• PAGE ONE
• INDEX
• HOME

Videocon Power gets another month for financial closure

Our Bureau

CHENNAI, June 24

VIDEOCON Power Ltd has got one more month to achieve financial closure for its 1,050-MW coal-based project in north Chennai.

The deadline expired on Friday and the members of Tamil Nadu Electricity Board (TNEB) have decided to extend the deadline by a month.

However, TNEB has not agreed to an increase in the capital cost of the project as outlined in the firm financial package, which was submitted for the board's approval.

As per the package, the capital cost would be Rs. 4,666.87 crores, an increase of about Rs. 240 crores over the cost of Rs. 4,423.83 crores approved by the Central Electricity Authority during techno-economic clearance.

Videocon maintains that the increased capital cost, mainly under the heads of interest during construction and financing charges, will not result in a higher tariff for TNEB.

But the electricity board is of the opinion that it is the capital cost that matters since the project is an MoU-based one.

Videocon Power signed the escrow agreement with TNEB last December, and was supposed to achieve financial closure within six months.

Another reason for the financial closure getting delayed was the shared facilities agreement for a berth to unload coal at the Ennore Port. However, official sources said that issue has been sorted out.

TNEB wants Videocon to reduce the capital cost to the level approved in the TEC, which the company feels will be quite difficult given the nature of the financial package it has finalised. Also, any further re-working of the package will take a lot of ti me.

Sources said that because of the nature of the financial package _ where most of the foreign debt comes with export credit agency cover _ there has to be some upfront payment to the export credit agencies, which is why the financing charges have gone up.

Moreover, the higher interest during construction in the first four years (the construction period) will be more than offset by the lower interest rates over the next 12 years of the project, the sources pointed out.

Videocon feels that the increase in capital cost will not be reflected in the tariff. It would like the TNEB to carry out an independent study of the tariff.

If there is an increase in tariff, the company is even willing to absorb that cost, the sources added.

According to them, the increase is mainly on account of financing charges, which have gone up by about Rs. 180 crores, and interest during construction, which has gone up by about Rs. 60 crores.

As per the TEC, the equity was Rs. 1,327 crores and the debt Rs. 3,096.67 crores. Of the equity component, the foreign equity was to be $173.11 millions and Indian currency equity, Rs. 729.93 crores. The debt was to be made up of $403.3 millions in forei gn currency and Rs. 1,705 crores as Indian currency.

In the firm financial package submitted to TNEB for approval, the equity is about Rs. 1,400 crores and debt Rs. 3,266.82 crores.

Of the equity component, foreign equity is $300.30 millions and Indian currency equity, Rs. 364 crores. The debt will be made up of $534.25 millions in foreign currency and Rs. 1,423.65 crores in Indian currency.

According to the sources, Videocon Power will have foreign exchange protection for only 45 per cent of the dollar equity.

The foreign currency debt is covered by Hermes of Germany, ERG of Switzerland and SACE of Italy. Domestic financial institutions such as IDBI and ICICI are also involved in funding the project.

The Videocon group holds 51 per cent of the equity, with the rest being held by National Power of the UK, which is also the O&M contractor. Alstom is the EPC contractor.

In the initial years, the project will use imported coal, and will switch over to domestic coal once the captive mine in Orissa is developed.

The development of the mine will depend on the progress of the power project, according to the sources.

In a press release when Videocon signed the escrow agreement in last December, TNEB said that construction was expected to commence by March, 2000.

Power generation from the first unit of 525 MW was scheduled to begin by September, 2003, and from the second unit by January, 2004. The project was expected to feed 7,818 million units to the TNEB grid every year.