The Hindu Business Line : Lenders to exit Spectrum Power; Rolls Royce may follow

IDBI Ltd and its fellow lenders have decided to sell their one-third equity holding in the Andhra Pradesh-based Spectrum Power Generation Ltd (SPG). They are expected to appoint SBI Caps to find a buyer, an institutional source told Business Line.

Rolls Royce, which owns 33 per cent equity of the Rs 1,200-crore SPG, may also tag along with the financiers to exit from the company that runs a 208-MW electricity generation project in Kakinada in AP, the source said.

Banks and financial institutions led by IDBI had removed representatives of original promoters Spectrum Technologies of the US, and Bambino group and installed their own nominees on the board of the loss-making SPG at an emergency meeting on October 11 last year. The consortium had lent nearly Rs 700 crore to it but converted 20 per cent of that into equity to help the struggling company reduce its debt burden.

The shareholding of the two promoters fell to 17 per cent each and Rolls Royce's 50 per cent dropped to 33 per cent after the financiers converted about Rs 140 crore debt into one-third ownership.

Industrial Finance Corporation of India, ICICI Bank, State Bank of India, Special Undertaking of UTI and IIBI are the other major lenders in the IDBI-led consortium. The lenders have managed to recover about Rs 190 crore after taking control.

SPG now joins several other power projects, whose owners have put them on the block because inept management, high fixed costs, unreliable fuel supply and litigation have made them unviable. While Enron's 2,184 MW power project is lying mothballed at Dabhol in Maharashtra, Reliance Energy is reportedly looking for buyers for its projects in AP, Kerala and Goa with a total generating capacity of about 450 MW.

The company was set up by non-resident Indian Mr A.V. Mohan Rao's Spectrum Technologies and Mr M. Kishan Rao's Bambino group to build a power project when India invited private foreign investment in electricity generation. Constant bickering between the two promoters, who owned 25 per cent of equity each, sank the well-run project into trouble.

The project has since been mired in innumerable court cases between the Indian and NRI promoters, project contractors and lenders in various courts. An official with a leading private sector power company said litigation notwithstanding, prospective buyers would be willing to pay a good price for the plant as it is a gas-based one and is situated close to abundant sources of the fuel on the East coast.

More Stories on : Power | Financial Institutions | Andhra Pradesh

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