C. Shivkumar

Bangalore, Jan. 18

NAGARJUNA Power Corporation Ltd (NPCL) has turned down the Jindal group's offer to buy out the entire equity in the 1,015-MW power project, now in the construction phase.

NPCL's Rs 4,299.12-crore power project is coming up in Udupi district of Karnataka.

NPCL sources said the Jindal offer was not acceptable. "What we want is a strategic equity and not a buy out of the project," the NPCL sources said.

NPCL's equity is currently around Rs 1,290 crore, of which 51 per cent is held by Nagarjuna Fertilisers and group companies.

Jindal South West Energy Ltd's (JSWEL) Chief Executive Officer and Managing Director, Mr Raaj Kumar, confirmed that an offer was made.

"We made an offer to buy out the entire equity of the project. They are yet to get back to us," he said. Mr Kumar declined to reveal the pricing. JSWEL already runs a 260-MW power project at Tornagallu in the State.

Not price related:

NPCL's disinterest in the Jindal offer was not price related, the sources said. NPCL's promoters preferred to retain the management control during the power purchase agreement (PPA) period of 30 years.

This was because the project had managed to overcome all the major hurdles, including legal, fuel, and development risks. The project was now on the verge of a wet financial closure, with all the financial institutions ready to begin disbursement of the project debt estimated at Rs 3,010 crore.

The sources said, at this juncture NPCL was looking for only a 49 per cent strategic equity stake.

Other suitors:

It has some suitors that included Ranhill Bhd, Genting Bhd, Tenaga National Bhd and Suez Energy of Europe. All these suitors had completed their due-diligence. The sources said discussions were still underway for finalising their equity stake before completion of the Central Electricity Regulatory Commission deadline of 120 days for full financial closure, as part of the project cost approval.

Interest in the project had been building up since NPCL had secured all the forward and backward linkages. NPCL had already placed the letter of intent with BHEL for equipment supply and Simplex Ltd for civil works. Fuel supply of three million tonnes of coal has been tied up for five years with Australian, Indonesian and South African companies.

The forward linkages included a 30-year PPA with the five electricity supply companies in Karnataka (Bangalore Electricity Supply Company Ltd, Mangalore Electricity Supply Company, Hubli Electricity Supply Company, Gulbarga Electricity Supply Company and Chamundeshwari Electricity Supply Company) and the Kerala State Electricity Board.

The PPAs in turn were backed by a financial security package that included a letter of credit and an escrow account comprising of 1.25 times of the outstanding and a funded State government guarantee.

(This article was published in the Business Line print edition dated January 19, 2006)
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