An opportunity to all energy consumers to participate in the revival plan of standstill (Lanco) Teesta-VI Hydro Electric Project (4×125)500 Megawatt, Sikkim.
Multistate Energy Coop is offering equity stake to Energy Consumers of Sikkim and West Bengal in Teesta-VI HEP revival plan through a tailor-made scheme known as the Kilowatt Energy Share Scheme (KESS). Offer for sale of 50,00,000 shares of Rs.1000 each at block of ten shares (Rs.10,000) of Multistate Energy Consumers’ cum Producers’ Co-operative Society Ltd. and 5,00,000 Secured 11% optionally convertible debentures at par value of Rs.55,000 per debenture. The offer is tailor-made to allot KESS bearing 500,000 Kilowatt of 500 MW Teesta-VI HEP at Per Kilowatt cost of Rs.65,000 i.e.Rs 10,000 towards equity and Rs.55,000 towards debenture.
Project has achieved 50% completion and will be commercially operational from June 2021.
Overview
100% ACQUISITION OF TEESTA-VI HEP
Multistate Energy Coop is in the process of acquiring 100% equity stake of standstill (Lanco) Teesta-VI HEP (4X125) 500 MW from the Lenders of The Project and shall develop the project with stakeholders mainly comprising of domestic energy consumers.
RISK GUARANTEED
– Section 61, MSCS Act , 2002 Central Governnment to provide guarantee of repayment of share capital ,and dividends thereon , repayment of principal and payment of interest on debentures
– Security of the Project Asset will be given on pari passu basis to Debenture Holders
MEMBERSHIP & ADMISSION FEE
– Ordinary Energy Consumer (Individual ,Household, Group, Cooperative , Institution and Government Corporation)
– Nominal/Associate Energy Consumer( Companies and Other Organization )
– Ordinary Membership Fee Rs .500
– Nominal / Associate Membership Fee RS 5000
Benefit of Secured Optionally Convertible Debenture (OCD)
– OCD will carry an interest of 7 % per annum calculated annually from the date of allotment of OCD till Commercial Operation Date (COD) June 2021 which will be accumulated till COD
– Post COD value of OCD will increase from Rs.55,000 to Rs.69,720 on account of accrued interest
– Post COD, OCD will carry interest of 11% per annum payable annually and and will be redeemed in twenty years in equal installment starting from 11th year post COD on the value of Rs 69,720
– Debenture holder will earn an interest of Rs 1,57,219 till redemption of OCD
Learn more about our Project
Scenario I
Return on Equity of Rs.10,000 is Rs 1,36,500 including redemption over the period of 35 years without exemption of Income Tax and Dividend Distribution Tax.
Scenario II
Return on Equity of Rs 10,000 is Rs.2,34,000 including redemption over the period 35 years with exemption of Income Tax and Dividend Distribution Tax . (Exemption of Income Tax and Dividend Distribution Tax for renewable energy sector is under consideration by Govt of India)
500 MW Teesta-VI Run of the river project (The Project) whose construction activities were suspended by existing developer (LANCO TEESTA HYDRO POWER LIMITED – The Company) since 2013, Multistate Energy Coop has identified The project to be taken over and develop the same. After making detailed study made by Multistate Energy Coop considering completion period, balance cost of completion,Technical and commercial issues associated with the project and considering viability of the project, approached the lead lender of the project (M/S ICICI Bank Ltd.) and made offer for acquisition of the project at a consideration of Rs.2 per equity share for entire issued equity share capital of the company. Further it was asked for discount on the existing outstanding debt on account of interest accrued during the period project remained suspended. Further, to keep project viable at revised completion cost, interest rate on outstanding debt to be reduced to 10% PA and the same has to be funded by lenders till project achieves Commercial Operation.
Multistate Energy Coop as per its studies has made estimate of project completion within 42 months from restart of the project with an estimate of Rs.2,625 crores towards project completion cost excluding interest during construction.
