Maheshwar hydropower developer defaults on loan payment

With a massive financial burden weighing down heavily on Shree Maheshwar Hydel Power Corporation Limited (SMHPCL), the developer of the 400 MW Maheshwar hydro electric project (HEP) in Madhya Pradesh, the company is now trying to maneuver its way out of the chaotic state of affairs by securing infusion of equity from a potential investor or financier.Having defaulted on re-payment of the subordinate loan, which was due by mid October 2011, worth Rs 375 crore extended by its prime lender, Power Finance Corporation (PFC), the company has blamed the stop-work order issued by the Ministry of Environment and Forests (MoEF) for its failure.Speaking on the issue, SCMHPL has asserted that the MoEF`s unjust decision delayed the project by more than a year and prevented it from achieving the conclusion of all works as envisaged earlier.Further, the helpless SMHPCL was unable to venture out into the capital market and accumulate the required sub debt amount.With MoEF revoking the order on the condition that the project be commissioned only after successful completion of all rehabilitation and resettlement (R&R) activities, SCHMPL has been forced to focus on concluding all R&R activities at the earliest to avoid any further delay in commissioning beyond the revised schedule.In a desperate attempt to fast track the implementation of activities for the project, which is now slated to be commissioned in December 2012, SMHPCL has now diverted the fresh tranche of equity capital to fund the rising R&R costs, which have tripled from its original estimates, instead of utilizing it to clear PFC's pending subordinate debt.In light of the above mentioned setbacks faced due to the MoEF order, SMHPCL has only found it fair that it be granted an extension of 1 year from PFC to repay the loan.To substantiate its demand made to PFC, the company has claimed that the proceeds from the proposed IPO, which is expected to be filed by the second quarter of 2012, will be used for the purpose of repayment.