CESC seeks to pare debt costs

CESC Ltd, the RPG Group company and power utility, has embarked on its second round of financial restructuring whereby it is looking at ways to reduce its existing rates of interest on debt arrived at through the CDR package.

Sources close to the development said they were looking at a 9 per cent rate of interest rate on an average after the second round of restructuring.

CESC has entered into dialogues with financial institutions for swapping its high interest debt which after the recent recast had come down to 13.5 per cent on an average from 16 per cent per annum.

"We have entered into talks with a number of institutions for swapping our debt to bring down the rate of interest to levels which would be comfortable for us," explained Sanjeev Goenka, vice-chairman, RPG group.

Goenka was talking to reporters at the sideline of an extra-ordinary general meeting convened today to receive shareholders nod for issuing rights share of Rs 10 at a premium of Rs 50 a share. The promoters of the company, however, has underwritten the shares in case of undersubscription.

The EGM is also scheduled to receive stakeholders consent for securitising term loans and debentures of ICICI Bank, UCO Bank, IDBI Trusteeship Services, IDBI and Punjab National Bank.

Both the resolutions were, however, put to poll by the shareholders the result of which will be declared a couple of days from now.

Talking about restructuring, Goenka said CESC is also looking at opportunities for swapping its foreign loans, a major portion of which was in pound sterling.

"We are trying to convert foreign loans into rupee loans. The question, however, is the exchange rate. We have to work out the pros and cons of the conversion proposal," he added.

Talking on the status of the new 250 mw power project at Budge Budge, Goenka said CESC is waiting for environment clearance from the state following which it would initiate negotiations with lenders.

"The Rs 1,000 crore power plant will primarily be funded by foreign investors," he explained. "We have initiated primary negotiations with them, but nothing concrete will emerge unless we receive the clearance from the government," he said.

CESC at present owes ICICI around Rs 800 crore at 13.5 per cent "" the largest single debt component in CESC's balance sheet.

CESC's debt to FIs including banks, domestic FIs, foreign banks, and foreign bond holders stands at Rs 3,300 crore, of which around Rs 1,800 crore were to domestic institutions.

ICICI Bank has the largest exposure of about Rs 800 crore, followed by the Industrial Development Bank of India (IDBI) with about Rs 250 crore.

Under the original scheme of repayment, prior to the debt recast, CESC was paying around Rs 490 crore per year as interest repayment and finance charges "" one of the reasons for the company to go into red. This has, however, declined by around Rs 90 crore post recast, which will be reflected in the balance sheet from 2004-05.