The Hindu Business Line : Mangalore power project — Nagarjuna brings down tariff to Rs 2

Sources said here that the tariffs would be among the lowest for any green field thermal project in the country. The levellised tariff was estimated to be in the region of about Rs 2 per unit. This was virtually on par with some of the Central and State-run generating units.

Even the first year tariff is expected to be about Rs 2.30 a unit, which again compared favourably with the public sector thermal plants. In fact, in the case of another green field thermal stations planned by the Karnataka Power Corporation, the levellised tariff is estimated to be in the region of Rs 1.99 a unit.

The levellised tariff is calculated over the debt-servicing period of 15 years.

In the case of the Nagarjuna group's power station, the tariff has been estimated on the basis of a plant load factor in excess of 80 per cent. Besides, the plant fixed cost also included a flue gas desulphurisation plant, to conform to emission standards.

The sources said that one of the major factors that has contributed to the reduction in tariffs was the changes in the fixed charge component. The sources said that changes in the fixed charges included the reduction in the debt servicing costs. Interest costs for the project were now estimated to be about nine per cent as against the original estimate of 14 per cent plus.

But efforts were on to push down the project interest costs even further. The benefits of this reduced interest costs would be passed on to customers.

Besides, the fixed costs were brought down due to customs duty exemptions in view of the mega power status accorded to the project. The appreciation of rupee against the US dollar had also helped bringing down the tariff.

The sources said that the strategic equity for the project was in the process of being finalised. The promoter groups, which include the Nagarjuna Fertilisers Ltd, would hold 51 per cent of the equity stake in the Rs 4,400-crore project. The project funding would be done on the basis of a 70:30 debt equity ratio.

The sources said that the Power Finance Corporation (PFC) was in the process of finalising the debt-financing package. PFC was expected to provide the deferred payment guarantees and the rupee-funding component for the project. The Export Import Bank and a clutch of vendor financiers would provide the foreign currency funding for the Engineering Procurement and Construction Contract.

PFC, the sources said, had accepted the payment security mechanism cleared by the Karnataka government. Accordingly, financial closure for the project is estimated to be completed by June end this year. The project debt requirement is estimated to be in the region of Rs 3,080 crore.

PT Adaro of Indonesia and Rio Tinto of Australia were expected to be the major fuel suppliers for the project. PT Adaro is among the world's largest suppliers of "enviro coal" or low-sulphur coal (0.1 per cent sulphur and 1.2 per cent ash).

The clearances would ensure the project commissioning before the end of the current Plan period. When completed in 2005, the NPCL project would be the first private sector mega power station in the southern region. The first phase of the project is expected to be completed 35 months after financial closure and the second phase 6 months later.

This completion of the project would increase the power availability in the southern grid about 7100 million units or about 19.5 mu a day.