Breakup of Rs 2625 crores is as under:
Cost estimate for completion of project is as under : Rs. in Crores
| # | Items | Cost (In Crores) |
|---|---|---|
| 1 | Civil Cost | 1,965 |
| 2 | Electro Magnetic Equipment | 262 |
| 3 | Hydro Mechanical Equipment | 83 |
| 4 | Pre Operated, Finance Charge, Claims etc | 265 |
| 5 | Land | 20 |
| 6 | Contingencies | 30 |
| Total | 2,625 | |
| Acquisition cost of Equity | 274 | |
| Total Fund Requirement | 2,899 | |
| Proposed Fund raising by Multistate Energy Coop for project is as under: | ||
| Membership of Multistate Energy Coop | 500 | |
| Optionally Convertible Debentures | 2,750 | |
| Total Fund Proposed to be raised | 3,250 |
Multistate Energy Coop has a plan to acquire some more Hydro Power projects in the State of Sikkim. Surplus funds will be utilized towards acquisition of the Hydro Power projects.
Multistate Energy Coop has shown interest for acquisition of LTHPL and after making detailed study of the Project status, Cost required to Complete the Project, Obligation under Power Purchase Agreement (PPA) and Bulk Power Transmission Agreement (BPTA) with Power Grid Corporation Ltd. made offer to Lead lender to acquire 100% issued equity of LTHPL at Rs.2/- for each Rs.10 fully paid up equity share of the company (i.e. Equity held by Lanco Group Companies and by consortium of Lenders).
The following concession is under consideration from Lenders of LTHPL:-
- Acquisition of Equity at Rs. 2 per share i.e. for Rs. 274 Crores. (Discount of Rs. 1,094 Crores).
- 30% Waiver of outstanding debt including overdue interest as on 30th June 2017 (Waiver of around Rs. 673 Crores).
- No further interest will accrue from 30th June 2017 till transfer of ownership to Multistate Energy Coop.
- Brand and implement the objectives as “Alternative Free Energy” programme.
- Revised Interest rate will be at 10% PA calculated on monthly basis on reduced debt and same will be funded by Lenders till COD which is targeted at 42 months post transfer of Ownership.
- Post COD debt along with accrued interest will be repaid in 10 years along with monthly interest payment at 10% PA. Company will have right to prepay the debt post COD without any prepayment penalty.
As per the draft policy announced by Ministry of Power, project is entitled to get interest subvention of Rs. 350 Crores till project COD is achieved. Further for first five year post COD, Project will get total of Rs. 350 Crores towards interest subvention. As of now Project has completed just above 50% of construction activities.
Teesta Stage VI Hydro Electric Project was allotted to LancoTeesta Hydro Power Limited (LTHPL) (Erstwhile known as Lanco Energy Private Limited), wholly own subsidiary of LancoInfratech Limited. Project capacity was enhanced from 350 MW to 500 MW after shifting the dam location and further study made by the LTHPL. The project is a run of the river hydroelectric power project across the Teesta river. The project site is located at SubinKhore, in the southern part of Sikkim. The project is a part of the overall development of the Teesta basin being undertaken by the Government of Sikkim (GoS). The project’s design energy was 2,441 million units at plant load factor of about 56% and 250 million units of secondary energy (based on 90% dependable year).Design Energy is now revised to 2338 MU’s based on revised Hydrology study carried out by LTHPL.
Implementation Agreement The Company has entered into an Implementation Agreement (IA) with Government of Sikkim (GoS), which provides the company with the right to develop the Project to the Company. Further, as per the IA, for the initial 15-year period commencing from the date of commercial operations, 12 % of the energy generated would be offered to GoS free of charge as royalty payment, which would be increased to 15 % for the remaining years.
Based on Detailed Project Report cost of Rs.2,997 Crores, Company executed Power Purchase Agreement with Maharashtra State Electricity Distribution Company Limited at a levelized tariff of Rs. 2.32/- KWh for 25 years.
Project achieved financial closure from consortium of 9 lenders (ICICI bank being a lead lender) with apprised cost of Rs. 3,000 Crores with Debt Equity ratio of 80:20 and May 2012 as a Project Commercial Operation Date. LTHPL has awarded EPC contract to Lanco Infratech Limited under International Competitive Bidding.
However, project could not achieve commercial operation as per schedule COD of May, 2012 mainly due to delay in handing over of site to EPC Contractor due to delayed clearance from Ministry of Environment & Forest for diversion of forest land, geological surprises, change in design due to adverse site conditions. Due to delay, Project encountered with increase in Project cost which LTHPL was not able to achieve cost overrun funding mainly due to Fixed price PPA with MSEDCL. As such project lenders have stopped disbursing fund for project and construction activities were stopped since 2013.
