New Delhi: The Department of Investment and Public Asset Management (DIPAM) has turned down Power Finance Corporation (PFC) and REC Ltd’s proposal for a debt resolution plan for the beleaguered 1,800-MW KSK Mahanadi Power Company project.
The state-owned duo had sought approval from the department to participate in the ongoing insolvency proceedings by submitting a debt resolution plan, said people aware of the development.
However, DIPAM rejected the proposal with a view that lenders’ backed resolution plan, in this context, should normally be avoided as it involves additional resource infusion and business risks, they said.
ET’s queries emailed to PFC, its subsidiary REC and DIPAM did not elicit any response till press time.
The project is undergoing insolvency proceedings, but the resolution of the project was stalled after the National Company Law Tribunal stayed the sale process in June 2022 following a plea to consolidate the resolution of KSK Mahanadi Power Company and two of its ancillary companies, which are also under a resolution process.
Lenders are now willing to let the project go standalone under the proceedings, said one of the persons, who did not wish to be identified.
When the asset was first put up for auction under the insolvency proceedings, REC and PFC, with NTPC Ltd as the technical partner, Vedanta Ltd, Adani Power Ltd, and Jindal Power Ltd were among the companies that had shown interest.
“More companies have shown interest in participating in the acquisition of the asset. It is good for the valuation of the project,” said another person.
State Bank of India was the major lender to the project until six asset reconstruction companies (ARCs), including Aditya Birla and Kotak Mahindra-backed ARCs, recently accumulated 55% of the project’s Rs 29,330 crore debt from the lenders.
The total claim by lenders in the project is about Rs 32,000 crore, of which PFC and REC have Rs 5,500 crore, according to people in the know.
Among ARCs, Aditya Birla ARC has largest share of 33.38% in claims from KSK Mahanadi Power Company, followed by ASREC (India) Ltd which has 11.98%
The proposal was on similar grounds as that of Lanco Amarkantak, where the companies had bid for the project. PFC and REC and Reliance Industries had withdrawn their bids later, with the project finally landing with Adani Power for Rs 4,101 crore.
