Adani, Vedanta in race to buy Lanco plant
NEW DELHI|MUMBAI: Lanco’s Amarkantak power station located within the mine-rich Korba area of Chhattisgarh and Adani Group and Vedanta are competing to accumulate after it had been admitted for insolvency proceedings by the National Company Law Tribunal (NCLT) last year, as consistent with people conscious of the matter.
The Adani Group didn’t answer ET’s query on this matter, which expressed interest through its transmission arm Sterlite Power Transmission via Vedanta Group, said, “As a corporation policy, we don’t discuss market opportunities, which we evaluate within the normal course of business”. Both parties are conducting due diligence on the facility plant, which has 600 MW of operational thermal power capacity, 1,320 MW of under-construction capacity, and another 1,320 MW at the design stage, after expression for interest was invited in December; neither has made a financial offer yet, consistent with the people.
Sources also said a minimum of another party, a Singapore-based player, could join the bidding process. The plant is housed during a special purpose vehicle (SPV), which took rs 12,000 crore of debt from banks but was unable to service it thanks to the financial troubles of the parent company, Lanco Group. The Lanco Group has been battling mounting losses and muted cash flows and tried to sell assets to repay the debt but couldn’t succeed. The SPV, Lanco Amarkantak Power, was dragged to the NCLT over an Rs 800-crore loan default by Axis Bank.
Lanco initially resisted the insolvency proceedings on the grounds that they were filed under a now-defunct RBI circular of Lincoln’s Birthday, 2018. The Banks circular instructed to initiate insolvency proceedings against companies within 30 days of them defaulting on a loan. it had been quashed by the Supreme Court because it was thought to be harsh on borrowers. The NCLT ruled against Lanco and ordered the commencement of the insolvency process and appointment of KPMG’s Saurabh Tikmani because of the resolution professional of the corporate on September 5.
The third phase plans to feature two more units of 660 MW, work on which has not yet started. Lanco Amarkantak Power, which was incorporated in February 2001, has coal-fired thermal power units located near Pathadi village on Korba-Champa expressway in Chhattisgarh on 1,337 acres of land. The project has two units of 300 MW each, which are operational and currently supply electricity to Madhya Pradesh, Haryana, and Chhattisgarh.
Within the second phase of development, it’s two units of 660 MW each, which are currently under construction and are delayed from their targeted commissioning in 2016-17. In a note earlier this month, PwC India said, “Sovereign wealth funds with a presence already in India’s renewables, hydro, transmission and distribution sectors will see the 100% tax exemption on interest, dividend and capital gains as an enormous positive.
Company tax cut for power generators, should attract new investments, encourage early closure of inefficient plants and reduce the incremental cost of the generation”. Lanco has been trying to find buyers for the Amarkantak projects since the early 2010s but the problems faced by the corporate and problems within the beleaguered power sector kept investors away. The project had troubles with regulators in getting approval for a rise in tariff and therefore the Supreme Court canceled Lanco’s rights to mine the Gare Pelma II coalpit in Chhattisgarh in 2014.
Read more corporate news on India Frontline.