Adani Group to Bag Essel's 4000 Crore Transmission Project

The Gautam Adani-led Adani Group is interested in buying a large power transmission project from debt-laden Essel group. Not just that, but the Subhash Chandra-led Essel Group is also in talks with Tata Power to sell its under-construction Warora-Kurnool transmission line in an attempt to lower debt, two people familiar with the company’s plans said. If Adani Group bags the project, then it will be a huge help to the group and its dominance in ports and airports. The talks are at an initial stage and a deal depends on various factors including valuations, state of the project and how much haircut lenders are willing to take, people familiar with the plans stated.

The project worth 4,000-crore involves laying about 941km of transmission lines across Maharashtra, Telangana and Andhra Pradesh, and building a sub-station at Warangal. The Warora-Kurnool transmission line was the biggest inter-regional transmission project awarded under inter-state tariff-based competitive bidding in July 2016. The 765 kV project, which included laying of transmission lines in central India from Warora in Maharashtra and Kurnool in Andhra Pradesh, was supposed to facilitate distribution of power to the southern region. However, it has been hit by delays as the timeline for the scheduled commissioning of the project is past its November 2019 deadline.

“This is one of the biggest transmission projects ever given out to the private sector to develop and operate. However, given Essel’s debt problems, they had been struggling to bring in the equity needed to complete the project and, hence, the lenders have initiated a substitution process to bring in a new sponsor to develop the project, which is Adani Transmission Ltd. The process has been led by Yes Bank, which is the main lender for this project," one of the two people cited above said on condition of anonymity. The process is currently awaiting regulatory clearances, he added.

Though YES Bank and PTC India Financial Services are the lenders to the project, but it is unclear as to how much the company has borrowed out of the 4,000 crore sanctioned to the Warora-Kurnool project. The total project cost of 4,000 crore is to be funded through a debt of 2,790 crore and equity of 1,210 crore, according to the latest credit rating report by Care Ratings. As of 31 December 2018, Essel group had infused only about 458.5 crore equity into the project. Around 1,200 crore debt has been disbursed so far for the project, the person cited above added.

In the last few years, the Adani group has expanded significantly through acquisitions. In the ports sector, where Adani is already the largest private sector port operator, the group has recently acquired a 75 percent stake in Krishnapatnam Port Co. Ltd for an enterprise value of 12,000 crore. It is also in the process of acquiring the under-construction Dighi Port in Maharashtra under the corporate insolvency resolution process.

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