Adani, JSW, Vedanta Join Intense Bidding for Rare Hydro Power Asset! Bids Soar Past Rs 3000 Crore!

Nine Firms Vie for GVK Energy's Alaknanda Hydropower Plant

A competitive bidding process is underway for GVK Energy's 330 MW Alaknanda hydropower plant, with nine major Indian companies submitting formal offers. The operational asset, featuring a long-term power purchase agreement (PPA), has attracted significant interest despite the company's substantial debt burden.

Intense Bidding Competition

• The list of potential buyers includes some of India's biggest names in the power and commodities sectors.
• Notable bidders are Adani Power Limited, JSW Energy Limited, and Vedanta Group.
• Other interested parties include Jindal Power Limited, Torrent Power Limited, Sarda Energy and Minerals, Purvah Green Power Private Limited (part of RP Sanjiv Goenka Group), Orissa Metaliks Private Limited, and Inox GFL Group.

Financial Stakes High

• Bids submitted for the GVK Energy subsidiary, Alaknanda Hydro Power, are reportedly in the range of Rs 3,000 crore to Rs 4,000 crore.
• However, the plant and its parent company owe creditors a total of Rs 11,187 crore in direct and indirect exposure through corporate guarantees.

Key Lenders and Creditors

• The resolution process involves complex negotiations with various lenders.
• Phoenix ARC is the sole secured creditor, with an exposure of Rs 1,351 crore, having taken over loans from Edelweiss Finance.
• The majority of debt, approximately Rs 9,837 crore (88% of total admitted claims), is held by unsecured creditors, primarily banks like IDBI and other financial institutions.
• Two Kotak entities, Pheonix ARC and funds from Kotak Alternate Asset Managers, are also mentioned as secured lenders with direct exposure.

Strategic Asset Value

• Alaknanda Hydro Power commenced commercial operations in 2015.
• It operates under a 30-year PPA with Uttar Pradesh Power Corporation Limited, supplying 88% of its generated power until 2045.
• The cost to build a new hydropower plant today is estimated between Rs 4,300 crore and Rs 5,300 crore, making an operational asset with an existing PPA highly valuable.

Challenges in Resolution

• The resolution process is complicated by the significant portion of unsecured creditors.
• Any offer must gain approval from these majority owners of the debt, despite their lower position in the recovery waterfall.
• Resolution Professional Venkata Chalam Varanasi stated he could not comment on the confidential bid details.

Impact

• This acquisition could significantly bolster the operational capacity and renewable energy portfolio of the winning bidder, potentially impacting their stock price and market share.
• The resolution of GVK Energy's debt will determine the recovery for its creditors, influencing financial institutions and asset reconstruction companies involved.
• The competition highlights continued investor interest in operational renewable energy assets in India.
• Impact Rating: 7

Difficult Terms Explained

• PPA (Power Purchase Agreement): A contract between a power generator and a buyer (like a utility company) that specifies the terms of electricity sale, including price, duration, and quantity.
• Corporate Guarantees: A promise by one company (the guarantor) to pay a debt or fulfill an obligation if the primary borrower or obligor defaults.
• Resolution Professional: An insolvency professional appointed to manage the resolution process of a company undergoing insolvency or bankruptcy proceedings.
• Secured Creditors: Lenders whose loans are backed by specific assets (collateral) of the borrower. They have a higher priority in recovery if the borrower defaults.
• Unsecured Creditors: Lenders whose loans are not backed by specific collateral. They have a lower priority in recovery.
• ARC (Asset Reconstruction Company): A company that buys non-performing assets (NPAs) or bad debts from financial institutions, often at a discount, to recover the money.
• Commercial Operation Date: The date from which a power plant officially starts generating and selling electricity.