As per RBI Guideline project should achieve COD latest by May2016, beyond which asset classification in the books of lenders has to be downgraded. Further in June, 2015 RBI has come out with guideline on Strategic Debt Restructuring (SDR) whereby Lenders can convert it’s part of a debt so as to lenders collectively held 51% of paid up capital of The Company post conversion of debt by lenders. Lenders can get protection of 18 months from downgrading of Asset classification within which Change in Management of The borrower should happen. As per SDR guideline, Joint Lender Forum of the lenders have decided to invoke SDR and converted Rs. 698 Crores from it’s outstanding debt/overdue interest to Equity of LTHPL. As of June 2017, LTHPL’s paid up capital was around Rs. 1,368 Crores. Entire shareholding of the LTHPL held by Lanco Group Companies is under pledge with Lenders. Lenders have executed agreement whereby, Lenders have a right to sale, transfer the shares of LTHPL held by Lanco Group Companies in the manner they think it fit unless Lanco has better offer for the same. As on date, Lenders of Teesta are not able to identify New Promoter for Change In Management and protection to Asset Classification, which was available till January 2017 is no longer available.
Project has to renegotiate existing PPA with MSEDCL or terminate the same and entered into fresh PPA with new beneficiary. Viability of The Project is being established with a first year tariff of Rs. 3.75/- KWh and 1 % escalation year over year till 35th Year with design energy of 2338 Mus with the completed cost of Rs. 6,573 to the Company. Further project is expected to generate 250Mus of Secondary energy, which will be added to profitability of the Project. Project is expected to earn more than Rs. 4,500 Crores profit after tax at above tariff in concession period of 35 years. Project IRR is expected to be 11.65 % considering discount in acquisition of Equity and availment of concession requested from Lenders. Project will have saleable energy of 2,006 Mus and 1,938 Mus for first 15 years and for balance 20 years respectively after considering auxiliary consumption, transmission losses and royalty to State Government Agency. It is estimated that State Government Agency will get 10870 MUs by way of Royalty, which will give revenue of Rs. 4,900 Croresin Project life cycle of 35 years.
Key terms and condition of Secured Optionally Convertible Debenture (OCD) are as under:-
- OCD will carry interest at around 7% per annum calculated annually from the date of allotment of OCD till COD, which will be accumulated till COD.
- Post COD value of OCD will increased from Rs. 55,000 to Rs 69,720 on account of accrued interest assuming interest is not subject to Tax Deducted at Source and entire OCD’s are subscribed under present offer.
- On the date of COD along with accrued interest debenture holder will have option o convert the entire amount into Equity Shares of Multistate Energy Coop in multiple of Rs.1,000/- per shares. Surplus will be paid in cash to debenture holder.
- Post COD, OCD will carry interest of 11% per annum payable annually and will be redeem in twenty years in equal installment starting from 11th year post COD on the value of Rs. 69,720.
- Debenture holder will earn interest of Rs. 1,57,219 till redemption of OCD.
- Security of the Project asset will be given on pari passu basis to Debenture Holders along with Lenders of the Project.
- Rating of OCD, if required, will be carried out.
- Debenture Trustee will be appointed.
- Section 61, MSCS Act, 2002 Central Government to provide guarantee of repayment of share capital, and dividends thereon, repayment of principle and payment of interest on debentures.
Multistate Energy Coop members will get internal rate of return by way of dividend and redemption of shares at the end of project life, which is expected to be 11.31 %. As dividend declared by Multistate Energy Coop is tax-free income, 11.31% Internal Rate of Return is considered reasonable considering 35-year life cycle of Project.
As Multistate Energy Coop will be exempted from Income Tax under Indian Income Tax Act and Dividend Distribution Tax on Dividend to be declared by Multistate Energy Coop to it’s Members, Project IRR is expected to be increased to 13.09 % from 11.65%.
Based on the representation made by renewable energy producers association, Govt. of India may consider exemption /concession to power producer generating energy from renewable energy source under Income Tax Act.
On exemption of Income Tax and Dividend Distribution Tax members will get 13.70% Internal Rate of Return on account of dividend income and redemption of Equity Shares at the end of project life. Development of Project under Multistate Energy Coop, members are likely to get cumulative return of Rs. 11,700 Crores till 35 years from COD.