With power generation at the Ratnagiri Gas and Power (RGPPL) grinding to a halt in the absence of natural gas, lenders to the project may consider a further conversion of debt into equity to help the company tide over the crisis, Arundhati Bhattacharya, chairperson of State Bank of India, told FE, adding that the portion of debt, that got converted into equity, would no longer be treated as “past due debt”.
Bhattacharya said the power ministry was soon going to convene a meeting of all stakeholders in RGPPL’s 1,967 MW power generation and natural gas regasification plant at Dabhol in Maharashtra to discuss the issue. “That (converting some of the debt to equity) is an option that we are looking at,” Bhattacharya, said. “It will help for a little while till we can work out a permanent solution.”
RGPPL’s outstanding debt is around R8,500 crore and the last month in which the company repaid the principal amount due on its loan was in March, when it paid around R151 crore to banks. Lenders have converted a portion of the debt that RGPPL owed to them into equity in the past and currently have a 17% shareholding in the company.
RGPPL, which has state-run undertakings Gail (India) and NTPC as major shareholders, hasn’t been generating power since December due to lack of gas supplies from Reliance Industries’s KG-D6 offshore gas field, which has been facing technical challenges.
The power plant in Dabhol, which initially used naphtha as fuel, was converted to a gas-based plant in 2007. Almost all the gas-based power RGPPL generates is allocated to the Maharashtra State Electricity Distribution (MSEDCL). The cost of power generated by RGPPL worked out to around R4.8 per unit. MSEDCL contended that this was higher than the prevailing market price of power and refused to purchase power from RGPPL.
This led to a cash flow crisis for RGPPL and impacted its debt servicing obligations.
“RGPPL’s asset is good, but it just doesn’t get the input needed,” Bhattacharya of SBI said. “Up to March 2011, they were making profits and repaid 2-3 instalments in advance. As long as they get gas, they can do very well.”
As per Indian banking regulations when repayments on loans are overdue for more than 90 days, they are classified as non-performing assets (NPAs). RGPPL has managed to avoid being classified as a defaulter by