Ratnagiri uses insurance reserves to repay Dabhol debt3 min read . Updated: 31 Dec 2013, 12:59 AM IST
Deadline to repay debtors expired on Saturday; first time Ratnagiri drew on its `150.34 crore reserves
New Delhi: In a desperate attempt to avoid being classed as a non-performing asset (NPA), beleaguered Ratnagiri Gas and Power Pvt. Ltd (RGPPL), the operator of Dabhol power plant, has dipped into its insurance reserves to service ₹ 139.12 crore in September dues to its debtors, the deadline for which expired on Saturday.
This is the first time the company has drawn on its ₹ 150.34 crore insurance reserves. Experts said that although the company is likely to see off an immediate disaster, it cannot avert an impending financial crisis for long.
The move comes at a time when lenders have been demanding the sale of a liquefied natural gas (LNG) terminal associated with the project.
“They have bought time for now," said a person aware of the development, requesting anonymity. “Now, the next payment of around ₹ 46.33 crore will be due in January. It has to be paid to avoid being an NPA. Also, another payment of ₹ 44.84 crore has to be made by 28 February. What will they do then?"
After the September payment, RGPPL’s insurance reserves stand depleted at ₹ 11.22 crore.
A senior RGPPL executive, requesting anonymity, confirmed that the company was drawing on its insurance reserves to avoid being classified as an NPA.
Cash-strapped RGPPL has a debt of around ₹ 8,500 crore, with an outstanding debt service obligation of ₹ 837.94 crore for the current fiscal year.
RGPPL, earlier known as Dabhol Power Co., was conceived in the 1990s and originally promoted by the now-bankrupt US energy, commodities and services giant Enron Corp. The asset was transferred to the government in mid-2005, with the project fully commissioned on 31 March 2010. As of 30 November, ₹ 424.18 crore was paid to the lenders.
“They have been facing some problems and have temporarily dipped into their insurance reserve for the loan repayment. The issue of LNG terminal has not yet been discussed in detail," said M.S. Raghavan, chairman and managing director of IDBI Bank.
State-run NTPC Ltd and GAIL (India) Ltd own 32.86% each in the utility, the Maharashtra government has a 17.41% stake, and the rest is owned by public sector banks and financial institutions such as IDBI Bank, State Band of India (SBI), ICICI Bank Ltd and Canara Bank.
In response to a question about the lenders’ demand for the sale of the LNG terminal, Ajoy Mehta, managing director of Maharashtra State Electricity Distribution Co. Ltd (MSEDCL), said: “The lenders are not the only ones in the project. There are other stakeholders as well. The stakeholders have to take a decision."
The stakeholders have communicated their concern to the government.
Queries emailed to the spokespersons of NTPC, GAIL and SBI on Sunday afternoon remained unanswered. While a Canara Bank spokesperson could not be contacted, an ICICI Bank spokesperson in an emailed response said: “ICICI Bank does not comment on client-specific issues."
The development comes in the backdrop of consultancy Deloitte Touche Tohmatsu India Pvt. Ltd working out a restructuring plan for RGPPL. The Dabhol plant requires 9.7 million standard cu. m per day (mscmd) of gas, but has been allocated 8.5 mscmd by a panel of ministers, of which it receives only 0.9 mscmd. Various plans were drawn for the revival of the project, including leasing out the terminal to earn user-charges, but they were dropped.
Also, according to RGPPL, MSEDCL owes it ₹ 1,112 crore in electricity dues.
“There are no dues. We have paid whatever is due. One can’t expect full rate for infirm power," said MSEDCL’s Mehta.
IDBI Bank’s Raghavan spelled the way forward for RGPPL.
“The only solution is the availability of gas for RGPPL. They have been operating below capacity. Gas availability is the only way out. The issue has been discussed at various levels. We have to take it forward," said Raghavan.
The project’s capacity was derated from 2,150 megawatts (MW) to 1,940MW in 2008 due to problems with equipment—a first for a plant in India that wasn’t fully commissioned.