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Thursday, Mar 10, 2005

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PFC board okays debt package for Nagarjuna Power's Mangalore project

C. Shivkumar

Bangalore , March 9

THE board of the Power Finance Corporation has cleared the debt-financing package for the 1,015-MW power project near Mangalore, promoted by Nagarjuna Power Corporation Ltd (NPCL).

Sources said that the Rs 4,400-crore project is now expected to achieve wet financial closure by May this year. Wet financial closure implies lenders' readiness to disburse the committed funds. Once this milestone is achieved, NPCL will become the first privately promoted mega thermal project to reach full financial closure. PFC's funding offer is for 12 years at an interest rate of 7.25 per cent.

The sources said that the lending consortium for the estimated Rs 3,080-crore project debt included Rural Electrification Corporation Ltd, Hudco, Life Insurance Corporation, State Bank of Mysore, State Bank of Travancore, and Canara Bank. PFC is the lead arranger.

The project funding by the financial institutions was on the strength of a three-tier payment security package comprising a letter of credit, an escrow cover for up to 1.25 times of the outstanding billing and a State Government guarantee.

The project equity in NPCL, estimated at Rs 1,320 crore, is being brought in by the Nagarjuna Fertiliser group and associated companies.

The promoter group is expected to hold 51 per cent. Foreign investors, who are yet to be finalised, would hold another 49 per cent. PFC's clearance of the project funding comes after the approval of the revised terms of the power purchase agreement by the State Government-owned Karnataka Power Transmission Corporation Ltd in January this year. Under these terms, the rate of return has been fixed at 14 per cent on the basis of 80 per cent plant load factor.

NPCL has also entered into fuel supply arrangements with international coal suppliers for 3 million tonnes with a calorific value of 6,000 kilocalories. The project would be the single largest user of imported coal in the country.

The company has already finalised BHEL as the engineering procurement and construction (EPC) contractor for the project and Simplex Constructions for the civil engineering component. The EPC component is expected to cost at least Rs 2,500 crore and the civil works another Rs 980 crore.

The first phase of the project, comprising 507.5 MW, is expected to be commissioned 38 months after full financial closure and the second after 42 months.

This implies, the sources said, the project commissioning would extend into the Eleventh Plan Period.

Once the project is fully commissioned by the end of 2007, the addition to the State grid would be at least about 7,600 million units per annum assuming a plant load factor of 85 per cent. The first year power tariff from the project is estimated at Rs 2 a unit in line with the guidelines of the Ministry of Power.

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