Adani Group’s efforts to acquire a thermal power plant that had been a key electricity supplier to Mumbai may get a boost with Reliance Power Ltd settling a loan dispute, effectively clearing a stumbling block in the deal discussions.
In a regulatory filing on Wednesday, Reliance Power said it had settled its obligation of ₹3,872.04 crore as a corporate guarantor for the debt of its former subsidiary Vidarbha Industries Power. Vidarbha Industries owns the 600 MW thermal power plant in Butibori, Nagpur that the Adani Group is looking to acquire.
On 19 August, Mint reported that Adani Power Ltd had begun talks with CFM Asset Reconstruction Co. to acquire the Butibori plant. CFM had acquired all the loans of the Butibori project for ₹1,265 crore.
Adani Group, India’s largest private thermal power producer, is negotiating a deal in the range of ₹2,400-3,000 crore to acquire the Butibori plant as it seeks to capitalise on the rising electricity demand in India.
The Butibori project had initially drawn interest from JSW Energy Ltd but the Sajjan Jindal-promoted company pulled out from the race citing valuation and operational issues, according to a person cited in the earlier Mint report.
Adani Group is keen to expand its thermal power capacity. In an August presentation, it said that the growing peak power demand in India was “accentuating the need for dispatchable capacity best served by thermal power”.
At present, both the units at the Butibori thermal plant—of 300 MW each—are shut due to unavailability of coal supply.
If the acquisition talks fructify, the project will likely resume since Adani Group already has a coal supply available for its 3.3 GW coal-based supercritical thermal power plants in Tiroda, which is about 125 km from Nagpur. The group plans to integrate its Tiroda plant with the Butibori project.
That will allow it to resume power generation at the two Butibori units and supply electricity to Mumbai and other surrounding regions, competing with Tata Power Ltd and Maharashtra State Electricity Distribution Co. Ltd.
The Tiroda plant has long-term power purchase agreements with the Maharashtra government for 3,085 MW of electricity, which can be potentially enhanced if the acquisition of the Butibori project goes through.
The Adani Group had been associated with the Butibori project even earlier.
Vidarbha Industries, while it was still under Reliance Power, had reached a power purchase agreement with Adani Electricity Mumbai Ltd that expired on 16 December 2019. Till then, the Butibori project was a key supplier of electricity to Mumbai.
This end of the agreement led to a series of repayment defaults and an arbitration dispute between Adani Group and Reliance Power. In a separate statement on Wednesday, Reliance Power said it had mutually settled this dispute with both groups withdrawing all arbitration claims against each other.
Reliance Power said it had entered into certain agreements with Adani Electricity Mumbai and Adani Energy Solutions Ltd with regards to the “settlement of disputes and withdrawal of arbitration claims against each other as mutually agreed on 17 September, 2024”.
The agreement pertained to disputes related to a breach of the terms of the share purchase agreement dated 21 December 2017 for the transfer of the Mumbai power business to Adani Energy Solutions, Reliance Power said on Wednesday.
Adani Energy Solutions added in a separate exchange filing that the two groups had “mutually agreed to settle all disputes and withdraw all claims… in connection with the share purchase agreement dated 21 December 2017”.
Reliance Power, under its settlement agreement with CFM, has pledged 100% of the shares of Vidarbha Power in favour of the asset reconstruction company. In exchange, CFM has released the corporate guarantee given by Reliance Power against the outstanding debt of Vidarbha Power, amounting to ₹3,872.04 crore.
Following this, Axis Trustee Services, as a trustee for CFM, and Axis Bank, the lender to Vidarbha Power, have invoked a share pledge and taken over the management control of Vidarbha Power, Reliance Power said in its filing.
“Vidarbha Power now ceases to be a subsidiary of Reliance Power. The company (Reliance Power) has also achieved zero debt status,” Reliance Power said, adding that following the latest agreement with CFM, the Anil Ambani entity has a consolidated net worth of ₹11,155 crore.
