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Our Bureau

Chennai April 2 The Rural Electrification Corporation (REC) will provide Rs 16,000 crore loans to the Tamil Nadu Electricity Board (TNEB) over the next five years to fund its expansion programme.

According to an official press release, an agreement that provides for the funding assistance to the TNEB's capital investment programme during the 11th Plan (2007-12) was signed between the two here in the presence of the Chief Minister, Mr M. Karunanidhi.

The loans are of a tenor of 13 years. For the first three years, loans given for generation projects would carry an interest rate of 10 per cent and those for transmission and distribution projects, 9.75 per cent.

TNEB will borrow from REC as and when required for its projects. According to Mr S. Kathiresan, Member (Accounts), TNEB, these were the best rates the Board could get for a 13-year tenor. REC had the right to re-fix the interest rates after three years. TNEB would then have the option of not borrowing from REC if the rates were not competitive, he said.

According to the policy note of the Energy Department tabled in the Assembly on Monday, the TNEB plans to increase its generation capacity by 11,768 MW along with the required expansion in transmission and distribution facilities during the 11th plan. The outlay for the period is Rs 21,159.14 crore.

REC's caveat for loans Mr Anil Kumar Lakhina, Chairman and Managing Director, Rural Electrification Corporation (REC) told journalists here on Monday that although the MoU speaks of lending Rs 16,000 crore, REC could not give loans more than about Rs 5,000 crore to a single borrower. Mr Lakhina said that according to its internal norms, REC could not lend to a single borrower more than 100 per cent of its own net worth, which was about Rs 5,000 crore. If TNEB wanted more loans, it would necessarily have to come as "multiple borrowers."

Asked if this meant a demand for unbundling of the Board into generation, transmission and distribution, Mr Lakhina said that it could be that, or TNEB could set up special purpose vehicles for different projects.

More Stories on : Credit Market | Power | Tamil Nadu

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