Promises Broken, Future Bleak: Coastal Energen Suffers as Banking System Fails Established Power Player

Delhi, 21st February, 2024

Coastal Energen Private Limited (CEPL) faces significant challenges that threaten its operation and ability to serve the state’s power needs. These include non-disbursement of crucial working capital by banks, increased construction costs, delayed loan approvals, retrospective taxes, and the lack of a power purchase agreement for its second unit.

A consortium led by State Bank of India had provided loans to CEPL to establish a 1,200-megawatt thermal power project in Tamil Nadu. Due to delays in fund and a cost overrun, the project cost shot up to Rs 7,870 crore, with a debt of Rs 6,296 crore and equity of Rs 1,574 crore. The original cost was Rs 4,297 crore, with a debt of Rs 3,323 crore.Mutiara & Precious Energy Holdings, the existing promoters of Coastal Energen Pvt Ltd, have already offered a total settlement of ₹5,847 crore, including 15 per cent equity.

With the above settlement offer, the Promoters of Coastal Energen are confident that the SBI-led Consortium will view the offer favourably considering an extremely attractive recovery of 82 per cent and amongst the highest in the country. Despite financial constraints, existing promoters ensured Coastal Energen was well maintained, enabling a good recovery for banks, said the company.

Of the total settlement offered, ₹2,327 crore has already been settled with the State Bank of India (SBI) Consortium, according to a statement from Coastal Energen. It also pointed out that the settlement offered by existing promoters is among the highest in the country.

Due to delays by the bank and a cost over-run, the project cost shot up to ₹7,870 crore (with debt of ₹6,296 crore and equity of ₹1,574 crore) from the original cost of ₹4,297 crore (with debt of ₹3,323 crore and equity of ₹859 crore).

The project’s Unit 1 of 600 MW is tied up with Tangedco under a 15-year Power Purchase Agreement. Unit 2 faced difficulties in getting long-term PPAs, and consequently, the company couldn’t service its obligations under the credit facilities provided by the lenders.

A consortium led by State Bank of India had provided loans to CEPL to establish a 1,200-megawatt thermal power project in Tamil Nadu.

In February 2022, the National Company Law Tribunal admitted an application by SBI against CEPL to initiate the CIRP. The company is promoted by Coal & Oil Group through Mutiara Energy Holdings Ltd., Mauritius, and Precious Energy Holdings Ltd., a Dubai-based energy conglomerate.

Despite these hurdles, Coastal has demonstrated its commitment to resolving its financial challenges. It has collected Rs.2600 crore from TANGEDCO and settled over 50% of its outstanding dues, even without access to necessary working capital. Additionally, the company secured investments totaling Rs.150 crore from its promoter and achieved an average turnover of Rs.1700 crore since 2017.

Coastal offers a One-Time Settlement (OTS) plan to its lenders, presenting a significantly better alternative than any potential liquidation outcome. The company urges the tribunal to consider its ongoing operations, its past efforts, and its commitment to securing future funding to ensure a positive resolution for all stakeholders.