Hyderabad: KfW German Development Bank and the Rural Electrification Corp. (REC) have expressed interest in funding the entire debt requirement of around Rs6,756 crore for the 1,600MW Krishnapatnam power project.
The coal-fired power project is coming up at an investment of Rs8,432 crore near Krishnapatnam port in Andhra Pradesh’s Nellore district, around 200km north of Chennai.
The first phase of the project, involving 800MW, will be launched by the end of 2010 and the second phase with an additional 600MW will go on stream by June 2011.
The Krishnapatnam project is being implemented on fast-track mode through a special purpose vehicle (SPV) called the Andhra Pradesh Power Development Co. Ltd (APPDCL), a 50:50 joint venture between AP Power Generation Corp. (AP Genco) and Infrastructure Leasing & Financial Services (IL&FS).
AP Genco, India's third-largest state-owned power generating utility, after NTPC and Maharashtra Power Generation Co., currently has a power generation capacity of 6,709MW, comprising 3,172MW of thermal, 3,856MW of hydro and 2MW of wind power.
AP Genco’s director finance, D. Prabhakar Rao, said IL&FS would continue to hold 50% equity in the SPV till the EPC (engineering, procurement and construction) contracts are awarded. Later, their holding would be transferred to AP Genco, which in turn would be offered to the state-based?power?distribution?firms.
“We have already invited international competitive bids for award of EPC contract. The pre-qualification process has been completed and four companies were qualified to bid for EPC. These include the Japan-based Marubeni Corp. and Hitachi Ltd, Korean company Doosan and Indian public sector player Bhel. We expect to finalize the EPC contract by June 2007,” said APPDCL advisor P. Kodandarami Reddy.
The project will be funded through 20% equity and 80% debt, amounting to Rs1,686 crore and Rs6,756 crore, respectively. “KfW has in principle expressed its willingness to enhance the assistance to €650 million (Rs3,640 crore). Further, REC, which has agreed to extend financial assistance of around Rs2,846 crore, has in-principle agreed to pump in additional funds to meet shortfall, if any. We expect to achieve financial closure by month-end,” Reddy said.
“As Krishnapatnam falls under the category of mega-power project, it gets the benefits of customs duty, excise duty exemption and hence the bid price is likely to be in the range of Rs5-5.5 crore per MW,” Reddy said.
Of the already sanctioned loan of €281.06 million by KfW, an amount of €121.54 million is soft loan and a €159.52 million is market loan.
While soft loan carries an interest rate of 0.75% with repayment period of 40 years, the market loan attracts a rate of 5.31% with repayment schedule of 12 years.
“With the domestic financial institutions and banks unable to lend at competitive interest rates, there has been an increasing trend of power utilities approaching the international funding agencies to avail of low-cost funding. This would eventually bring down the cost of power,” a senior research analyst with a leading broking house in Mumbai said, while preferring not to be quoted citing the firm’s policy.
AP Genco plans to add power-generating capacity of 8,963MW at an investment of Rs35,010 crore during the 11th Plan period. The power utility will more than double its capacity to 15,724MW by 2012.