Lanco Infratech misses its quarterly Rs 90-cr loan repayment

MUMBAI: Lanco Infratech has missed its quarterly repayment of loan raised for its 1,200-mw imported coal power project at Udupi in Karnataka as the poor health of state distribution companies is taking a toll on power utilities.

Lanco Infratech's subsidiary Udupi Power Corporation Ltd (UPCL) was unable to make a debt repayment of 90 crore that was due on January 15, as it has not received payments totaling 450 crore from the state distribution companies (discoms) in Karnataka for its first unit of 600 mw at Udupi. Also, inordinate delay in commissioning of the second unit of 600 mw has further worsened cash flows to the company.

"There has been delay in payment on outstanding of 90 crore as we have receivables due with the state discoms. We are working closely with the state government so that the issue is resolved and we have cash," a senior executive from Lanco Infratech said.

The company had raised a loan of 4,500 crore for the project from a consortium of 15 banks led by state-run Power Finance Corporation. Although the company did not reveal names of other banks, analysts said that the consortium included Bank of Baroda, Dena Bank, IFCI, Canara Bank, Bank of India, Indian Overseas Bank, Punjab National Bank, Indian Bank and IDBI. They said that ICICI Bank, Axis Bank and Rural Electrification Corporation do not have any exposure to the loan.

"UPCL has paid all installments until now. The non-payment in January is not yet a concern…it takes six months to consider it as a non-performing asset," Power Finance Corporation's chairman and managing director Satnam Singh said.

UPCL is in pact to sell power to eight state-run power distribution companies, of which seven are located in Karnataka and one in Punjab. The first unit of 600 mw, which sells power primarily to Karnataka discoms, started operations in 2010. The second unit is ready for commercial operations but is not able to do so as Karnataka Power Transmission Corporation has not been able to complete the transmission line due to delay in clearance from the ministry of environment and forests.

In April 2011, the company's loans were rescheduled due to a delay in commercial operation of the second unit from an earlier schedule of August 30, 2010, to April 30, 2011. It has been further postponed to August 2012.

Earlier this month, CRISIL Ratings downgraded the ratings on the bank facilities of UPCL to 'CRISIL B+/Negative' from 'CRISIL BB+/Negative' and cautioned that the company may not be able to service its debt repayment in January. The rating agency had said that UPCL was seeking an additional loan of 340 crore and was talking to its offtakers for payment to manage cash flow.