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Coal-based power project -- Videocon Power prunes capital cost

N. Ramakrishnan

CHENNAI, July 24

VIDEOCON Power Ltd has submitted a revised financial package for its 1050 MW coal-based power plant in North Chennai, in which it has reduced the capital cost to the level required by the Tamil Nadu Electricity Board (TNEB).

The company had earlier submitted a firm financial package to the TNEB for approval in which the capital cost of the project was pegged at Rs. 4,666.87 crores. The TNEB objected to this capital cost, as the cost approved in the techno-economic clearance given by the Central Electricity Authority was Rs. 4,423.83 crores.

At its board meeting last month, the TNEB did not approve the firm financial package and gave Videocon Power one month to achieve financial closure. That deadline expired on July 22, before which Videocon Power presented its revised package.

According to company sources, the capital cost has been pegged at Rs. 4,423.83 crores, which is what the TNEB wanted. The reduction in cost has been achieved by cutting down the period of construction by two months, thereby reducing the interest during c onstruction, and by absorbing some other costs.

In the firm financial package, the increase in capital cost was mainly because of increase under the heads of interest during construction (Rs. 180 crores) and financing charges (Rs. 60 crores). Company officials pointed out that because of the nature of the package -- where most of the foreign debt came with export credit agency (ECA) cover -- there had to be some upfront payment to the ECAs, which was why the financing charges had increased.

TNEB sources said the electricity board needed to study the package before it could take any decision. It was pointed out that the company was given time till July 22 to achieve financial closure, whereas it had only submitted a revised package.

Only after the financial package is approved can the company achieve financial closure.

Meanwhile, at its board meeting last week, the TNEB approved the shared facilities agreement for the Videocon project. This project will use the port coming up at Ennore to unload coal. One berth has been allotted to Videocon Power and hence it had to si gn an agreement with the TNEB for using this facility.

The Videocon project is an MoU-based project and is among the six independent power projects that have obtained escrow cover in Tamil Nadu.