Tata Power, through Resurgent Power Ventures Pte Limited, has expanded its transmission business by acquiring a 100 per cent stake in NRSS XXXVI Transmission Limited. Resurgent Power is a joint venture based out of Singapore, 26 per cent of which is held by Tata Power through its wholly owned Singapore-based subsidiary. The remaining 74 per cent is held by ICICI Bank and other investors such as Power Platform Limited and the Kuwait Investment Authority. The recently acquired asset fits in the company’s overall strategy and highlights Tata Power’s renewed interest in the expansion of its transmission business.
Details of the acquisition
In November 2021, PTC India Financial Services Limited (PFS), NRSS XXXVI’s lender, selected Resurgent as nominee to acquire a 100 per cent shareholding in NRSS XXXVI. The transaction is part of the stressed transmission asset resolution process initiated by PFS through competitive bidding.
NRSS XXXVI was incorporated as a special purpose vehicle to establish and operate the transmission system for the northern region. It is a wholly owned subsidiary of Essel Infra Projects Limited, which won the bid to strengthen the transmission system in the northern region across the states of Rajasthan, Haryana and Uttarakhand along with LILO of Sikar-Neemrana 400 kV D/C at Babai, Rajasthan, on a build-own-operate-maintain basis. NRSS XXXVI has three elements consisting of a total transmission line length of 153 km. Of this, a small portion of 1.5 km and two bays of 400 kV have been completed while work on the balance 151 km of lines and four bays of 400 kV is under way.
PFS sanctioned a loan of Rs 3.06 billion to NRSS XXXVI after it was awarded the project through competitive bidding initiated by the Ministry of Power through bid process coordinator REC Transmission Power Company Limited. As the sole lender, PFS disbursed around Rs 2.07 billion out of the sanctioned loan amount. On account of liquidity issues in the promoter group, the account began to exhibit signs of stress in the second quarter of 2019-20 and later on became a non-performing asset.
PFS has selected Resurgent as the lender’s nominee to acquire 100 per cent shareholding by exercising its right to appoint a nominee under the Substitution Rights of Lenders as per the transmission service agreement. The process has concluded and the letter of intent has been issued by PFS to Resurgent. However, subsequent regulatory approval is under process. Resurgent will invest equity and raise debt in NRSS XXXVI at a total enterprise value of around Rs 4.7 billion to implement and commission the above projects and turn around the asset. In the process, PFS is expected to receive a resolution amount close to the book value of the account.
The road ahead
In an official release, Dr Praveer Sinha, chief executive officer and managing director, Tata Power, said, “In line with our aspiration to expand our transmission business, Tata Power through Resurgent Power had bid for acquiring a 100 per cent stake in the NRSS XXXVI transmission project. We are delighted to have been selected as the successful bidder by PFS. This asset fits in our overall strategy to maximise shareholder value through growth and sound investments. After a successful turnaround of the 1,980 MW Prayagraj Power project, this asset will add further value to the Resurgent portfolio.”
In addition to the acquisition of NRSS XXXVI, Resurgent Power Ventures has emerged as the highest bidder for acquiring South East UP Power Transmission Company Limited (SEUPPTCL), which is undergoing insolvency, with a Rs 30 billion offer. Other bidders in the fray included Adani Power, Sterlite Power, Power Grid Corporation of India Limited and REC Power Development and Consultancy Limited. SEUPPTCL was admitted for insolvency and bankruptcy code proceedings by the National Company Law Tribunal (NCLT) on the lenders’ request last year after owner Grupo Isolux Corsan filed for bankruptcy in Spain. The lenders, which include REC Limited, the Power Finance Corporation, Bank of India and Axis Bank, stand to recover 100 per cent of dues.
Overall, due to crowding of bidders leading to unviable pricing, Tata Power had so far deferred its plans in the transmission space. However, upon revisiting the current conditions in the transmission space, marked by consolidation seen in the recent past and a more level playing field for large players, the company is looking forward to greater participation in this space. Besides, in partnership with its group company Tata Projects, Tata Power has a significant competitive edge in the transmission business.
Going forward, Tata Power is expected to have a good portfolio of transmission assets by pursuing both greenfield and stressed projects.