GVK looks to reschedule debt as power business ails

By Matthias Williams

NEW DELHI (Reuters) - GVK Power and Infrastructure has asked lenders to reschedule loans worth $214 million to its power business, which has been hit by gas supply shortages that have left its power plants running far below their normal capacity.

The company, whose interests span highway construction to coal mining, has asked lenders for an extended moratorium of two years on its debt, Isaac George, the chief financial officer of GVK, told Reuters by phone.

GVK is also in talks with potential investors to sell a stake in its airport business, which runs airports in Mumbai and in Bangalore, George said.

 

Demand for gas in India far outstrips consumption, but prices have been kept low for strategic industries, deterring investment in the sector.

The government recently approved a hike in gas prices to help spur investment and encourage exploration, but the benefits of the hike could take years to bear fruit. Two of GVK's plants have shut down as supplies dried up from the KG basin.

"We anticipate that gas will not be available for some time now, and we have requested the lenders to postpone the debt repayment schedule to a later date," George said.

"We've asked for an extended moratorium of two years," he said. "Lenders are evaluating it and I think they are inclined to look at it positively from the discussions that we had so far."

Infra majors including GVK, Lanco Infratech , Tata Power and Adani Power have posted losses in the first quarter of the fiscal year.

Their woes are typical of an infrastructure industry that has been clobbered by rising debt, fuel supply shortages and slow bureaucratic approvals that can stall projects for years.

The sector's ills have spelled more bad news for Asia's third-largest economy, which has struggled to lift itself out of its worst slowdown in a decade. Indian Prime Minister Manmohan Singh has prioritised fixing endemic power blackouts and building new roads, ports and airports to kickstart growth.

Like GVK, Lanco Infratech Ltd has struggled to get fuel for its plants and has asked banks to restructure debts worth 75 billion rupees. Ratings agency Moody's cut its ratings outlook to "negative" from "stable" on Tata Power, citing "material covenant breaches on bank debt" for its Mundra plant.

GVK had a net loss of $5 million in the April-June quarter, narrowing from $10.5 million in the year ago period.

George said the performance was due increased revenue in its airport business, helped by a tariff hike at its Mumbai airport, and an improving road construction business. Its share price was up 13 percent in a market closing up nearly 1 percent.

"The entire proceeds from the airport stake sale will go to reduce debt. We are not going to keep a penny with us," George said.