TIDMKSK
RNS Number : 8473J
KSK Power Ventur PLC
05 April 2018
5(th) April 2018
KSK Power Ventur plc
("KSK", the "Company" or the "Group")
Business Update
KSK Power Ventur plc (KSK.L), the power project company listed
on the London Stock Exchange, with interests in multiple power
plants across India through its subsidiary KSK Energy Ventures
Limited, the equity shares of which are listed and traded on the
National Stock Exchange of India Limited ("NSE") and the BSE
Limited ("BSE") provides the following business update:
KSK Mahanadi has now executed the Fuel Supply Agreements under
the "SHAKTI" (Scheme for Harnessing and Allocating Koyala (Coal)
Transparently in India). Coal auction and coal supplies have
recently commenced from the Mahanadi Coal Fields area. Supplies
from the South Eastern Coal Fields are expected shortly, providing
the much required support on long term coal linkage supplies. The
Group continues its efforts to secure necessary reliefs for revival
and realisation of intrinsic value of the Sai Wardha and VS Lignite
projects
During February 2018 the Indian central Bank (Reserve Bank of
India), notified a revised framework for resolution of distressed
assets, harmonised with other regulations and this stipulates a
strict time bound resolution of assets with large debt exposure.
The action plan includes, exploring options such as the sale of
debt exposure by banks to other investors, change in ownership or
restructuring.
This undermines the historical efforts of the Group to achieve /
conclude further strategic funding and equity collaboration at each
of the asset levels as well as anticipated reduction of debt
leverage at various asset holding companies of the Group, based
upon fund realisations from such equity stake divestment at the
project companies. Resultantly, the balance has tilted in favour of
the project lenders for appropriate resolution plan approvals, at
each of the project companies, impacting the existing sponsor's
continuation alongside the new investors in resolving the stress as
well as the business challenges and participation in the value
creation ahead.
For instance, at KSK Mahanadi, where approx $ 0.5 billion of
equity and $ 3 billion of debt has been invested over the years,
operational output currently is only 1800 MW; value creation is
therefore contingent upon the lenders agreeing to debt
restructuring, in terms of principal, coupon and tenor, to a
position where a RP4 rating of the residual debt through
independent credit evaluations can be achieved, in accordance with
the revised framework notified by Reserve Bank of India.
KSK Mahanadi
At a stabilised 85% PLF and linkage coal supplies secured for
entire capacity, the potential of substantial revenue and EBITDA
for the 2400 MW of KSK Mahanadi project subsists making it
attractive. However, the new regulations and resolution framework
expose the equity of the Group to any decision of the Project
lenders at KSK Mahanadi to reorganise their $ 3 billion of debt
that includes over $ 1+ billion of accumulated interest during
construction over the years. Resultantly, KSK Mahanadi has unpaid
EPC creditors and until further funding for capital expenditure is
resolved there are likely to be delays associated with developing
the fourth 600 MW unit.
Further, it is estimated that, while the Central Electricity
Regulatory Commission has been hearing the petitions concerning KSK
Mahanadi's claim under change in law provisions under PPA as well
as central Government directives on coal supplies, the delay being
experienced in their realisation coupled with the challenges of
providing extended credit to the Discoms for the power sales, has
led to much higher working capital and funding requirements.
Therefore, the Group expects to have to engage actively with
Private Equity and India focussed Infrastructure / Special
Situation Funds who could partner with the Group to address the
emerging situation and financing requirements. Further, such
discussions require evaluating a number of potential alternative
solutions to address the current situation at KMPCL with its
lenders.
New Business Strategy
These developments require a different approach to be pursued at
the Group to address the challenges and to continue to seek the
restoration of economic value for the Group and its shareholders.
The Directors are focussed on convincing various Indian banks and
institutions that have funded the Group's holding companies to
continue supporting the group in these efforts to turnaround the
various assets, failing which the revised framework could impair
the continued ability of such holding companies.
This effort could result in shareholder dilution through the
capitalisation of debt as a result of a business restructuring as
well as include a change of management driven by the lenders at the
respective operating projects. In the process of such
reorganisation driven forward by the lenders, substantial risk of
loss of equity value exists.
Board Reorganisation
Given the various significant developments within the Indian
environment, the Company's Board is being reorganised to address
these new business challenges. This includes the stepping down of
three of the existing Non-executive Directors and the appointment
of new Non-executive Directors with experience and expertise in
Indian government and banking matters as well as international
investors, and additionally to assist with the pursuit of requisite
collaborations as may be required.
In this regard, the Board wishes to express its thanks and
appreciation to Mr. S.R. Iyer, Mr. Vladimir Dlouhy and Mr. Keith
Henry for their valuable association and contribution to the
Company over the years. The Board is also pleased to announce that
Mr. Jonathan Blanshard Keeling and Mr. Kambala Bapi Raju have
agreed to join the Company's Board as Non-Executive Directors
subject to usual regulatory searches and is looking forward to
their valued experience and expertise in assisting the company to
navigate through these challenging times. Additionally, the company
is currently in advanced discussions with, another potential
Non-Executive Director, with extensive background and experience at
senior management level of Indian banking regulator and / or
government level, to assist the company and the board in its
stakeholder representation and obtaining any possible regulatory
forbearance / dispensation as may be required to address these
various new developments.
Outlook
Therefore, a continued engagement with project stakeholders is
envisaged to pursue all reasonable efforts to address the
situation, with the ultimate objective to produce sustainable power
generation on the best possible commercial terms. Majority of these
are external issues and not directly within the Company's control
to resolve.
Against this current difficult Indian policy environment, the
Company continues to work tirelessly with the Government, the
authorities at all levels and other project stakeholders seeking
their support to address these issues in the best manner possible.
However, actual achievement in these situations is contingent upon
a number of factors, many of them outside the control of the
Company.
Finally, this performance would not have been possible without
the continued support of our shareholders, who have enabled us to
pursue business opportunities against a background of challenging
market conditions across the Indian power sector.
For further information, please contact:
KSK Power Ventur plc
Mr. S. Kishore, Executive Director, +91 40 23559922
Arden Partners plc
Steve Douglas / Paul Shackleton +44 (0)20 7614 5900
This information is provided by RNS
The company news service from the London Stock Exchange
END
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