Ratnagiri Gas and Power (RGPPL) has rejected a proposal by lenders to hive off its electricity generation and LNG businesses into separate entities and dilute equity holding to pare its debt of Rs 8,200 crore. NTPC, which is a co-owner of the firm that took over the assets after the collapse of Enron Corp, said the lenders had been asked to convert some of the debt into equity. The proposal to hive off the assets was put forth by IDBI, State Bank of India, ICICI Bank Canara Bank, IFCL and PFC.
"We are not on board with this plan as we don't see it as viable because one lucrative business (LNG) cannot be made to pay for the problems that another business (power) is facing. As of now, the lenders have been asked to convert a portion of the debt into equity as there is no other option," NTPC chairman Arup Roy Choudhury said.
Sources said the finance ministry had backed the proposal, but the government said no decision had been taken. "As the issue is under consideration and a decision is yet to be taken, no specific response is possible at this stage," Sharmila Chavaly, joint secretary for infrastructure at the finance ministry, said. GAIL India, which also holds equity in the firm, and the lenders did not respond to ET's queries.
The gas-based power plant stopped producing power in July 2013 after supplies from the Krishna-Godavari basin stopped. The plant had an allocation of 7.6 mmscmd from KG-D6 and 0.9 mmscmd from ONGC's C-series fields. Senior RGPPL executives also told ET that the company is left with Rs 60 crore in its coffers which is only enough to survive till September 2014.
"The lenders had proposed this survival plan of hiving off the power and LNG businesses as a short-term fix as they wanted to stop it from becoming an NPA," said a senior RGPPL executive.
Industry sources also told ET that GAIL was also against this proposal as it has signed re-gassification agreement with RGPPL for the LNG that it was sourcing from the US. GAIL has also entered into a 25-year concession agreement with RGPPL for the commercial operation of the entire 5-MT capacity by operating the terminal on a tolling basis. The terminal has a current capacity of 3 MTPA which can be raised to 5 MTPA once the terminal's break-water facility is constructed.
Sources added that the finance ministry was batting for the lenders' proposal and tried to convince GAIL by saying that an outright third-party sale of both the businesses is not the only option. And both GAIL and NTPC can exercise their 'right of first refusal' over the LNG and power businesses. Of the Rs 10,000-crore debt, IDBI and SBI have the maximum exposure followed by IFCL, Canara BankBSE -4.02 % and PFC.