- (1.) M/s Sinnar Power Transmission Company Ltd. (SPTCL), a Transmission Licensee, has filed a Petition on 7 March, 2014 under R s amended in 2006 for approval for creating encumbrance on the assets of its Licensed transmission business.
(2.) SPTCL's Prayers are as follows: " a) Provide approval for creation of charge over the assets of the applicant in favour of existing and all future lenders on an urgent basis to secure the financial assistance from lenders; b) Condone the delay / any inadvertent omission / errors / shortcomings and permit SPTCL to add/ change/ modify/ alter/ this filing and make further submissions as may be required at a future date; and c) Pass such other and further orders as are deemed fit and proper in the facts and circumstances of the case."
(3.) The Petition states that: i) Vide Order dated 28 December, 2010 in Case No. 31 of 2010, the Commission has granted Transmission Licence No. 2 of 2010 to SPTCL and authorized it to establish and operate the following transmission lines, inclusive of related infrastructure: a. 400 kV D/C Quad Moose Transmission line from Sinnar TPP to existing MSETCL Babhaleshwar Sub - Station. b. 2 Nos. 400 KV line bays at existing MSETCL Babhaleshwar Sub -Station. ii) Vide Order dated 26 April, 2012 in Case No. 136 of 2011, the Commission approved SPTCL's Multi Year Tariff Business Plan for the second Control Period from FY 2012 -13 to FY 2015 -16. iii) Finalization of debt from the lenders is in process. Hence, SPTCL needs to create charges on its Licensed assets for availing debt from lenders. Accordingly, SPTCL seeks the Commission's approval for creating encumbrance on its Licensed business assets for the purposes of its own Licensed business. iv) Secured loan from the lenders requires the borrower to pledge\mortgage some assets as collateral for the loan, which then becomes a secured debt owed to the lender. In the event of default by the borrower, the lender takes possession of the asset used as collateral and may sell it to secure repayment of a part or the entire amount lent to the borrower. A secured loan creates an encumbrance charge on the assets, which is the right or interest that exists with the borrower who is other than the owner of the assets, and that restricts or impairs the transfer of the assets. In case of SPTCL, the security includes a mortgage on the Licensed business assets of the Transmission Licensee. v) Section 17 (3) of EA, 2003 states that: "No Licensee shall at any time assign his licence or transfer his utility, or any part thereof, by sale, lease, exchange or otherwise without the prior approval of the Appropriate Commission." vi) Further, under Clause 15.3 of the MERC (Transmission Licence Conditions) Regulations, 2004: "15.3 The Transmission Licensee shall seek the approval of the Commission before creating any encumbrance on the assets of the Licensed Business except where such encumbrance is created for the purpose of the Licensed Business" vii) However, para 5.3 of the Transmission Licence No. 2 of 2010 requires SPTCL to seek the approval of the Commission before creating any encumbrance on the assets of its Licensed business: "5.3 The Transmission Licensee shall seek the approval of the Commission before creating any encumbrance on the assets of the Licensed Business." Hence this Petition seeking approval of the Commission to create encumbrance on SPTCL's assets. viii) SPTCL has received sanction a letter from Power Finance Corporation Ltd.(PFC) for loan amount of Rs. 82.16 crore on 2 December, 2013. As per its terms and conditions, PFC wants to create a first charge on all the properties, book debts, receivables, etc relating to the project. ix) The term 'present and future intangibles' as referred to in the terms and conditions of sanction by lenders relates to the value of intangible assets such as goodwill, patents, trademark, etc. as reflected on the balance sheet of the Company. The Transmission Licence granted by the Commission to SPTCL does not form part of the assets as reflected in the balance sheet, and hence is not considered as an intangible asset for the purpose of creation of charge on the Licensed assets. x) The Transmission Licence for SPTCL is an authorization to establish and operate assets and not an asset itself. Hence, it is not considered as intangible for creation of encumbrance charge. xi) SPTCL has to create the encumbrance/charge on the assets before the first disbursal of funds. Non -creation of encumbrance charge on the assets within the stipulated period, that is before the first disbursal of loan amount, would lead to additional 1% interest per annum (compounded quarterly) over and above the applicable interest rate. xii) SPTCL is in the process of obtaining sanction letter for balance loan amount from other lender(s), including Rural Electrification Corporation Limited, which also requires creation of encumbrance/charge on the assets of the Licensed business. Hence SPTCL also seeks approval of the Commission for creation of encumbrance/charge on the assets based on the rest of the loan amount. It will submit the copy of sanction letter(s), once received, to the Commission ;