Coastal Energen Developers Reaffirm Commitment to Single Settlement with Lenders

Promoters of troubled power company Coastal Energen have reiterated their earlier settlement proposal of ₹5,847 crore, significantly higher than Adani’s offer of ₹3,440 crore.

In a statement, the company noted that the total financial commitment of the promoters towards the project stands at ₹7,097 crore, including ₹5,847 crore offered as settlement to the banks (with ₹2,200 crore already settled) and ₹1,259 crore in equity invested incrementally since 2006.

The company, which has been in bankruptcy proceedings since February 2022, stressed that it was an 18-year investment journey, with the promoters having committed to a One-Time Fair Settlement (OTS) with the consortium of banks. They are aiming for a fair and equitable process to manage and rebuild the Thoothukudi power plant in Tamil Nadu.

In February 2022, the State Bank of India (SBI) and a 13-member consortium of banks initiated NCLT proceedings against Coastal Energen over loan defaults totalling ₹6,296 crore. This amount had increased from ₹3,323 crore due to a 48-month bank funding delay amounting to ₹2,600 crore, retrospective taxes of ₹470 crore and an increase in scope of ₹400 crore due to the increase in the project capacity from 1,080 MW to 1,200 MW. In addition, ₹1,600 crore of working capital assessed by the banks was not made available to the company.

Potential divergences

Recent discussions have highlighted potential discrepancies in the Expression of Interest (EOI) process and the unusual urgency demonstrated by the resolution professional in issuing a Letter of Intent (LOI) to Dicky Alternative Investments Trust (DAIT) – Adani Power Consortium.

While continuing its engagement with the promoters of Coastal Energen, the Committee of Creditors (CoC) invited interested parties to submit an Expression of Interest through the Corporate Insolvency Resolution Process (CIRP) on February 10, 2023. The interested parties included Jindal Steel Power, Sherisha Technologies and Dicky Alternative Investment Trust (DIAT). Adani Power’s bid was initially not shortlisted and was subsequently rejected in a subsequent submission on July 29, 2023.

However, in October 2023, Adani returned as a joint venture partner of DAIT to make a backdoor entry as a consortium partner, despite DAIT not meeting the financial and experience criteria set by the CoC. This raises serious questions about the compliance of the DAIT-Adani consortium bids with the Insolvency and Bankruptcy Code (IBC) guidelines, the company said.

In October 2023, Mutiara & Precious Energy Holdings, the existing promoters of Coastal Energen, offered a total settlement of ₹5,847 crore, including 15% equity, while Adani Power emerged as the top bidder to buy the company.

However, lenders have approved Adani’s Rs 3,500-crore resolution plan, which was pending approval by the NCLT. In response, Coastal Energen’s promoters filed a petition in the NCLT against the resolution plan submitted by the consortium of Dickey Alternate Investment Trust (DAIT) and Adani Power.