Stressed state-run power utility Ratnagiri Gas and Power (RGPPL) is set to convert Rs 450 crore of its debt into equity with an extraordinary general meeting scheduled this week to formally pass the proposal. Once this gets done, the State Bank of India-led consortium of lenders would — for the first time — become the majority stakeholder in the company.
This would be the second time the company would be forced to convert debt into equity ever since its power station stopped generation in March 2013 due to a continuous decline in domestic gas supply from the KG-D6 basin.
In January 2014, RGPPL had converted R405 crore into equity. With the first conversion, the total debt of RGPPL, pegged at R8,500 crore, reduced to R8,095 crore. The second tranche of conversion of R450 crore is the principal and interest burden accumulated till January 1, 2015. Post the second conversion, RGPPL’s net debt will be R7,645 crore.
The Maharashtra government, which currently holds a 15.32% stake in the company after the first round of conversion and has been hesitant to the debt-to-equity conversions, gave its nod in writing on March 31, according to a senior RGPPL official.
Separately, bankers in the SBI-led consortium held a presentation in mid-March with RGPPL officials where they again mooted the option of hiving the 5 mmtpa LNG regassification plant to a separate SPV. The SPV will take up 50% of the total debt of RGPPL and will gain the benefit of a three year moratorium on interest payment.
“The bankers don’t want the LNG plant to bear RGPPL’s expense burden as it is currently the only revenue-generating part of the company,” the official said.
The lenders also proposed that if the hive off plan is accepted, they will refinance the new company with an additional R1,200 crore to construct a breakwater facility.
The LNG plant currently cannot receive ships between May to October as high waves prevent passage of ships.
RGPPL had initially planned to construct a breakwater facility, which would facilitate ships to berth in its docks throughout the year. In FY15, the LNG facility received 10 ships. However, with the construction of a breakwater, the facility can receive up to 80 ships in a year.
“Currently the LNG terminal has a revenue of about R180 crore annually with 10 ships. With 80 ships and the interest moratorium of 3 years, that will increase to almost R1,200 crore. So, LNG can then service the 50% debt transferred to the new SPV from RGPPL,” the RGPPL official said.
This proposal had been mooted previously in December 2014 but was not accepted by the company. However, there is a significant chance of the proposal being passed now with the lenders taking up a majority stake in the company.
The official said that lenders were told to rework the proposal after which global consulting firm Deloitte would analyse it for RGPPL.
A banker familiar with the discussions said that the latest proposal would be considered under Reserve Bank of India’s 5:25 scheme, wherein the new SPV will be assured funds for a long-term with refinancing evaluated every five years.
“We are trying very hard to make it viable since it is a great plant stuck due to non-availability of domestic gas,” the banker said.
