Torrent Power is seeking relief via the 5/25 scheme for one of its power projects for which banks have lent it approximately Rs 1,300 crore, according to three senior bankers familiar with the development.
The Ahmedabad-based firm has five power generation plants — all located in Gujarat. It is, however, not immediately clear for which of the projects the company wants the refinance.
While Torrent’s net profit plunged almost 73% to Rs 105.2 crore in FY14, despite revenues rising nearly 5% to Rs 8.681 crore, the FY15 numbers were better with the topline registering a growth of nearly 15% to Rs 9,986.9 crore and net profits rising nearly three-fold to Rs 359.6 crore, according to Bloomberg data.
The company has a total debt of R8,365 crore as on March 31, 2015. A senior bank official said Torrent’s cash flows are not stressed; however, the refinancing arrangement will enable it to free up resources that can be re-invested in the business.The company declined to comment for this story.
The five plants, including one solar and one wind power unit, have been commissioned. Two of the units — 1,530-MW SUGEN mega power plant near Surat and 1,200-MW DGEN mega power plant at Dahej SEZ, near Bharuch — are gas-based plants.
The SUGEN plant consists of four units for which gas was to be sourced from the KG basin fields of Reliance, PMT Gas fields and RasGas, Qatar. There are currently no supplies from KG basin and reduced supplies from PMT, according to Torrent’s investor presentation issued at the end of FY15.
Analysts say its operational power plants are absorbing the entire fixed cost amounting to R730 crore related to the stranded SUGEN and Dahej power plants.
While the SUGEN plant is operated by Torrent Power itself, the DGEN plant is operated by Torrent Energy (TEL) — a wholly owned subsidiary. It was commissioned in November 2014. The original project cost was estimated to be Rs 5,724 crore, but TEL said that it expected the costs to climb to Rs 6,503 crore on completion, “due to factors beyond the control of the company, including increase in forex rates, commissioning fuel, etc”. The project was developed with Siemens India and its parent company, Siemens AG, and delay in completion entitled TEL to damages amounting to Rs 506 crore.
For DGEN, the company had been sanctioned term loans of Rs 4,100 crore by a consortium of lenders, led by State Bank of India.
The SUGEN plant was initially set up as a 1,147.5-MW gas-based power plant and later an expansion of 382.5 MW (named UNOSUGEN) was executed, with the expanded unit commissioned in April 2013. While the plants had an availability factor of about 99%, “its capacity remained unutilised throughout (FY14) owing to non-availability of domestic gas and reluctance of beneficiaries to off-take power based on expensive LNG”, says an extract of the company’s FY14 annual report.
However, the new gas import policy spells good news for both the plants since its cost of generation is among the lowest in the industry.
** WHAT IS the 5/25 SCHEME?
* The 5/25 scheme allows banks to extend long-term loans of 20-25 years to match the cash flow of projects, while refinancing them every five or seven years.
**TORRENT seeks to free up cash
* Torrent Power had a total debt of R8,365 crore as on March 31, 2015. A senior bank official said Torrent’s cash flows are not stressed; however, the refinancing arrangement will enable it to free up resources that can be re-invested in the business
On May 18, Torrent Power informed the exchanges that SUGEN, UNOSUGEN and DGEN were allocated gas for four months from June 1 to September 30. While SUGEN was categorised as a plant receiving some domestic gas and operating at lower PLF; UNOSUGEN and DGEN were classified as stranded projects.
“The award will enable SUGEN to run at 35% PLF from the base level of approximately 25.60% PLF , while it will enable UNOSUGEN and DGEN projects to run at 35% PLF,” Torrent Power said.
The company is also looking to amalgamate TEL and another subsidiary, Torrent Cables, into the parent.
Credit ratings agency Crisil said in a March 17 note it “ understands that lenders’ approval for re-organisation of the consolidated long-term financing arrangements with appropriate moratorium and longer repayment tenure (by around 15 years) is critical for the success of the scheme of amalgamation”.