Essar Power approaches banks for debt recast for Mahan project: Report

Private power producer Essar Power has approached its lenders — a consortium led by ICICI Bank — for strategic restructuring of Rs 6,564 crore of debt, which the company borrowed from banks for Mahan Power Project, Moneycontrol reported.

The report quoted unnamed banking officials as saying that as part of the debt recast, the company has offered to convert most of the debt into equity through dilution of its stake.

The 1,200 MW Mahan power project was set up by Essar Power MP Ltd (EPMPL) — a subsidiary of Essar Power — in Singrauli district of Madhya Pradesh. Apart from ICICI Bank, Punjab National Bank (PNB), Power Finance Corporation (PFC), Rural Electrification Corporation Ltd (REC) and IDFC are the other lenders to the project.

"Essar wants to give up majority stake in the unit. It is classified as a non-performing asset in our books now. ICICI Bank, being the lead lender, has to now call for a joint lenders forum meeting," Moneycontrol quoted a bank official as saying. 

ICICI Bank has lent Rs 1,632 crore to the Mahan project, with PFC and REC lending Rs 1,345 crore each. The remaining amount was disbursed by PNB and IDFC. Total equity portion of the project stood at Rs 3,200 crore.

"The company has submitted a proposal for restructuring of the debt. The company has been in discussion with the lenders for early approval of its proposal," the report quoted Essar Power official as saying.

Currently, Mahan Power project has one operational unit of 600 MW, while another unit of the same capacity is under construction. According to officials, it will take another 8-10 months for commissioning.

Essar's Mahan power project had faced problems from the very beginning as its first unit began operations in April 2013 after lying non-operational for quite some time due to non-availability of coal. It also lost the coal block allotted to the project as a result of the Supreme Court's verdict cancelling allocations of 214 coal blocks in 2014.