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Essar Power asks lenders to work on debt recast

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Source: The Economic Times
Friday, May 12, 2017

 KOLKATA: Essar Power has requested lenders to work out a debt recast plan for ensuring sustainability of group company Essar Power Gujarat Ltd (EPGL) as it fears an unfavourable tariff order might wipe off EPGL’s cash flow necessary for servicing debt. 


EPGL had filed a petition seeking an increase in tariff, citing higher global coal prices, but feels its request may not be entertained since the Supreme Court has struck down similar pleas from Adani Power and Tata Power in the recent past. GPCL’s petition is awaiting Gujarat Electricity Commission’s decision. 

EPGL, which runs a 1,200 mw plant in Gujarat, had entered into an agreement with Gujarat Urja Vikas Nigam to supply 1,000 mw for 25 years from 2013 at a fixed tariff. The plant has been running on coal imported from Indonesia. 

A change in law in Indonesia has now substantially increased the price of coal from that country. This led EPGL to file the petition for increase in tariff, saying at the current level of tariff, the company can only meet the fuel costs without leaving any margin to cover fixed costs and debt obligations. An Essar Power spokesperson declined to comment. 

In its letter to lenders, a copy of which ET has seen, Essar Power said: “Considering the Supreme Court’s judgement in Tata Power and Adani Power tariff review petition, and if a similar order is passed for EPGL, based on current coal prices, there will be no cash flow available with the company for servicing interest and principal repayments. 
 
Therefore, a long-term viable solution for EPGL needs to be worked out along with lenders to ensure sustainability of the company.” The company has already paid Rs 2,100 crore interest and returned principal of about Rs 1,270 crore to its lenders which include State Bank of India, United Bank of India, Indian Overseas Bank, Allahabad Bank, India Infrastructure Finance, among others. 


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