Essar Power in talks with lenders to deleverage debt

Ruias-controlled Essar Group's power arm, Essar Power is said to be in talks to deleverage about Rs 20,000 crore of its debt to bring it down to about one-third through measures of debt restructuring of group's 2,400-MW Independent Power Producer (IPP) companies.

Essar has so far invested about Rs 32,000 crore in the power portfolio, which includes Rs 12,000 crore of equity, the rest through other modes including debt.

"Essar Power is discussing with its lenders to restructure all its existing debts. The talks are now at an advanced stage. The company aims to bring down the leverage in its balance sheet from Rs 20,000 crore currently to about Rs 7,500 crore," an official told Businessline requesting not to be named. The official did not confirm the timeline to pare the debt.

The deleveraging efforts include the debt restructuring in the IPPs, which were affected by the cancellation of coal mines and unviable pricing of imported coal.

The company operates 2,400 MW as IPP with plants in Madhya Pradesh and Gujarat. The remaining are Captive Power Plants (CPP) in Gujarat & Odisha.

Adding further the official said, "The company has put together a clear programme to address the challenges faced by IPPs and is confident of overcoming them in the current year. The business is focussed in the short-term on stabilising its existing portfolio."

Essar Power Hazira

Notably, Essar Power arm Essar Power Hazira Ltd (EPHL), which operates 270-MW multi-fuel power plant at Hazira in South Gujarat is betting big on its existing PPA with its anchor customer - Essar Steel India Ltd (ESIL). After the Corporate Insolvency Resolution Process (CIRP), the ownership of ESIL is set to go to LN Mittal-promoted ArcelorMittal.

EPHL is an operational creditor of ESIL and has an admitted claim of Rs 126 crore as part of the CIRP process.

But the change of ownership is not likely to hamper the revenues for EPHL, claimed the official.

"EPHL is one of the best assets in our power portfolio. Since its commissioning in 2016, it has delivered robust performance and has set benchmarks for other assets of similar capacity. ESIL is our anchor customer, and regardless of its ownership, the PPA terms assure us of a fixed revenue stream from the asset,” the person quoted above said.

For last two years, it has been operating at a Plant Load Factor of 100 per cent with steady revenue stream of over Rs 425 crore. For last fiscal 2018-19 it reported EBITDA of over Rs 300 crore.

Overall, Essar Power owns plants in India and Canada with a planned generation capacity of 5,090 MW, of which 3,830 MW is operational across six multi-fuel plants located in three states and one thermal power plant in Canada.

With estimated 7 per cent year-on-yer rise in power demand in India in coming years, Essar Power looks to tap this opportunity by staying light on leverage and enter into new PPAs to utilise its entire generation capacity. While it also keeps its options open for renewables game through organic and inorganic routes.

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