Bengaluru-based infrastructure conglomerate GMR Group is in advanced stages of refinancing a `4,500 crore loan for its Kamalanga power project in Odisha under the 5/25 scheme, said Madhu Terdal, chief financial officer for the group.
The 5/25 refinancing scheme, introduced by the Reserve Bank of India (RBI) in July 2014, helps infrastructure firms borrow for tenures matching the life cycle of projects. The scheme, initially intended for new projects, was extended to existing projects of `500 crore and above in December.
The 1,400 megawatts (4×350 MW) Kamalanga plant in Dhenkanal district is run by GMR Kamalanga Energy Ltd. Its unit 1 was commissioned in April 2013, unit 2 in November 2013 and unit 3 in March 2014. The Union power ministry has granted it the mega power project status.
“GMR is mulling to refinance the entire loan under the flexible finance sheme of 5/25 with the existing lenders,” Terdal said. He said the idea is to bring down the high-cost debt and obtain additional finance to repay loans.
In March, GMR Infrastructure Ltd, the flagship firm of GMR Group, had a consolidated debt of `42,201.56 crore.
“Under the flexible financing scheme of 5/25, GMR Kamalanga Energy will get a moratorium of two years. Besides, the repayment years would be extended to 19 years from current 12 years,” Terdal said.
An executive director of a public sector bank which has lent to GMR said the group has not received the Central Electricity Regulatory Commission’s permission to raise power tariffs for the Kamalanga project, which has led to losses and increased expenditure.
“The parent firm is pumping in money, so they are able to pay the critical amount; but the stress is visible to everyone. This is why they need refinancing,” the banker said on condition on anonymity as he is not allowed to be quoted in the press.
The banker added that the lending consortium had also approved an additional funding of `400 crore as the company needed to manage some cash flow mismatches.
Earlier this year, the GMR Group refinanced a `3,000 crore loan for EMCO Energy Ltd by bringing a fresh lender—State Bank of India (SBI).
EMCO Energy is a 600MW coal-based power plant in Warora in Maharashtra.
The EMCO loan was refinanced under the erstwhile refinancing norms and SBI took the single largest exposure of `1,250 crore.
In a note to investors, GMR Group in May said that the revenue of the energy segment of the group grew 33% in 2014-15 and Ebitda (earnings before interest, taxes, depreciation and amortization) rose from `28 crore to `222 crore on account of improved performance of EMCO and Kamalanga plants, which were fully operational during last year.
GMR Kamalanga Energy has also signed a short-term power purchase agreement with Punjab to supply power during the monsoon months.
GMR is not alone in seeking the 5/25 route for refinancing loans. On 5 June, the Kolkata-based Bhushan Steel Ltd informed the stock exchanges that the joint lenders’ forum (JLF) discussing the means to manage the company’s `35,000 crore debt had agreed to refinance it under the 5/25 scheme. Bhushan Steel is now in the process of getting individual approvals from the banks in the consortium.
Adani Power Ltd, Jaiprakash Power Ventures Ltd and Jaypee Infratech Ltd are also reported to be discussing refinancing options in their respective projects.
However, experts are not convinced.
“Infrastructure projects have always needed long-term sources of funding. In that sense, the 5/25 scheme is very good for infrastructure companies. But there is also a sense that this is being used to protect infrastructure companies that still have the ability to make interest payments from becoming NPAs (non-performing assets) and allow them extensions on loan repayments,” said Abizer Diwanji, partner and national leader, financial services, at EY, a consultancy firm formerly known as Ernst & Young.
According to a Crisil Ratings report in May, the 5/25 scheme may be misused to mask the true state of stressed assets in the economy. “Structuring under 5/25 (~`80,000 crore in FY16) can mask true picture of asset quality,” said the rating agency, adding it expects 15% of the loans to turn bad. Banks have in the past struggled with upgrading restructured loans. About 40% of loans restructured in 2011-14 turned bad, noted Crisil.
Source: Mint; 28 June 2015