Committed to OTS with lenders: Promoters of Coastal Energen

Promoters of Coastal Energen have reiterated that their earlier settlement proposal at Rs 5,847 crore is far higher than Adani’s proposal at just Rs 3,440 crore. The total financial commitment by the promoters toward the project is Rs 7,097 crore including Rs 5,847 crore offered as settlement to banks — Rs 2,200 crore already settled and Rs 1,259 crore equity progressively invested since 2006.  

A press statement issued by the promoters of Coastal Energen says that this has been an 18-year journey of investment and the promoters are committed to a fair one-time settlement (OTS) with the consortium of banks and a fair and equitable process that allows them to manage and rebuild the plant.

In February 2022, the State Bank of India (SBI) and a 13-member banking consortium had initiated NCLT proceedings against Coastal Energen due to defaults on a loan totaling Rs.6,296 crore. This amount had escalated from Rs. 3,323 crore due to a 48 month bank funding delay amounting to Rs. 2,600 crore, retrospective taxes of Rs 470 crore, and a scope increase of Rs 400 crore due to increase in capacity of the project from 1,080 MW to 1,200MW. A sum of Rs 1,600 crore of working capital assessed by banks was also not made available to the company.  

While continuing to engage with the promoters of Coastal Energen, the Committee of Creditors (COC) invited an EOI through the CIRP on the 10th February 2023. While there were interested parties like Jindal Steel Power Limited, Sherisha Technologies and Dicky Alternative Investment Trusts (DIAT), Adani Power’s bid was not shortlisted and in fact in a later submission on 29 July 23 rejected. Then in October 2023, Adani came back as a joint venture partner of DAIT to make a back door entry as a consortium partner. This was in the context of DAIT not meeting financial and experience criteria laid down by COC.

This raises serious questions about the compliance of the DAIT-Adani Consortium’s bids with IBC guidelines, says the statement by the promoters.

Financial resources backed up

A large diversified and well-respected business group with a quiet distinguished record of nation building over 50 years, the Group planned Coastal Energen to develop 1,200 MW IPP in Tuticorin, providing crucial support to industrial development in Tamil Nadu.  The project plan allowed possibility of expansion up to 4,800 MW, and many times supplies ~6% of Power needed for the State, and Power to approx. 3.5 Mn households.’

Operations During Covid 2019

Despite various challenges, the company continued to invest and operate the plant and provide power supply. During Covid, Energen continued to supply power to TANGEDCO. Most power plants, on being declared NPA, stopped operations. However, Coastal Energen continued to operate due to the tireless efforts of the promoters. This ensured that the plant did not turn out to be a scrap and gave handsome recovery of almost 82% to the lenders. 

Inclusion of Adani raises compliance concerns

Recent discussions have underscored potential discrepancies in the Expression of Interest (EOI) process and the unusual urgency shown by the Resolution professional in   issuance of a Letter of Intent (LOI) to the Dicky Alternative Investments Trust (DAIT) – Adani Power Consortium. While the matter is currently sub judice, it will be interesting to see how Hon’ble NCLT Chennai Bench is going to decide on the matter when a similar resolution plan for Rajesh Lifespaces was recently dismissed by the Hon’ble NCLT, Mumbai Bench due to non-compliance with the CIRP regulations and the discovery of material irregularities. Whether Coastal Energen will face a similar verdict based on these parameters or a different verdict will be given just because the interested party is Adani remains to be seen. Another interesting point to note or a rather co-incidence is the orders passed by IBBI on the same Resolution Professional handling the Coastal Energen matter for not following the process specified by IBC regulations in the case of Appu Hotels. We need to wait and see if IBBI will initiate some investigations in the matter of Coastal Energen’s CIRP process as done in the case of Appu Hotels to unravel the real picture.

Promoters’ commitment to home state 

Promoter’s family is working on restoring Keelakarai, a historical town in Ramnad district, TN with aspiration to make it a Model Town. They are working on Solid Waste Management, Sewage treatment, Roads, Ecotourism (Gulf of Mannar Bio Reserve), Restoration of Historical Monuments etc. Coastal Energen plant was commissioned in 2014, at the right time when the state witnessed over 3000 Mw power shortages. They are amongst the largest private and local Investor in TN State at Rs 7,870 crore.

Also See: Adani Power given backdoor entry to bidding process, claims former promoter of Coastal Energen