Mumbai: Canara Bank, a minority shareholder in Ratnagiri Gas and Power Pvt. Ltd (RGPPL), has moved the New Delhi bankruptcy court months after a debt recast plan and demerger was approved, in a move that has taken lenders such as the State Bank of India (SBI), IDBI Bank and ICICI Bank by surprise, said two senior bankers.

The bankers said that Canara Bank’s application under the Insolvency and Bankruptcy Code (IBC) could derail the resolution plan, involving demerger and a deep restructuring of debt. RGPPL’s liquefied natural gas (LNG) regasification plant has been demerged into a subsidiary company, Konkan LNG Pvt. Ltd (KLPL), while loans of the power plant were restructured by lenders.

The demerger of the LNG business of RGPPL into a new company, KLPL, was filed for approval with the National Company Law Tribunal (NCLT) in December 2016 and NCLT adjourned the petition in August 2017. The company filed an appeal in August 2017 with the National Company Law Appellate Tribunal (NCLAT), which approved the demerger proposal in March 2018.

Canara Bank has filed two separate cases against RGPPL and KLPL under Section 7 of the IBC. One of the bankers cited above said that Canara Bank has been advised by its auditor to seek resolution under IBC and to classify these companies as non-performing in the September quarter of FY19.

“Canara Bank, which owns only 5% of the total loans of 9,000 crore and a little over 2% of the equity in RGPPL, could potentially affect more than four years of revival efforts," said one of the bankers mentioned above. Even the Prime Minister’s Office (PMO) was involved in the resolution discussions to expedite the process, he said.

The other banker said that Canara Bank had already issued sanction letters for fresh loans to KLPL for construction of a breakwater facility. The breakwater facility will help ships carrying LNG to dock near the plant during choppy weather during May and October.

RGPPL ran into trouble in 2013 after insufficient natural gas output from Reliance Industries’ (RIL) KG D6 basin hit production at the gas-based power plant.

Shareholders in RGPPL include NTPC Ltd (25.51%), GAIL (India) Ltd (25.51%), MSEB Holding Co. Ltd (13.51%), IDBI Bank Ltd (12.61%), SBI (10.03%), ICICI Bank Ltd (8.91%) and Canara Bank (2.15%). The holding in KLPL is same as that in RGPPL.

RGPPL, which was originally owned by Enron Corp., was earlier the Dabhol Power Co. It was bought by a consortium of lenders and MSEB, GAIL and NTPC in 2005 after Enron filed for bankruptcy in the US.

The debt restructuring proposal included bifurcation of existing loans of Rs9,000 crore into RGPPL and its subsidiary KLPL. Around Rs5,200 crore of loans to the power plant was then divided into sustainable (Rs2,000 crore) and unsustainable debt (Rs3,200 crore) with the latter being converted into cumulative redeemable preference shares (CRPS). The sustainable loan was given a very long repayment schedule and interest rates were reduced from 13% to 9%. Meanwhile, KLPL was given additional loans of Rs1,200 crore to build the breakwater facility.

Emails sent to NTPC, GAIL, RGPPL, MSEB, Canara Bank, IDBI Bank, ICICI Bank and SBI remained unanswered till the time of going to press.