Business Standard reported that Essar Power is in talks with lenders to re-structure the principal debt of its coastal Gujarat power project in Salaya.

Special purpose vehicle Essar Power Gujarat is said to be seeking a longer tenure to repay the principal. The interest payments are being done regularly. The debt is around INR 3,600 crore. State Bank of India is one of the major lenders to the company.

The 1,200 MW coal based Salaya-I is facing a problem haunting all projects drawing coal from Indonesia.

A senior executive of a public sector bank said that “The pricing of coal has become more market-based, and that has changed the financial profile of the project, as the cost of fuel has gone up. That has led to inadequate coal supply to the unit.”

In response to an email query, Essar Power said the unit is running at 100% plant load factor. The company said that “We confirm that we are meeting all our debt commitments according to schedule, without commenting on the repayment schedule.”

The power plant has grappling with increased international coal prices, and a change in Indonesian regulations for coal import, like many other coastal power plants in India. The new regulations have altered the plans of companies that have bought coal assets in Indonesia with the hope of keeping coal costs under control in the long term. According to the changed regulation, coal exports from Indonesia are benchmarked to international prices.

Essar had acquired the Aeries mine, at East Kalimantan, in 2010 for USD 118 million. The coal block is known to have 64 million tonnes of mineable reserves, and an annual potential production of four million tonnes. The reserves were seen suitable for the requirements of Salaya-I in Gujarat. Essar has started construction of supporting road and port infrastructure, and the coal is expected to become available in 9 to 12 months.

Source - Business Standard

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