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Federal Bank loan for Raichur thermal unit

Our Bureau

BANGALORE, March 27

THE private sector Federal Bank has sanctioned a term loan of Rs 25 crore for financing unit VII of the 210 MW Raichur Thermal Power Station.

A press release here today said, that the loan is priced at 11.5 per cent with a tenor of 13 years and is to be guaranteed by the State Government. This rate is currently a spread of about 400 basis points over Sovereign Government paper of an identical maturity profile. This pricing is also close to the coupon of another State Government backed bond issue — the Krishna Bhagya Jala Nigam Ltd.

Unit VII, it may be recalled, has so far not attained financial closure and is being funded through bridge and terms from banks.

This is because the State Government has failed to meet the conditions precedent in the multipartite agreement signed with the lead arranger, Infrastructure Development Finance Company Ltd. Some of the conditions involved creation of a reform fund out of disinvestment proceeds from the distribution companies and State Government's divestment from Karnataka Power Corporation Ltd. Besides, the power purchase agreement for the project has still not been approved by the Electricity Regulatory Commission.

The total cost of the Unit VII is estimated to be Rs 613 crore, inclusive of interest during construction.

The debt requirement accordingly is in the region of about Rs 490 crore. But debt requirement could escalate since one of the lending institutions, ICICI, has backed out a lease financing deal with the project.

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