Mumbai: Reliance Power Ltd., which sold shares in India’s biggest initial public offering last year, may face delays in building its largest coal-fired plants as the global credit crunch holds up loan approvals, an analyst said. The company denies any delay in construction.
The delay in raising funds may hurt Sasan’s completion schedule, said Abhineet Anand, Mumbai-based analyst at Antique Broking Ltd. The timing of raising funds is key to Sasan and other large Indian power projects.
Mumbai-based Reliance Power is Rs25 billion short of the Rs145 billion ($3 billion) it needs to borrow for its first 4,000-megawatt plant at Sasan in central India, Chief Executive Officer Jayarama Chalasani said in an interview. Reliance Power expects to raise funds for a similar plant at Krishnapatnam in the south by June, he said.
The lead time for getting loans has increased, Chalasani said by telephone in Mumbai. Work on the plant at Sasan in Madhya Pradesh state has started to ensure loan delays don’t affect the completion schedule, he said.
On hold: A company image of the land in Madhya Pradesh where the largest coal-fired power plant is going to come up.
Reliance Power, controlled by billionaire Anil Ambani, sought to borrow $4 billion overseas for the projects by December and was forced to seek rupee loans instead after banks led by Standard Chartered Plc asked for more time to study proposals. A dispute over the supply of natural gas has stalled the utility’s largest plant in northern India.
Reliance Power’s shares have declined 56% since they started trading on 11 February 2008, compared with a 42% decline in the Bombay Stock Exchange’s Sensitive Index in the same period. The stock fell 0.4% to close at Rs102.8 in Mumbai today.
The company, which is yet to start producing power, has borrowed Rs120 billion for Sasan from a group of 12 banks led by the State Bank of India and expects to get the rest by the end of this month, Chalasani said.
The rupee debt will be repaid when the company secures dollar-denominated loans from overseas banks, the CEO said. Reliance Power has appointed Standard Chartered as lead banker and China Development Bank Corp. for the overseas borrowings.
The overseas loan for Sasan was delayed because it is the largest to be raised on a project-finance basis, Chalasani said yesterday. Banks, therefore, need more time to examine the expense side of the business including mining technology and capital and operating expenses. This is much more complicated and is completely different from financing any other power project.
He declined to give a timeline for obtaining overseas loans.
The first phase of the Sasan project is scheduled to be completed by December 2011 and the second by March 2013. The Krishnapatnam plant in Andhra Pradesh is due to start in 2013.
Ultra Mega Projects
The company will be awarded another 4,000-megawatt plant at Tilaiya in the eastern state of Jharkhand after it bid the lowest price for producing electricity. Reliance Power will get a letter of intent tomorrow, state-owned Power Finance Corp. said in an e-mailed statement in New Delhi today.
The three coal-fired plants are among 12 so-called ultra mega power projects that the government is auctioning to increase India’s generation capacity by 33%. Each project may cost as much as Rs200 billion, Chairman Ambani said 23 September.
Reliance Power spent Rs26.86 billion from the proceeds of last year’s share sale on the Sasan and Krishnapatnam plants and on other smaller projects as of 31 December, the company said in a 22 January statement to the Bombay Stock Exchange.