The Hindu Business Line : Lanco-Jindal awaits Ministry nod for bank guarantee

"Once we receive clearance, we are expected to furnish a guarantee of Rs 300 crore, sign up for PPAs and, thereafter, achieve financial closure within 12 months of securing nod."

Hyderabad March 21 The Lanco-Jindal consortium is awaiting the Ministry of Power and Power Finance Corporation nod to provide bank guarantee for the Sasan ultra mega power project (UMPP) and, thereafter, sign up for the purchase agreements with bulk buyers.

The Chairman of Lanco Infratech Ltd, Mr J. Madhusudhan Rao, told Business Line "PFC was conducting a due diligence of the contract awarded to us and we are confident that we would be called upon to execute the project."

On his return from the US on Wednesday, Mr Rao said, "As per conditions, once we receive the clearance, we are expected to furnish a guarantee of Rs 300 crore, sign up for PPAs and, thereafter, achieve financial closure within 12 months of securing nod."

Concerns

Asked about some of the concerns raised lately about the consortium partners and particularly by Globaleq Singapore, with which it had jointly bid for the project, Mr Rao said that the bidding process was based on the strength of Globaleq, which owns the Singapore arm. "So there is no point in raising issues about Globaleq Singapore and financial issues relating to the latter.

In fact, the bidding process allows even a shell company or even a special purpose vehicle that could be a bidder directly to take part through a consortium or a strategic partner.

"Second, the most important aspect of the whole issue is once the bidding process is concluded and the project awarded to a particular consortium, no request to reconsider the qualification would be entertained citing unconnected issues after the award of the contract," he said.

"If such a condition were to be allowed, any change subsequent would attract reconsideration of any bid awarded earlier. For instance, say there is a financial crisis in a company after the bid is allowed, would one cancel the award of such a contract, he questioned.

Reiterating the company commitment to execute the project, Mr Rao said, "Apart from Lanco, you need to factor in the strengths that Jindals brings to the table. This is one of the few companies in the country which has significant mining capability — which is also a crucial part of the Sasan coal project."

The 4000 MW Rs 16,000-crore Sasan coal project envisages use of domestic coal through captive mining that is part of the bidding process, Mr Rao explained.

The Sasan project, which was awarded to Lanco Globaleq consortium after they quoted a price of Rs 1.19 paise per unit, kicked up a debate about its aggressive pricing. Thereafter, with Globaleq of the UK deciding to exit the power business, they had put up Globaleq Singapore for sale. This was acquired by the Lanco and Jindal combine. This raised issues about ownership necessitating PFC to look into the project promoters once again.