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R. Balaji

Chennai, Aug. 7 The Chennai Water Desalination Ltd, a subsidiary of IVRCL Infrastructure & Projects Ltd, has gone in for additional borrowings to meet the escalation in project cost.

The company, which is implementing the 100 million litre a day seawater desalination plant, originally planned for a project cost of Rs 470 crore but now it expects to complete the project at a cost of Rs 550 crore, officials said. DEG Bank of Germany is to come in with the additional lending of €14 million (Rs 80 crore).

DEG, which has done the due diligence on the project, is the fourth lender, after Canara Bank, United Bank of India and Indian Overseas Bank. The Chennai Metropolitan Water Supply and Sewerage Board (Metrowater), for which the company is setting up the plant on a Design-Build-Own-Operate-Transfer (DBOOT) basis, has approved the move.

While the company had earlier gone in for a rupee loan, it pays the EPC contractor in euros calculated on a dollar equivalent, which now works out to about Rs 64 against the earlier average of about Rs 54. Also, additional surveys on environmental impact had been conducted before the project started, which had set the project back by about a year.

Chennai Water Desalination now hopes to seek a 15 per cent increase in capacity to offset the increased costs. The promoters have to bear the additional cost as equity as provided under the agreement with Metrowater, officials said.

Officials said originally the company had planned to go on stream in June and had rescheduled to start commercial operations from August in stages. But the marine work for laying the intake pipeline could not be taken up because of adverse sea conditions.

Now this would be done by the end of August and they were confident that the plant would start producing freshwater from seawater in January 2009.

Instead of stepping up production in phases, the plant would start at full capacity. Trial commissioning is expected to go on between September and December.

IVRCL holds a 75 per cent stake in Chennai Water Desalination, and Befesa of Spain holds the balance.

The company has entered into a 25-year bulk water purchase agreement with Metrowater, which will buy the freshwater at Rs 48.66 a kilolitre.

That is about Rs 48 lakhs a day as the plant is expected to supply about 10 crore litres of freshwater a day.

The agreement with Metrowater has also been rescheduled to take into account the delay, company officials said.

More Stories on : Overseas Borrowings | Water | Tamil Nadu

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