Stressed Asset Deal

Vedanta acquires Athena Chhattisgarh Power

In a key recent development in the stressed asset space, mining major Vedanta Limited has acquired Athena Chhattisgarh Power Limited for Rs 5.65 billion to meet its captive power requirements. Athena Chhattisgarh Power currently has a 1,200 MW coal-based power plant located at Jhanjgir Champa district in Chhattisgarh. The project has two partially complete power units of 600 MW each. Vedanta reportedly outbid Jindal Power Limited (JPL) for the acquisition.

In a regulatory filing announcing the acquisition, Vedanta stated, “The acquisition is expected to fulfil the power requirement for Vedanta’s aluminium business and through vertical integration, add synergies by providing a cost advantage pertaining to power consumption.”

Power Line takes a look at Vedanta’s recent acquisition as well as other developments in the stressed asset space…

Project background and deal details

Athena Chhattisgarh Power is a special purpose vehicle promoted by Athena Energy Ventures Private Limited, a joint venture among Athena Projects Private Limited, PTC India Limited, and Infrastructure Development Finance Company Limited.

The plant is located at a distance of about 80 km from BALCO and about 180 km from Jharsuguda. It is well connected to national highways and railway stations and is also located in close proximity to its water source, the Mahanadi river, and its fuel source.

Units 1 and 2 (600 MW each) of the power plant are 80 per cent and 30 per cent complete respectively and therefore, the plant has never been operational. The coal requirement, estimated at 5.26 million tonnes per annum, can be procured from the Fatehpur East block of South Eastern Coalfields Limited’s mines.

Athena was admitted under the corporate insolvency resolution process in May 2019. The National Company Law Tribunal (NCLT), Hyderabad bench, directed initiation of the liquidation process of the company in May 2021, after the requisite majority of lenders rejected the plan submitted by Vedanta offering staggered payment of Rs 4 billion over a period of five years.

The tribunal ordered the sale of the thermal company as an ongoing process. The auction process started in December 2021 with a reserve price of Rs 15.03 billion, as per the first auction notice. However, since the liquidator did not receive any bids in the initial rounds, it was lowered with every successive auction. Both Vedanta and JPL were eyeing Athena Chhattisgarh for captive purposes, given the shortage of power supply. However, Vedanta emerged as the highest bidder, outbidding JPL. Importantly, Vedanta’s bid of Rs 5.65 billion is 16 per cent higher than the Rs 4.85 billion reserve price set for the auction.

The acquisition is likely to be completed during 2022-23 and the consideration will be in the form of cash. RBSA Advisors acted as the transaction advisers to the resolution professional.

“The acquisition of this stressed power plant augurs well for the revival of private sector interest in the power sector, which has been plagued with challenges including discom stress, coal availability issues and lower power tariffs,” stated Mitali Shah, managing director, RBSA Advisors.

Conclusion

Stressed asset deals are expected to pick up pace going forward. Analysts note that interest in distressed power companies has increased recently due to power supply shortages and the government’s nudge to state-owned banks to finance them, and this trend is likely to continue in the near term.

Nikita Gupta

 

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