Rattan India Amravati finds saviour in Goldman Sachs, Varde Partners

Rattan India’s Amravati power project (1,350 Mw) has concluded its debt restructuring with new lenders coming on board. 

Goldman Sachs and Varde Partners will take over Rs 4,050 crore of the total debt from existing lenders. 

This also includes 15 per cent equity each in the project. The new lenders have used the Aditya Birla Asset Reconstruction Company platform for the deal.

The total debt exposure of the consortium of lenders was Rs 6,575 crore. This would entail 38 per cent haircut by the consortium led by state-owned Power Finance Corporation. There were 12 lenders to the projects, including State Bank of India, Bank of India, Punjab National Bank and Axis Bank, among others.

Speaking with Business Standard, Rajiv Rattan, chairman, Rattan India group, said there was immense interest from foreign lenders for Indian assets. “This is the first-of-its-kind deal where fresh capital is being infused. The consortium of new lenders also has foreign firms which is also a first for the sector,” he said. He further said that there are many lenders which are sitting on the fence. They want to infuse capital in Indian assets and resolve the non-performing assets situation. 

Amravati is part of the list of 40 stressed assets in the power sector. 

The project has undergone two debt-restructurings in the past, of which the second one could not be concluded due a circular of the Reserve Bank of India (RBI) issued in February 2018. 

The circular directed banks to resolve all stressed assets in 180 days or initiate insolvency proceedings at the National Company Law Tribunal. A Supreme Court order in September 2019 quashed the circular.

Under the RBI’s new prudential framework for resolution of stressed assets, lenders to Amravati invited bids for the project. Company executives said there will not be any change in the rate at which power is sold from the project. The power purchase agreement does not have any provision for change in tariff.

The levellised power tariff of Amravati is Rs 3.26 per unit and the project cost was Rs 7,493 crore (along with cost overruns). The project faced delays due to shortage of coal from Coal India (CIL) and cost overruns delayed payments from states it was selling power to. 

The project is also under litigation of pass through of cost overruns on the final power rate. 

Rattan said the company will not be making any fresh investment in the thermal power sector. “We don’t have any plan for a greenfield investment in the thermal sector. However, as we have land, connectivity and water at Amravati, we may expand the project and construct the second phase. However, that will depend on when legal issues of the existing unit are resolved,” he said. 

Rattan is hopeful the variables that landed the project in trouble won’t repeat. “The sector is improving consistently. The letter of credit system has improved the payment mechanism,” he said. Given the current coal supply, the company plans to run the project at 60 per cent plant load factor or operating ratio. It is 40 per cent right now. Amravtai has a fuel supply agreement with South Eastern Coalfields of CIL for 5.5 million tonne supply. 

Rattan India’s another thermal power unit in Nashik is also under stress. “For the Nashik project, we are working with the lenders. With the success of Amravati, we are hopeful that there will be similar interest in other assets,” said Rattan.

POWER PLAY

Rattan India Power Amravati's thermal power project details:

Capacity: 1,350 Mw

Additional capacity envisaged: 1,000 Mw

Total project cost with overruns: Rs 7,493 crore

Debt: Rs 6,575 crore

Debt taken over by Goldman Sachs and Varda Partners: Rs 4,050 crore

Levellised tariff: Rs 3.6 per unit

Tariff with cost overruns: Rs 4 per unit