The Hindu Business Line : REC to fund Bengal thermal project expansion

THE Rural Electrification Corporation (REC) has agreed to finance the Rs 1,000-crore expansion plan of the Santaldih Thermal Power project, making its first major fund infusion, since the cooling off of its ties with West Bengal on account of massive payment defaults.

State power department sources said that with the receipt of the sanction letter from the REC, the project has now achieved financial closure.

Confirming that this is REC's first major exposure in West Bengal since the mid-90s, sources said that while REC will provide Rs 800 crore for the project, the remaining portion would come from the State coffers and the internal generation of West Bengal Power Development Corporation Ltd (WBPDCL) which is implementing the project. The interest rate has been pegged at 8.5 per cent.

The project comprises adding a 250 MW unit to the Santaldih Thermal Power Plant of WBPDCL in Purulia district. STPP now has four units .

The REC was set up in 1969 with the primary objective of providing refinance assistance for rural electrification. However, of late, it has diversified into other related areas such as project financing.

In case of West Bengal, where the State Electricity Board had piled up debts of Rs 800 crore, the REC had stopped funding projects in West Bengal alongwith four other States.

As per an agreement between the REC, the WBSEB and the State power department, the loan has now been rescheduled and a settlement amount of Rs 705 crore has been arrived at. "Payment has already begun", sources said.

WBPDCL officials who had earlier mulled the equipment finding route for financing the project, are happy that REC finances would flow in, saying that they would appoint a consultant this month to work out the details and had the option now to choose between the domestic or the global tendering route.

The project has already received the necessary clearances, including the one from the National Airports Authority of India for chimney height.