Mumbai: Reliance Power Ltd, a unit of the Reliance-Anil Dhirubhai Ambani Group (R-Adag), has achieved financial closure for its coal-fired Rosa power plant, after raising at least Rs2,400 crore from a consortium of domestic financiers for the second phase of the 1,200MW project at Shahjahanpur in Uttar Pradesh, according to a top company official.
Power-packed: The second phase of the project requires a total investment of roughly Rs3,000 crore, which will be funded through a debt-equity ratio of 80:20, implying debt funding requirement of Rs2,400 crore.
Reliance Power is also the most recently listed company—it went public in February 2008—from R-Adag, which is led by billionaire industrialist Anil Ambani. The Rosa plant, to be built in two phases, is expected to become the company’s first revenue generating project.
The first phase, of two units of 300MW each, is expected to be commissioned in the last quarter of 2009, a senior company executive said, on condition of anonymity. He added that with lenders lined up, execution of the second phase—also comprising two units of 300MW each—will be faster as most of the greenfield project development work has already been done.
Equipment has already been ordered from Shanghai Electric Corp. Ltd in China, this executive said.
The second phase will include a dedicated 12km transmission line from the plant to the nearest link on the national transmission grid as power from one 300MW unit—also known as a “merchant power” unit—will be sold to private buyers at commercial rates.
The second phase requires a total investment of roughly Rs3,000 crore, which will be funded through a debt-equity ratio of 80:20, implying debt funding requirement of Rs2,400 crore. It is expected to start commercial operations by the end of 2011. The total project cost of the thermal plant, the two phases put together, will come to Rs6,000 crore.
“A clutch of lenders has sanctioned the finances for the second phase of Rosa. IDBI (Bank) led the consortium and has financed about a quarter of the sum,” the Reliance Power executive said. “The banks and financial institutions are currently in the process of signing all the documents and will finish by mid-June. The average interest rate is about 12%.”
Punjab National Bank, United Bank of India, Life Insurance Corp. of India, Rural Electrification Corp. Ltd, Vijaya Bank and Karur Vysa Bank Ltd are among the 10-12-member consortium, he said.
Yogesh Agarwal, chairman of IDBI Bank Ltd, which part-financed Reliance Power’s 3,960MW plant at Sasan in Madhya Pradesh, said he was “pleased to work with R-Adag”, but declined to give details of the loan for both projects, citing client confidentiality agreements.
This is the second financial closure for the company in as many months—the first was for the Sasan plant. So far, the company has bagged three of four ultra mega power projects put up for bidding by the government and has the largest development pipeline of power plants in the country.
India has a total installed capacity of 147,000MW, but only around 85,000MW is operational at any given point of time. In the five years to 2007, 20,950MW of capacity was added, but was short of the target of 41,110MW set by the Union power ministry. India plans to add 78,577MW by 2012.
Reliance Power’s power projects will have an aggregate capacity of around 32,200MW, according to a company statement. However, the firm is yet to set up a fully operational power plant from the ground up, leading sector analysts say they would prefer to wait and watch.
“The company may be strong on promise, but it hasn’t commissioned a full power project till now. Financial closure clears the first hurdle, but we will wait and watch as clarity emerges on project execution,” said a Mumbai-based analyst with a domestic brokerage firm.
In April, the company in which India’s second largest utility Reliance Infrastructure owns a 45% stake, had raised Rs14,550 crore—the largest debt financing for a project—for the Sasan project.
Girish Solanki, sector analyst with Mumbai-based domestic brokerage Angel Broking Ltd, said the recent financial closure for the Rosa plant was a “positive and significant” development that indicated the company’s ability to raise money even in tight liquidity conditions.
He has a neutral rating on the company.
A 5 February power sector outlook report issued by credit ratings agency Fitch Rating Ltd said that “financial closure of new projects would remain challenging in 2009 though lower interest rates, relaxed external commercial borrowing guidelines and eased lending norms for the domestic banking system could mitigate the financing risk for borrowers with stronger credit profiles”.