The Hindu Business Line : General Mediterranean hopeful of reviving TN power project

`Promising' investment
One of the larger foreign direct investments in the State
First major FDI in the power sector in the whole country after a long gap
Project has bright chances because of emerging power shortage

Chennai , Dec. 15

Luxembourg-based General Mediterranean Holding is confident of reviving the 1,000-MW Kattupalli power project that its Indian subsidiary Chennai Power Generation Ltd, proposes to put up.

Officials of the company had a meeting with the Tamil Nadu Power Minister, Mr Arcot Veerasamy, along with senior officials of the Tamil Nadu Electricity Board on Wednesday.

Speaking to Business Line soon after the meeting, Mr Madhu Gupte, Director, Chennai Power Generation, said that the State Government was "very supportive of the project".

He said that although the Ministry of Power had said it would not encourage MoU-based project, a way would be found for viable power projects because of the emerging shortage of power in the country.

The Rs 4,000-crore project would be one of the larger foreign direct investments in the State and perhaps the first major FDI in the power sector in the whole country after a long gap, Mr Gupte said.

When the project was first conceived in the late 1990s, it was to be gas based. With naphtha or LNG prices very high for power projects today, the company has decided to switch to coal, he said.

Today, the issue before the project promoters is to negotiate the tariff. Chennai Power intends to sell its output to Power Trading Corporation. PTC, in turn, will have to have agreements with various State electricity boards to sell the power. The company is hoping that TNEB would buy the bulk of the power.

The company does not want to sell the electricity directly to TNEB because then it would not qualify for `mega power projects' status. One of the conditions for the mega power project status, which gets the producer duty breaks for imported capital goods, is that it should sell the power to more than one State and not more than 80 per cent of its production to any one State.

Mr Gupte said that the chances of the project coming up were bright because of the emerging shortage of power in the country. He said that it was with this rationale that the company had stuck to the project for nearly a decade, even as most other foreign-owned Independent Power Producers gave up on their projects.

Asked about payment security, Mr Gupte said that Chennai Power would have recourse to bankers of its customer, PTC. In turn, PTC would have letters of credit from the bankers on behalf of various electricity boards.

He said that once the tariff negotiations were through, the project would go on smoothly, because all other elements were in place.

Chennai Power's President (Finance), Mr Nishith Gupta, said that Power Finance Corporation had agreed to lend Rs 680 crore to the project and also to syndicate the rest of the Rs 2,800-crore debt.

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