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Lanco Infratech’s effort to rescue its Amarkantak power project in Madhya Pradesh might go nowhere, with insolvency proceedings initiated by one of its lenders, IDBI Bank.
The approval of the National Company Law Tribunal is required for any debt restructuring or bailout for companies under an insolvency scanner. For the second phase (2x660 Mw) of the project (units three and four), Lanco had requested a cost overrun facility from government-owned Power Finance Corporation (PFC). The latter is lead lender of the consortium that gave loans totalling Rs 10,000 crore for the project.
PFC executives say they approved it but this might be futile, as IDBI Bank has initiated insolvency proceedings. “The project has been under rough weather. Wages are not being paid, people have been fired and the company is devoid of any working capital. They got approval for cost overruns before IDBI Bank filed for insolvency,” said a senior executive.
PFC Chairman Rajeev Sharma declined to comment on the matter. Sources said PFC was closely following the developments. “As the proceedings begin, we are looking at our loan amount and the latest cost-overrun approval getting stuck,” said an executive, requesting anonymity. “Lanco has consolidated debt of Rs 55,000 crore and Rs 11,000 crore is under insolvency proceedings,” said the company’s spokesperson.
Sources say close to 200 people have resigned due to non-payment of wages. Responding through email to Business Standard, Lanco said, “Not true. Amarkantak employees are paid their wages on time.”
Amarkantak’s phase-1 of 600 Mw is operational but the second phase of 1,320 Mw is facing operational and financial issues, being unable to find buyers for power supply. The company, in an e-mailed reply, said a fuel supply agreement for phase-2 was available, for linkage coal from South Eastern Coalfields. “We are in the process of obtaining power purchase agreements,” it said.
Recently, several companies, which are suppliers of varied equipment and services to Lanco, alleged it had encashed their bank guarantees (BGs), “trying to take out whatever money it can get before insolvency is declared”, said one.
Denying any relation with insolvency, Lanco said it recently encashed sub-suppliers’ BGs worth Rs 15.82 crore.
“At present, there are BGs worth approximately Rs 470 crore submitted by sub-suppliers to Lanco and valid as on date, in respect of various EPC (engineering procurement and construction) projects. BGs’ review and encashment follow a continuous and due process of review, based on sub-suppliers and project. The recently encashed sub-suppliers' BGs are either advances already given to these sub-suppliers or are outstanding for a period as high as 18 months,” said the Lanco spokesperson.
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