IL&FS power arm’s Rs 5,500 crore debt to be restructured by Sept-end

IL&FS Tamil Nadu Power Company operates a 1,200 MW imported coal-based plant in Cuddalore.

The restructuring of over Rs 5,500 crore loan of ITPCL, the power arm of Infrastructure Leasing and Financial Services (IL&FS) Group in Cuddalore, Tamil Nadu is expected to be completed by September-end, as the company sees the recovery of over Rs 2,000 crore receivables from the state discom to happen during the period.

Since the Tamil Nadu discom has exhausted its borrowing limit as per the FRBM Act, it cannot borrow from the first tranche of Rs 90,000 crore funds approved by the central government through PFC and REC.

Responding to a question from FE in a webinar, CS Rajan, managing director of IL&FS, said, “We have received the approval from our lenders for the restructuring of the loan, but there is a pending receivable of over Rs 2,000 crore from the state discom which has held up the restructuring. If the state discom receives the payment under the approved plan through PFC and REC, they will pay us the pending receivables, which will allow the lenders to restructure the debt under the sustainable and unsustainable category,” Rajan said.

“We have written to the ministry of power who have approached the Central Cabinet for approval of the PFC and REC loan for the state discom. We expect the approval to come before September,” Rajan said.

Power ministry has raised the concern with the 15th Finance Commission over how several states have exhausted the borrowing limits under the FRBM Act, and the inability of the states to stand guarantee to the Rs 90,000 crore central package.

The power ministry has recommended to the Finance Commission to re-examine the FRBM borrowing limit for states so as to allow discom losses and dues to be included in its report to pave way for states to amend the required laws to allow discoms to clear their pending dues.

Sources close to the development said the central cabinet approval allowing states to borrow from the first tranche against the state guarantee is expected before September-end.

IL&FS Tamil Nadu Power Company operates a 1,200 MW imported coal-based plant in Cuddalore. Around Rs 10,600 crore has been invested in the project, financed by Rs 6,080 crore of loans from public sector banks and Rs 4,560 crore in equity by IL&FS Energy Development, a group subsidiary.

TPCIL was taken for insolvency proceedings by SBI and other public sector banks in September 2018 on technical reasons as the lenders expected the company to default on its dues.

“Initially the lenders looked at the option of selling the plant to NTPC or Neyveli Lignite but that did not work out, after which the lenders thought of restructuring the loan and look at selling the plant after two or three years,” sources said.