The Hindu Business Line : Lanco, JSPL venture to sign power purchase pacts

Combined strategy
Both competing bidders have come together to take up the project after they bought out Globeleq interest in the project recently.
Lanco says Jindals bring significant synergies.

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Hyderabad Feb. 20 After Globeleq stake buy out recently, Lanco Infratech Ltd and Jindal Steel & Power Ltd (JSPL) venture is all set to sign power purchase agreements (PPA) next week with several major consumers for supplying power from the Sasan, Madhya Pradesh-based 4,000 MW ultra mega power plant.

Both competing bidders for the project through different consortia have come together to take up the project after they bought out Globeleq interest in the project recently.

The PPA co-ordinated by the Power Finance Corporation, the nodal agency handling ultra projects, would cover supplies to Delhi, Madhya Pradesh, Uttaranchal, Rajasthan, Uttar Pradesh, Punjab among other bulk users.

The Chief Financial Officer of Lanco Infratech Ltd, Mr J. Suresh Kumar, said: "We are committed to expedite the project. Once the PPA is signed, we expect to go on to achieve financial closure by December this year or early 2008 and thereafter implement the project within 36 months."

Speaking to Business Line, Mr Kumar said: "There is significant synergy between Lanco and JSPL. Jindals bring in a lot of project implementation and technology capabilities along with mining expertise. We expect both the companies would gain from partnering and working together."

Asked why Jindal was considered ahead of several others in race, Mr Kumar explained: "We felt that Jindals would be right strategic fit and since they were pursuing the same project during the bidding process, they were in the know of all aspects of development of this project."

"We felt that partnering with Jindals would bring in lot more value and help in faster decision making," he said.

Asked if a partnership of this nature alters the basic terms of the deal signed by the company along with Globeleq in December, Mr Suresh Kumar said, "no that was not true."

After the project was awarded to Globeleq-Lanco combine in December, in January, Globeleq decided to exit power projects and sounded out about their interest to exit.

"However, they expressed their commitment to this deal and Globeleq Singapore stake was bought out by Lanco and Jindal. We are keen to complete the mega project. Both of us bring strong financial and project implementation capability," he said.

Lanco has 72 per cent stake and JSPL has 28 per cent with the latter having the option to step up its stake to 49 per cent. The project would have an equity of Rs 3,200 crore.

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