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Financial closure of BPL power project likely by month-end

C. Shivkumar

V.K.Varadarajan

BANGALORE, Nov. 16

THE 520-MW thermal power project, promoted by BPL Group in Ramagundam in Andhra Pradesh, is expected to go into financial closure by the end of this month, making it one of the first private sector thermal projects in the country to do so.

Sources said that the formalities relating to the project financing were expected to be completed by the next ten days. The sources added that one of the major obstacles for the financial closure had been surmounted, with the Andhra Pradesh Government ag reeing to provide a financial security package. As per the agreement with the State Government, the financial security package is to be activated 30 days before the commercial date of operations of the project.

This exercise for project financial closure by ICICI comes close on the heels of the first round of the Crisis Resolution Group meeting held in Delhi on Wednesday.

The sources said that ICICI, the lead arrangers to the debt financing package had agreed to this formula as a precondition for financial closure of the project. This also makes Andhra Pradesh the first State in the country to accept the new guidelines la id down by the Ministry of Finance.

The total cost of the project has been currently estimated at Rs 2385 crore. This cost has been estimated based on an exchange rate of Rs 35.5 per $. However the sources said that this cost would have to be approved by the Central Electricity Authority (CEA).

But provisional estimate indicate a project debt component of Rs 1,669 crore based on the same exchange rate, based on a debt equity ratio of 70:30. About two thirds of the project cost is in foreign currency, the sources said. The entire project is bei ng funded on a limited recourse basis, implying that project creditors would not have any resource to promoters and would entirely have to rely on project cash flows backed by the security package. But part of the equipment finance amounting to about $28 5 million is to be provided by the Japan Bank for International Cooperation, on the strength of guarantees provided by ICICI, IDBI, IDFC and IFCI.

The power project has already finalised, Marubeni and Electric Power Development Corporation Japan as the engineering procurement and construction and operation & maintenance contractors. Both these contractors would also be equity holders in the projec t to the extent of 26 per cent and 11 per cent respectively. The remaining portion of the equity is to be held by the BPL group.

The sources said that fuel supply agreements were also due to be finalised next week with Singareni Collieries Ltd for supply of 2.7 million tonnes of coal per annum. This coal requirement has been worked out on the basis of a 85 per cent plant load fac tor. About 55 per cent of the coal is to be transported by rail and 45 per cent by road, the sources added.