Date:11/05/2005 URL: http://www.thehindubusinessline.com/2005/05/11/stories/2005051102700100.htm

Back Alternative payment security model — Lenders finalise norms for funding power projects

Anil Sasi

New Delhi , May 10

WITH over ten major power projects in the pipeline planning to sell their generation to power trading utilities, financial institutions led by SBI, ICICI, IDBI and PFC have drawn out an alternative payment security model with a checklist of norms for funding such projects.

Among the prerequisites, the lenders plan to look at capital adequacy of the trader in relation with the size of the power station. Also, promoters of the projects would have to ensure adequacy of transmission linkages to the extent that the trader is able to divert electricity if the single largest buyer of power from a project decides not to draw electricity for any reason.

The promoters would also have to satisfy the lenders on viability of power, based on the final cost of delivered electricity to the end-user, incorporating the wheeling charges and trading margins of the trader, institutional sources involved in the exercise said.

Essar Power's 1,500-MW Hazira project, Jindal's 1,000-MW Raigarh project, Nagarjuna Power Corporation's 1,015-MW Mangalore project and the Jaypee group's 1,000-MW Karcham Wangtoo hydroelectric project are among those where the promoters are in talks with power trading companies for offtake of electricity, instead of selling it to the State electricity boards or other distribution utilities.

In the case of these new projects, traders would evacuate power directly and then sell it to one or more distribution utilities or to high-tension consumers directly.

"A number of major power projects in the pipeline, with cumulative installed capacity of over 6,000 MW, have firmed up plans to sell power directly to power traders. Since institutions finance power projects largely in the form of syndicates, we have jointly worked out the broad contours of the financing plan of such projects," an executive with one of the institutions said.

According to industry players, while the promoters of most of the projects are in talks with PTC India Ltd for selling the entire generation from their plants, other traders such as NTPC Vidyut Vyapar Nigam Ltd, Reliance Energy, Tata Power, Essar Power and Amalgamated Power are also in the fray for trading assignments.

A majority of the projects where traders are evacuating power are believed to be extremely viable in terms of their tariff. The retail tariff for the Nagarjuna project is expected be at around Rs 2.08 per unit, for Essar Power to be around Rs 2.20 per unit, while in the case of the Jaypee group's project it would be around Rs 2.08 per unit, industry sources said.