Jun 23 2000
FIs take 15% in S Kumarsí hydel project
IN A major departure from past practice, leading financial institutions such as LIC, GIC and IDBI have picked up 15 per cent stake in the Rs 2,000-crore hydel project promoted by the S Kumars Group.
This is the first time that FIs are picking up an equity stake in any power project in the country. The move appears to be in tandem with their recent strategy to help power projects achieve financial closure by contributing to their equity.
The FIs are expected to invest around Rs 100 crore in the Rs 600-crore equity base of the power company. In the past, institutions have restricted their participation in power projects to debt. The institutions are believed to be buying the 15 per cent stake from one of the partners.
The initial promoters, S Kumars, are restructuring the equity of Shree Maheshwar Hydel Power Corporation, which is setting up the 400-MW project in Madhya Pradesh.
According to a senior official of S Kumars, the project has already tied up the debt portion (Rs 1,400 crore), and is finalising the equity structure. The new partner, Ogden Energy of the US, is picking up 49 per cent in the project, earlier held by the German partner Bayernwerke, before pulling out of the project.
"The remaining 51 per cent stake will be held by the Indian promoters, equipment suppliers (Siemens and ABB), and Indian financial institutions," the official told ET. S Kumars and equipment suppliers are expected to share 36 per cent of the equity.
The project will have a 70:30 debt-equity ratio. "Debt is provided by Power Finance Corporation, IFCI, IDBI, SBI, Dena Bank and Punjab National Bank. Also, Bank of Baroda, Canara Bank and Central Bank have picked up guarantees with a total exposure of $132 million," said the official.
The Madhya Pradesh Electricity Board recently signed an escrow agreement with the promoters, making the project the first one to have achieved financial closure in the state. The issue of escrow cover to four power projects in the state attracted controversy and involved a legal tangle, till the Supreme Court cleared it recently.
The Maheshwar hydel project is under construction at Mandaleshwar, about 100 km south-west of Indore. The project is expected to star generating electricity by 2004. "We have completed excavation in powerhouse area, and started work for the main dam," said the company official.
Industry sources said FIs were taking a serious look at various power projects in the country, especially hydel projects which are very cost-effective with long gestation period. In case of Maheshwar project, the levelised tariff for the concession period of 35 years is expected to be around Rs 4.50 per unit.
According to the company officials, the project has acquired the required techno-economic clearance and all other relevant environmental clearances from the authorities.