Payment security on revolving L/C, escrow accounts

Our Bureau

Slew of sops


A higher-debt

equity ratio could be considered

Freedom

to choose tech, unit size

Income tax

benefits

New Delhi, March 24

Revolving Letters of Credit (L/C) and escrow accounts establishing claims on the receivables of buyers would form the mainstay of the payment security mechanism worked out by the Government for the proposed `ultra mega' power projects.

In the case of a default by any of the State electricity boards that would be buying power from these projects, the developers of the five proposed 4,000 MW `ultra mega' projects would have the option of direct supply to industrial consumers, Government officials said.

Competitive bidding

The Government has completely ruled out offering any sovereign guarantees for the five `ultra mega' projects coming up in the country, which would be handed over to developers through a competitive bidding process.

Among the other concessions, a higher-debt equity ratio, as against a normative 70:30 debt equity ratio, could be considered for these projects and developers are likely to get the freedom to choose technology and unit size for these project, officials said.

An extension of tax benefits under 10 (23G) of Income-Tax Act has already been accorded to these projects in the Budget for the next fiscal.

Electricity costs

According to officials, the projects are likely to generate electricity at a cost of under Rs 2 per unit. While two plants would come up at pithead locations in Chhattisgarh and Madhya Pradesh and will use domestic coal as fuel, three projects would be at coastal locations in Karnataka, Maharashtra and Gujarat and would use either imported coal or a blend of domestic and imported coal.

The State-owned Power Finance Corporation is doing the initial groundwork for setting up the projects. PFC has formed special purpose vehicles that are working independently to get all the necessary approvals and according to plans firmed up by the Government, the projects will be transferred to potential investors by the end of 2006.

Related Stories:
Pvt players keen on ultra mega power projects
Govt invites EoIs for `ultra-mega' power project in M.P.
`Ultra-mega' power plants Generation cost to be under Rs 2 per unit

(This article was published in the Business Line print edition dated March 25, 2006)
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