB (13%), IDBI Bank (12.50%), SBI (10%) and Canara Bank (2.15%).

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