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Lenders to the now-closed 1,967-MW Dabhol project in Maharashtra have proposed partial conversion of its debt into equity, to avoid the project being declared a non performing asset (NPA).
The lenders made the suggestion at a recent board meeting after the project’s operator, Ratnagiri Gas & Power Pvt Ltd (RGPPL), defaulted in its debt servicing in June.
The lenders want to convert debt into equity equivalent for interest dues worth Rs 405 crore. As of now, the RGPPL’s equity is worth Rs 2,965 crore. The equity holders include NTPC (32.86 per cent), GAIL India (32.86 per cent), IDBI Bank, ICICI Bank, SBI and Canara Bank together (16.87 per cent) and MSEB Holding Company (17.4 per cent). With the conversion of debt into equity equivalent to interest dues of Rs 405 crore, the equity would increase to Rs 3,370 crore.
“The board has already discussed the matter. MSEB Holding Company is opposed to the conversion of debt into equity, while other stake holders have given their consent. RGPPL desperately needs cash for debt servicing and also for expenses required for wages and maintenance of the Dabhol plant,” an RGPPL official, who did not want to be named, told Business Standard.
The official said if RGPPL was unable to mobilise cash at the earliest, it might have to cancel plant servicing and maintenance contracts. He added the project, which has been closed since December 28, urgently needs restoration of gas supply.
A Maharashtra government official confirmed that it was opposed to the lenders’ proposal of converting debt into equity at par. “The MSEB Holding Company may be short changed since the value of its holding is diluted and lenders would get the benefit when RGPPL’s financial health improves.” When the restructuring of the Dabhol project took place in 2006, MSEB Holding Company had received equity at premium to the face value.
Further, RGPPL has begun repatriating its staff to their parent companies. NTPC has repatriated 13 of its total 72 employees at the project site and deployed them in its various plants. Another 15 NTPC employees will be sent back to various plants.
As reported by Business Standard, the project would have turned NPA in March, but that was averted after RGPPL repaid Rs 150 crore received from MahaVitaran. RGPPL, which is facing a severe financial crunch, paid Rs 90 crore each to lenders in April and May, but defaulted in June. The company has also defaulted on debt repayment to Power Finance Corporation.
The RGPPL official informed that of the total debt of Rs 8,500 crore, it had so far repaid Rs 4,000 crore to Dabhol project lenders since the project was revived in April 2006.
