The Hindu Business Line : PFC slips over Jindal loan due to yen-dollar fluctuation

POWER Finance Corporation (PFC) has slipped up over a loan to Jindal Thermal Power Company Ltd. This has resulted in a loss of around Rs 4 crore to the power sector lender.

In March of last year, PFC had lent $50 million to the Jindals for their 260 MW Tornagallu power project in Karnataka. PFC originally borrowed the loan in yen currency from the international market. This was on-lent to the Jindals in dollar currency. The lending rate did not, however, take into account the loss/gain resulting from changes in dollar against the yen currency.

With the dollar weakening in the recent past, the loss to PFC is around Rs 4 crore. According to sources, the Jindals were issued a demand and asked to make good the difference. The Jindals declined to do it on the grounds that the loan agreement did not envisage a `back-to-back' agreement - where the cross-currency exchange rate between the dollar and the yen was also covered in the interest rate. They went on to add that if the differential were made good, the interest rate would not be competitive enough for them to borrow from PFC. The Jindal officials contended that the loan agreement between PFC and Jindal Thermal Power Company Ltd allows only for payment of an interest rate of `Libor plus 2.4 per cent' in dollar currency.

The PFC Chairman and Managing Director, Mr A.A. Khan, when contacted, said, "We have set up a committee to examine the issue. A report is likely to be submitted by the end of the month."

Speaking to Business Line, Mr Krishna Desika, Director (finance), Jindal Thermal Power Company Ltd, said, "We had taken a loan from PFC to refinance a US Exim loan for our 2x130 MW Tornagallu power plant. Our company has been issued with a demand from PFC to make good the difference on account of the exchange rate variation between the yen and the dollar. We are currently in talks with PFC and I would not like to go into the details of the negotiations."

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