Hyatt Regency Delhi has been dragged to bankruptcy by Continuum Energy, a Morgan Stanley-owned renewable energy company that claims the hotel defaulted on a power purchase agreement that the two sides had entered.
Continuum Energy has claimed at the National Company Law Tribunal that the deluxe south Delhi hotel entered a contract to buy clean energy from it two years ago.
As part of the contract, the hotel was obliged to draw electricity from a Continuum hydropower plant located in Himachal Pradesh.
The energy supplier claimed in court filings that the hotel failed to procure an open access licence from the electricity regulator to allow it to draw power during the tenure of the agreement.
Continuum subsequently terminated the power purchase agreement on March 13.
Hyatt owes the energy company Rs 2.5 crore as per court filings.
Continuum Energy’s chief executive officer Arvind Bansal confirmed the bankruptcy filing against Hyatt Regency Delhi.
Hyatt Regency Delhi termed Continuum’s application as “frivolous” in an emailed response.
The company noted that it had made a strategic investment in Continuum’s power plant, which is housed in a special purpose vehicle, Sandhya Hydro Power, to meet regulatory guidelines for group captive plants.
The guidelines stipulate that plants for captive consumption should be atleast 26%-owned by the group of customers who are drawing electricity from it.
“Regrettably, Sandhya Hydro company has not honoured on several counts having executed the agreement, including terms of supply & on aspects of captive compliance(s). Despite our claims of amounts owed, Sandhya Hydro, without assigning any plausible reason, stopped power supply to our company, which has prompted an appropriate civil action from our side,” said an email from the office of Shiv Jatia, managing director of Asian Hotels North, in response to ET’s queries.
Hyatt Regency is owned by Asian Hotels North, a listed company with a market capitalisation of Rs 144 crore as on January 15.
The company is undergoing financial distress and informed stock exchanges in November that it is seeking a relief package from its lenders.
It has borrowings of around Rs 1,100 crore.
“In the wake of the prevailing Covid-19 situation, performance of the company has been impacted substantially and has resulted in cash flow constraints. Therefore, the company has proposed for one-time restructuring under Covid-19 related stress circular of Reserve Bank of India, dated 6th August, 2020,” Jatia said in a stock exchange filing on November 13.
The government has announced a one-year moratorium on insolvency proceedings for all defaults occurring post March 25, 2020 as a relief measure for Covid impacted businesses. However, defaults occurring prior to that period are not covered by the moratorium.
Source: Economic Times