Arcelormittal bids ₹4,800 cr for Essar’s Mahan project
MUMBAI: Arcelormittal SA has set its sight on yet another asset of India’s Essar Group. The world’s largest steelmaker has bid ₹4,800 crore to acquire Essar Power Ltd’s Mahan power project, said a senior Power Finance Corp. (PFC) official.
The offer is 37% more than the ₹3,500 crore offered as a one-time settlement by promoters of Essar for the Mahan plant.
PFC chairman and managing director Rajeev Sharma said Arcelormittal has offered ₹4 crore per megawatt for the 1,200 megawatts (MW) project in Madhya Pradesh. The project has debt outstanding of about ₹7,500 crore, he added. Lenders to the Mahan project are ICICI Bank, Punjab National Bank, Rural Electrification Corp. (REC) and PFC.
“The project does not have power purchase agreements (PPA) and fuel supply agreements (FSA). We had received an offer for OTS of ₹3,500 crore, but now, we have received an offer from Arcelormittal of around ₹4,800 crore,” said Sharma.
Another PFC official, requesting anonymity, said Arcelormittal submitted its proposal a couple of weeks ago. The bankers are studying the proposal, he said, adding the Mahan project has been a non-performing asset for nearly a year.
PFC has a loan exposure of ₹1,000 crore to the project.
Spokespersons for Arcelormittal and Essar declined to com- ment.
Arcelormittal has previously bid for Essar Steel and EPC Constructions India Ltd, another Essar Group company, under the corporate insolvency resolution process. The bid for the Mahan plant is, however, outside the purview of the National Company Law Tribunal (NCLT).
The case is yet to be admitted by the tribunal, considering the Supreme Court had issued a status quo on insolvency proceedings against power companies under the Reserve Bank of India’s (RBI’S) February 12 circular.
The RBI had asked banks to draft resolution plans for defaulters within 180 days in cases where the exposure was above ₹2,000 crore. Subsequently, several petitioners, including GMR Energy Ltd, Rattanindia Power Ltd, Association of Power Producers (APP), Independent Power Producers Association of India, Sugar Manufacturing Association from Tamil Nadu, and a shipbuilding association from Gujarat, moved various courts challenging the RBI circular. Last September, the apex court had directed that all pleas related to the February circular should be transferred to it.
While Arcelormittal’s offer for EPC Constructions was rejected by lenders, its bid for Essar Steel is yet to be ratified by the NCLT, due to last-minute litigations. The resolution plan for Essar Steel proposed an upfront payment of ₹42,000 crore to lenders and an additional ₹8,000 crore towards capital expenditure.
On October 25, 2018, more than 92% of Essar Steel’s creditors voted in favour of Arcelormittal’s offer. On October 30, the resolution professional submitted the steel giant’s resolution plan before the Ahmedabad bench of the NCLT.