Insolvency cloud on Adani Power’s Mundra plant

Adani Power Mundra, a subsidiary of Adani Power, is likely to approach the National Company Law Tribunal (NCLT) for bankruptcy protection.

This comes after its lenders stepped back from stake-sale negotiations with Gujarat Urja Vikas Nigam (GUVNL), the state power distribution company.

Unable to service its power purchase agreement (PPA) amid rising costs, Adani Power, along with Tata Power and Essar Power, had initiated talks with GUVNL to buy 51 per cent stake in their conventional power plants in the state, for a token ~1.

“While we do not have official confirmation yet, it has been learnt that the lenders have pulled back from stakesale negotiations. In that case, Adani Power will have to look for viable options to clear its defaults and also honour the PPA with us, which could include proceedings at NCLT,” said a GUVNL official, on condition of anonymity.

According to sources, the move comes in the wake of the Reserve Bank of India (RBI)’s February 12 revised guidelines on stressed assets, bringing the 4,260-Mw Mundra power unit under the purview.

“The lenders, led by the State Bank of India, do not wish to go ahead now with the stake sale, ever since RBI shifted gear as far as large default accounts were concerned,” said a state government official.

The Adani’s Mundra power plant alone faces loan dues, reportedly above ~220 billion. This would make it the first Adani Group asset to move NCLT.

Under the RBI notification, Adani Power has time till August to come up with a resolution plan for its defaults with the lenders.

By its own admission, Adani Power is being forced to look at other options amidst “revised financial regulations”.

“On account of unforeseen factors such as fuel cost increase, shortages of domestic coal and recently-revised financial regulations, many projects of independent power producers, including Mundra, are facing challenges to remain viable. At Adani Power, we are working with the stakeholders to resolve challenges faced by the Mundra project in the larger interest of consumers and the nation. Accordingly, various options are being evaluated, in consultation with procurer states and lenders,” an Adani spokesperson stated.

With its plant load factor down from 73 per cent a year before to 37 per cent in the March quarter of FY18, Adani Power Mundra has been supplying almost negligible power under the two PPAs of 1,000 Mw each that it signed with GUVNL.