The Hindu Business Line : PFC sanctions Rs 530 cr for Essar Power project

POWER Finance Corporation (PFC) has agreed to become the lead financier for Essar Power's 1,500-MW expansion project by extending a loan of Rs 530 crore.

The Essar group is in talks with other domestic and international institutions to raise Rs 3,000 crore for the Rs 4,000-crore project.

A senior Essar group official said: "PFC has committed Rs 530 crore in January. SBI has evinced keen interest in the project. We are also in talks with external agencies like US Exim for about Rs 1,000-crore debt. The promoters will bring in about Rs 1,000 crore. We hope to achieve financial closure by July this year."

The borrowing programme will see the Essar group's debt-equity ratio rise from 1.14:1 to 2:1, the official said.

On whether the rising interest rates would affect the company's borrowing programme, the official said that the company would not have to worry if the increase were up to 50 basis points (half a percentage point).

"We do expect the interest rates to rise, but not so much as to cause concern. At the same time, the rupee is appreciating against the dollar, so the gains on our external borrowings it may partly neutralise any adverse impact due to the hardening interest rates."

Essar Power has already signed a power purchase agreement to sell the power produced from the new capacity to Power Trading Corporation.

It has also tied-up with the Gujarat State Petroleum Corporation for liquefied natural gas for the combined cycle power plant.

Essar Power currently operates a 515-MW combined cycle plant at Hazira.

It sells 300 MW power to the Gujarat Electricity Board and the rest to its group company, Essar Steel.

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