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Jinxed Dabhol Power Plant May Trip Again

Ratnagiri Gas, which owes `8,500 crore to lenders, may default on its next payment; co is hoping that MSEDCL will pay up some dues to bail it out

History may repeat itself at the jinxed Dabhol plant that was set up and then mothballed by Enron after a billing dispute. The fight over payments has erupted again, eight years after lenders and state energy firms revived the troubled project. Like it happened with Enron, the firm’s new avatar, the Ratnagiri Gas and Power (RGPPL), is also locked in a fierce dispute with a distribution utility of Maharashtra, which buys almost all the power generated at Dabhol.

The 1,950-MW plant has hardly generated any electricity for three months. It came perilously close to defaulting and being declared a non-performing asset (NPA), and may not be able to pay salaries after a few months, sources said.

It owes Rs 8,500 crore to lenders including IDBI Bank, ICICI Bank, SBI and Canara Bank. NTPC and GAIL, both listed PSUs that hold 33% each in the company are worried that the default may reflect on their financials too. The only saving grace is the LNG terminal, which is working well.

RGPPL has to pay Rs 250 crore due in three installments by March and was struggling to even arrange Rs 50 crore that is due by January-end. In December, IDBI, that leads the consortium of lenders, complained to the central power ministry that the Maharashtra State Electricity Distribution (MSEDCL) had dues of more than Rs 1,003 crore towards RGPPL, although the utility rubbishes the claim.

The Dabhol plant is facing a serious crisis as gas supply from Reliance Industries has stopped. The company managed to pay the installment of Rs 127 crore just a couple of days before the December 31 deadline, after which the loans would become NPAs.

The company did not respond to emailed queries but an executive, who did not want to be identified, said that time is running out. “We have a total repayment of Rs 250 crore in the next three months, but we have no resources to finance it. With the cash that we have, we wouldn’t be able to manage our operation and maintenance cost for more than 4-6 months.

There is a possibility of a default unless we get financial support from government or some other source,” the executive said. “We don’t even have enough cash to sustain operations and pay salaries beyond March. We have struggled to make sure we do not default so far, but it is very likely that we may default now if we don’t get financial aid,” a senior executive from RGPPL said on condition of anonymity.

With gas supply dwindling from Reliance’s KG-D6 fields, the only hope for the project was costly, imported liquefied natural gas (LNG). However, the state’s utility was not ready to buy the expensive electricity so produced. To service its debt, the plant needs to operate at 68% capacity, which requires 6.5 mmscmd of gas.

The utility has a different perspective. Power produced from costly imported gas would cost more than Rs 7 per unit, which the state cannot afford. Its power purchase agreement requires the generator to obtain the utility’s consent for switching to LNG. It says that it doesn’t owe any money to RGPPL as an amount of Rs 436.78 crore April-September has already been paid in parts. “As such, nothing is overdue as on date,” the company wrote to RGPPL on December 31 in a letter.

It also said that the threat of being classified as NPA and the erosion of equity is due to non-availability of gas and all stakeholders including the central government should make efforts to supply gas to the plant on a priority to make it viable.

But for the Dabhol plant, the situation is desperate. “It’s a do or die situation. We are seeking support from Union power ministry, Maharashtra government and even economic affairs secretary to help us out of this situation. Even if MSEDCL were to pay a part of the amount they owed us, it will be enough to keep us afloat for sometime,” a director on RGPPL’s board said.

“The government is considering making some gas available to the project at the administered price so that at least 50% of the capacity can be utilised. We have comfort that this proposal is moving and something positive may come out of it,” the RGPPL director said. Sources close to the development said that the government is working on diverting around 4.2 mmscmd gas from non-core sectors to the power plant so that it can operate, albeit at a lower capacity, until such time that Reliance Industries resumes gas supply. It may help the project get a fresh lease of life, but the process may take a few months while the company is in dire need of cash, company sources said.

“Only a one-time bailout of a project like RGPPL is not enough. The government needs to sit with all stakeholders and come up with a comprehensive sustainable solution for gas based projects. With domestic gas heading to $10 and imported at $15-18, it is an unviable proposition to generate power that is so expensive,” said Ashok Khurana, director general of Association of Power Producers.

The project ran into trouble after promoter Enron declared itself bankrupt in 2001. In 2005, it was taken over and revived by RGPPL, a company owned by the Government of India. GAIL and NTPC are the biggest shareholders, with 32.86% each, while the Maharashtra government owns 17.41% and its lenders 16.87%. RGPPL reported loss of Rs 1,156 crore in 2012-13 as it generated 9,000 million units less than its target.

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