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Stalemate over Tata Power's equity role in DVC project

Indrani Dutta

Kolkata Feb. 20

TALKS between Tata Power Ltd (TPL) and Damodar Valley Corporation (DVC) on the Maithon Right Bank project are now in a stalemate stage over Tata Power's equity participation issue.

Indications were that TPL was bargaining for a stake of around 74 per cent against the 51 per cent it had been offered by DVC for implementing the joint venture project in Jharkhand.

TPL entered the scenario in November 2003 after the exit of Reliance Industries-controlled BSES. The TPL board gave an in-principle nod to the company's proposed partnership with DVC for the MRB project, which is being developed by Maithon Power Ltd - a subsidiary of DVC.

However, although the entry of TPL into MRB marked the end of months of uncertainty for DVC (since July, when BSES announced its decision) it seems that some more time will now have to pass before a final picture emerges.

TPL's entry was conditional upon the company undertaking due-diligence and completing viability studies. Till date there is little progress in this matter, according to TPL sources.

While the DVC-BSES joint venture was patterned on an equal partnership of 45 per cent equity stake for each with the remaining being held by the domestic financial institutions, in this case indications are that although TPL was open to negotiations, it would still like a very high proportion of controlling equity.

A TPL spokesperson told Business Line that talks which were slated to be held two weeks ago would be resumed and the Tatas were open to discussions.

DVC sources said that the project, whose foundation stone was laid in January 2000 has been hanging fire for long. The 1000-MW coal-based thermal power plant's project cost is pegged at Rs 4,200 crore with a debt-equity ratio of 70:30.

The power is scheduled to be sold to the northern States through the Power Trading Corporation and a memorandum of understanding has also been signed with PTC in this regard.

The Jharkhand Government has given forest clearance for the project which has also received clearance from the Central Water Commission. All other statutory clearances are also in place, according to an official spokesman of DVC.

Coal linkages have been granted by the Union Coal Ministry. Land acquisition for the project, which needs 1,000 acres, is now on.

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