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The National Company Law Tribunal (NCLT) has approved the Rs 3,335.52 crore resolution plan for Coastal Energen, a bankrupt company that owns and operates a coal-based thermal power plant in Tuticorin, Tamil Nadu. The resolution plan, submitted by Dickey Alternative Investment Trust and Adani Power, marks a crucial step in the insolvency proceedings of Coastal Energen, which has been under financial distress for several years.
The approved resolution plan will provide approximately Rs 3,330 crore to the secured lenders of Coastal Energen, which accounts for 28.52 per cent of the total admitted claims of around Rs 11,677 crore. This partial recovery for the lenders reflects the financial challenges faced by Coastal Energen and the broader issues in the power sector related to imported coal costs and financial sustainability.
The consortium of Dickey Alternative Investment Trust and Adani Power, which has a 51:49 ownership ratio, has established a special purpose vehicle (SPV) named Moxie Power Generation Limited to implement the resolution plan.
This strategic move aims to streamline the acquisition and management process, ensuring that the restructuring and revival of Coastal Energen are efficiently handled.
In February of this year, the Competition Commission of India granted approval for the consortium to acquire the entire stake in Coastal Energen, paving the way for the resolution process. The acquisition is expected to bolster Adani Power's portfolio, further strengthening its position in the Indian power sector.
The insolvency proceedings for Coastal Energen began when the company was admitted to the corporate insolvency resolution process by an NCLT order dated February 4, 2022. The proceedings were initiated following a petition filed by the State Bank of India, which was one of the major creditors of the power company. Radhakrishnan Dharmarajan was appointed as the resolution professional, responsible for overseeing the resolution process and formulating a viable plan to address the financial distress of Coastal Energen.
The resolution plan was meticulously reviewed and received overwhelming support from Coastal Energen's Committee of Creditors (CoC), which approved the plan with a 97.80 per cent voting share. The plan's approval by NCLT Chennai is seen as a positive outcome for both creditors and the power sector, as it provides a structured solution to address the company's financial challenges.
Coastal Energen's Tuticorin power plant, which is based on imported coal, has faced several operational and financial hurdles due to fluctuating coal prices and other economic factors. The approval of the resolution plan is expected to stabilise the company's operations, ensure sustained power supply, and secure the interests of its creditors.
The approval of the resolution plan for Coastal Energen is a notable example of how India's insolvency and bankruptcy framework is being used to address corporate distress, offering a pathway for recovery and sustainability. It also highlights the growing role of private investment and strategic partnerships in reviving distressed assets and ensuring their long-term viability.
