Although the counter-guarantee for 1,040 mw Vishakaptnam power project was signed two months ago, the Centre is yet to resolve crucial issues related to coal supply and the transport agreement for the project.
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The finance ministry is yet to indicate whether it will give a letter of comfort to the ministry of coal covering the unforeseen liabilities falling upon Coal India Ltd in the event of the railways failing to deliver coal to the project.
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On the other hand, the ministry of coal has refused to sign the coal supply agreement unless it is assured that the railways' liability does not fall upon the ministry.
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Under the terms, the counter-guarantee will come into effect only after the promoters and the coal ministry sign the coal supply agreement.
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This implies that the power company cannot achieve financial closure until these issues are resolved.
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The coal-fired power project is expected to come up near Vishakaptnam in Andhra Pradesh. It will source coal from the Orissa-based Mahanadi Coalfields Ltd, a subsidiary of Coal India that will supply around 10,000 tones of washed coal to the project daily.
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Coal will be transported by the railways from the mine to the project site.
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The project will require an investment of Rs 6,500 crore and will be financed on a 70:30 debt -equity ratio. The total project equity is around Rs 1,950 crore.
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Its being set up by Hinduja National Power Corporation, a 51:49 joint venture between the Hinduja group and National Power Corporation Ltd of the UK.
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The power project will have a total debt component of around Rs 4,275 crore of which the foreign debt component is $818 million.
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IDBI has given a commitment of Rs 600 crore while State Bank of India is evaluating a proposal to lend Rs 500 crore. The rest of the domestic debt will be raised as syndicated loans from Canbank, Bank of India, Punjab National Bank and Bank of Baroda.
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The group has appointed Chase Manhattan as advisors for the foreign debt component, which is to be finalised following signing of the counter-guarantee. A large part of the foreign debt will be sourced from Japan's Exim Bank.
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The company supplying power to Andhra Pradesh State Electricity Board will charge Rs 2.71 per unit during the first year of operation, which will come down to Rs 1.6 per unit by the 13th year.
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