MUMBAI: Tata Steel, which bought Bhushan Steel, the bankrupt promoter of power company Bhushan Energy, is now the sole bidder in the fray for the latter too, said two people familiar with the development.
Tatas have offered Rs 500-Rs 600 crore to settle the loans of about Rs 2,500 crore of Bhushan Energy, the second company owned by Neeraj Singhal that is facing bankruptcy proceedings. Singhals flagship Bhushan Steel was sold to Tata Steel last month under the bankruptcy law.
Bhushan Energys plant is located within the premises of Bhushan Steels plant at Meramandali, Dhenkanal district in Odisha and was built primarily to power the steel plant and therefore makes economic sense for Tata to bid for it, said senior bank officials.
The development comes in the backdrop of differences that have emerged between the resolution professionals or RPs of Bhushan Energy and Bhushan Steel regarding the power purchase contract between the two companies.
Bhushan Energy, which had a power supply agreement with Bhushan Steel, had objected to Tatas plan to acquire the company. It objected on grounds that the Tatas proposal talked about terminating power purchase agreement with Bhushan Energy, which was constructed only to meet the demands of Bhushan Steels integrated plant.
Bhushan Steel has entered into two power purchase agreements with Bhushan Energy for supply of power until September 2024 and December 2024 respectively. As per the agreement between the Bhushan Steel and Bhushan Energy, there was no provision to terminate this agreement.
The agreement said that Bhushan Steel had to compulsorily buy all power generated by Bhushan Energy and if it fails to consume the entire output, it would have to compensate Bhushan Energy. The RP of Bhushan Energy claimed that Bhushan Steel owes Bhushan Energy Rs 114 crore under PPA. This claim was not admitted by the RP of Bhushan Steel. Tata, as a resolution applicant to Bhushan Steel, had sought special approval to terminate the agreement.
The lenders consortium led by State Bank of India will have to put in place a resolution plan by early September for Bhushan Energy. Lenders have received approval from the bankruptcy court to extend the insolvency resolution period by another 90 days.
In the middle of May, Tata Steel acquired Bhushan Steel for Rs 35,200 crore, signifying the first big success of IBC law aimed at throwing out defaulting borrowers by new promoters. As per the deal, Bamnipal Steel, a wholly-owned subsidiary of Tata Steel, will get a 72.65 per cent stake in Bhushan Steel, while lenders will own 12.27 per cent and the balance will be held by existing shareholders.
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