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Essar Power arm to be liquidated after lone bidder refuses to furnish guarantee

The NCLT Bench also asked the liquidator to probe the financial affairs of Essar Power Jharkhand with respect to the erstwhile promoters’ and directors’ bid to enter into “preferential transactions”.

Essar, Essar Power, Essar power debt, Essar power case, Essar insolvency case, indian express Essar Power Jharkhand, which has a total debt of around Rs 5,600 crore, was admitted into insolvency in 2017 on a plea moved by ICICI Bank.

The principal Bench of the National Company Law Tribunal (NCLT) has ordered the liquidation of Essar Power Jharkhand after the sole bidder for the company refused to furnish a performance bank guarantee after bidding for the power plant.

The NCLT Bench also asked the liquidator to probe the financial affairs of Essar Power Jharkhand with respect to the erstwhile promoters’ and directors’ bid to enter into “preferential transactions”.

Essar Power Jharkhand, which has a total debt of around Rs 5,600 crore, was admitted into insolvency in 2017 on a plea moved by ICICI Bank. The bank, which has voting rights of 99.3 per cent in the Committee of Creditors (CoC), had dragged the company to NCLT for defaulting on payment of nearly Rs 3,630 crore.

In April 2018, the NCLT admitted the company into insolvency, following which the resolution professional invited Expression of Interest (EoI) from prospective bidder for the power plant. Despite repeated extension of the last date for submission of bids, the company received no bids in the first attempt. In the second attempt, the CoC again issued a fresh EoI when the sole bid from Lighting Solutions LLC was received. It was approved by the bank on December 2018, and the bidder was asked to submit a performance bank guarantee by January 2019.

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Despite repeated reminders, however, Lighting Solutions failed to give the needed bank guarantee, following which ICICI Bank moved a plea and said it no longer wanted to go with the plan submitted by the firm.

In May last year, the erstwhile promoters of the company had attempted to take the power plant out of insolvency process by offering a one-time settlement of Rs 1,200 crore against the total debt of Rs 5,600 crore. Essar Power Jharkhand’s promoters had moved the application under Section 12 (A) of the IBC, which allows the corporate debtor another chance to make good on the default and retain control over the firm even after the case is admitted to the NCLT.

Explained

Winds up a complicated, long drawn case

The liquidation of Essar Power Jharkhand winds up the saga of an incomplete project that had been tagged ‘difficult to resolve’ by the Centre three years ago. The company, among the first power plants to be admitted into insolvency, was declared a non-performing asset in September 2016 after the two coal blocks allocated to the power project were taken away following a Supreme Court judgment in 2014.

The plan was, however, thwarted by ICICI Bank, which had more than 99 per cent voting rights. For an application to be accepted under section 12 (A) of IBC, the plan must be approved by more than 90 per cent of the lenders.

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Essar Power Jharkhand, a subsidiary of Essar Power, had planned to set up two domestic coal fired power plants of 600 mega-watt (MW) each in Latehar district of Jharkhand. The power project, planned in 2008, is only about 45 per cent complete till date, and has been tagged as “difficult to resolve” by the government.

The two coal blocks allocated to the power plant had been taken away from them following a Supreme Court judgment in 2014. The cost of the uncompleted project has since more than doubled to Rs 10,400 crore. It was among the first power plants to be admitted into insolvency. It had been declared as a non-performing asset in September 2016.

First published on: 09-01-2020 at 01:06:33 am
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