In a bid to recover bad loans, the country’s largest lender State Bank of India (SBI) has filed an application against East Coast Energy Pvt Ltd (ECEPL) in the National Company Law Tribunal (NCLT). ECEPL is an independent energy producer based in Andhra Pradesh. The company is currently suffering from project execution delays after facing funding constraints.
The company has defaulted on loans valued over Rs.5,000 crore to multiple lenders including Power Finance Corporation (PFC). The application by SBI asked the tribunal to declare ECEPL as bankrupt and initiate bankruptcy proceedings under the Insolvency and Bankruptcy Code of 2016.
The power company has obtained a loan of Rs.750 crore from SBI. The bank is now seeking Rs.1,000 crore along with interests and other charges. PFC has filed a separate application with the NCLT to recover its Rs.1,400 crore loan from NCLT.
ECEPL’s earlier venture on setting up a 2,600 MW power plant in Srikakulam faced huge hurdles owing to opposition from the local people. This venture resulted in huge delays in terms of execution of the power plant.
Various delays also caused a lot of funding shortage for the company, and this resulted in lack of activity over the past two years in the company’s core sites. Following these hurdles, many members including some from the top management have left the company already.
If bankruptcy proceedings were initiated, the company’s promoters would lose a lot of money. As per the Code, the bankruptcy proceedings will typically involve selling off the assets of the company and using the proceeds to pay off the loan.
Singapore-based infrastructure firm Asian Genco is the main promoter of East Coast Energy. Some of the other stakeholders in the company include Power Trading Corporation (PTC), Morgan Stanley, Goldman Sachs, etc.
While the company has obtained clearance for construction, it faced a lot of hurdles in terms of execution. Difference among the consortium of lenders is also said to be the main reason behind the ECEPL’s troubles.