After several quarters of posting losses and headwinds, both regulatory and external, GVK Power & Infrastructure Ltd sees the company business turning around with some of the key developments driving the change.
These include fuel linkage for the stranded coal-fired Goindwal Sahib thermal power plant for 24 years, refinance of the ₹9,000-crore debt of Mumbai International Airport Ltd (MIAL) and divestment of a stake in Bangalore International Airport Ltd (BIAL), all enabling the company to prune its debt.
The company, which had earlier sold a gas-based power plant in Andhra Pradesh, is also looking at divesting another gas plant, also to Andhra Pradesh Power Generation Corporation.
GVK Reddy, Founder Chairman of GVK, said: “Our focus in the recent times has been to strengthen the balancesheet, bring down debt and focus on consolidation. This has begun to yield positive results.
“The divestment of a 43 per cent stake in BIAL to Fairfax and the gas plant has helped us bring down debt significantly.”
Speaking at the company’s 23rd AGM, and later on the sidelines, Reddy said: “GVK has been chosen as the successful bidder for the Navi Mumbai airport project. The letter of award (LoA) is expected to be handed over to us by next month and work on this mega project will be taken up. It has all necessary approvals.
Preparatory work“While the work from our side will be taken up then, already, several contractors have been engaged for preparatory work for the project execution. This includes relocating people from three villages, to whom compensation has been awarded, bringing down three hills and filling up of the back water.”
“Funding is no problem,” Reddy told BusinessLine . “There is no need to create a separate Special Purpose Vehicle, it can be executed under the existing project.”
The BIAL stake sale to Prem Watsa-headed Fairfax helped raise ₹3,492 crore, which was fully utilised to bring down debt. The company has consolidated debt of ₹15,500 crore.
Referring to MIAL, Reddy said: “We have managed a complex refinance of the ₹9,000-crore loan we have on our books for the project.
“Headed by a lenders’ consortium of SBI, the interest rate has been refinanced from 10.75 per cent to 9.15 per cent, which will save about ₹100 crore per annum. The airport holding company balance debt is now 3-4 per cent lower.”
Coal linkageThe Goindwal Sahib project in Punjab started commercial operations last year and was kept under preservation due to lack of fuel linkage.
The Central Electricity Authority has approved 2.47 million tonnes per annum (mtpa) of coal to the project.
Of this, 1.7 mtpa was allocated by Coal India Ltd through coal linkage e-auction on September 11-12 and 6.3 tonnes per annum of coal was allocated by South Eastern Coal Fields Ltd.
The long-term linkage takes care of the balance 24 years of the power purchase agreement.
The fuel linkage from the originally allocated Tokisud mine was cancelled after a Supreme Court directive to cancel all coal mine allocations.
For FY17, GVK posted income of ₹3,516 crore, against ₹3,207 crore in the previous year, up 9.65 per cent. Airport assets contributed ₹3,121 crore, transportation ₹379 crore and energy barely ₹15.6 crore due to lack of fuel. The company posted a loss of ₹1,302 crore (₹646.80 crore).
The revenue generated during the year from the Deoli-Kota road project was not sufficient to cover the premium payable to the National Highways Authority of India, which resulted in an additional loss in the transportation sector.