The $35-billion Essar Group, led by billionaire brothers Shashikant Ruia and Ravikant Ruia, plans to monetize some of its power assets as part of efforts to pare $15 billion of debt. The group has already agreed to sell half its stake in refinery and steel businesses.
Among power assets, first on the block would be the 1,200 MW imported coal-fired power plant at Salaya in Gujarat’s Devbhumi Dwarka district.
The unit posted a 163 per cent growth in earnings before interest, taxes, depreciation and amortization (a measure of a company’s operating profitability) to Rs.525 crore in the financial year ended March 31, 2016.
Salaya plantThe Salaya plant is valued at more than Rs.7,000 crore, after Sajjan Jindal-led JSW Energy earlier this month agreed to buy younger brother Naveen Jindal-promoted JSPL’s 1000 MW plant for an enterprise value of Rs.6,500 crore.
“If assets become profitable, then buyers have interest,” Sushil Maroo, executive vice-chairman for Essar Power Limited said in an interview. “For us, Salaya, Vadinar and Hazira are profitable. We have not gone to the extent of talking to buyers as we are in process of turning around companies to be profitable. Anything can be monetized but at a right price. The valuation is to be done from different perspective and we need to talk to investment bankers and buyers,” Mr. Maroo said.
The Salaya plant, operated by Essar Power Gujarat Limited, a subsidiary of Essar Power meets 9 per cent of Gujarat state’s overall power demand and reported a net profit – within three years since commissioning -- of about Rs.35 crore.
That compared with a loss of Rs.684 crore in FY15 due to higher operational efficiency, a reduction in coal prices through e-auction based procurement and normative plant availability.
Besides Salaya, the group is also looking to sell its transmission business, in which it has invested Rs.2,200 crore so far.
Transmission business“Transmission lines are a separate business. It is a stable business so it is easy to get buyers for that. We have invested over Rs.2,200 crore so far in our transmission business but at what price we will sell will depend upon valuation modelling,” said Mr. Maroo.
Essar’s promoters pay interest of Rs.2,500 crore per year to service debt of Rs 20,000 crore.
Debt restructuringHowever, the company has managed to restructure Rs.10,000 crore worth of debt under the 5/25 scheme of RBI, which allows the repayment of the term loan over the life of the power plant.
The company is in talks with the banks to restructure another Rs.5,000 crore of loans under the scheme.
Essar Power Ltd, among India's top five private sector power producers with over 20 years’ operating record, owns power plants in India and Canada with a total generation capacity of 6,100 MW, of which 4,675 MW is operational. Of the total operational capacity, 3,075 MW is coal-based, while 1,600 MW is gas-based.
The operating plants in India are at Mahan, Hazira, Salaya and Vadinar.
