In a first for port PPP project, Tuticorin Coal Terminal heads for liquidation

P Manoj Mumbai | Updated on August 03, 2021

A view of the VOC Port Trust in Tuticorin (file pic)   -  N Rajesh

The expressions of interest filed by Felguera Gruas India Pvt Ltd and V K S Mining Services were rejected by the Committee of Creditors

Tuticorin Coal Terminal Pvt Ltd is heading for liquidation after a creditors’ panel rejected the expression of interest filed by two entities to buy the bankrupt facility located at the Centre-owned V O Chidambaram Port Trust (VOCPT), making it the first public-private-partnership (PPP) project in the ports sector to meet the fate.

The 7 mt-capacity terminal is developed by ALBA Asia Pvt Ltd with 74 per cent stake and Louis Dreyfus Armateurs SAS (LDA) holding 26 per cent. ALBA Asia is the Indian joint venture dry bulk port operating company controlled by French shipping group Louis Dreyfus Armateurs SAS.

Terminals left in the cold

The expressions of interest filed by Felguera Gruas India Pvt Ltd and V K S Mining Services were rejected by the Committee of Creditors led by Bank of India on valuation grounds, government sources said. The terminal operator also owes money to Felguera Gruas, the Indian unit of Spanish firm Duro Felguera S A, for suppling shore unloaders to the facility.

A bankruptcy court in Mumbai has initiated insolvency proceedings against Tuticorin Coal Terminal after Bank of India filed a petition seeking to recover unpaid dues of ₹90.87 crore after the facility was “abandoned” by the PPP operator. The terminal owes some ₹355.79 crore to a clutch of seven banks led by Bank of India.

To salvage the situation and recover money, the lenders have asked VOCPT to terminate the concession agreement signed with Tuticorin Coal Terminal and pay the debt due to them.

“Since the terminal had started operations (referred to as commercial operations date or COD), lenders are eligible for receiving debt due from the port authority in the event of termination due to default in repayment of loan,” said an official with one of the banks that had lent money to the terminal.

‘Resolution plan not viable’

Achieving the milestone of commercial operations date is one the conditions for payment of debt due by the port authority on termination, as per the substitution agreement signed between the port authority, the PPP operator and the lenders. The substitution agreement is a part of the main concession agreement.

VOCPT, though, is not in agreement with the lenders’ stand on termination.

“The terminal has not started commercial operations as per the contract before it was abandoned by the PPP operator,” said a VOCPT official. “Before commercial operations date, termination is not possible,” he stated.

To prevent liquidation, the lenders have also suggested that VOCPT can come in as a resolution applicant and file a plan under the Insolvency and Bankruptcy Code (IBC) arguing that the terminal assets were under the control of the port authority who also know port operations well to take over and run the terminal, the bank official cited earlier said.

“After extensive deliberations, we came to the conclusion that it was not viable to submit a resolution plan,” the VOCPT official said.

Port industry sources said that a port authority cannot file a resolution plan under IBC for its own asset that was privatised through the PPP route as per government policy.

Lenders seek EoI to sell Tuticorin Coal Terminal under IBC

“The terminal asset belongs to the port. How can the port trust bid itself. The port trust cannot be a concessioning authority and the concessionaire (PPP operator) in the concession agreement,” said an industry source.

VOCPT said it was “eager” to solve the issue as the port needs extra cargo handling capacity, particularly with the conversion of bulk cargo handling berth No 9 into a container terminal.

The port authority, according to sources, “may participate” in the liquidation process to buy individual assets of the failed terminal. The waterfront at the terminal already belongs to VOCPT and once the terminal assets such as cargo handling equipment are also acquired through the liquidation process, the port trust can either run the facility on its own or re-tender the project, the industry source said.

Published on August 03, 2021

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