JSW Energy lifeline for Bengal project

JSW Energy has provided the much-needed lifeline for the group’s Rs 35,000 crore project in Bengal, by taking up the power project .

JSW Energy and JSW Bengal Steel Ltd will form a special purpose vehicle (SPV) for setting up a power plant of 1,600MW capacity in West Bengal, with a shareholding of 26 per cent and 74 per cent, respectively. The estimated project cost is Rs 7,680 crore, which is proposed to be funded by debt and equity in the ratio of 3:1.

Biswadip Gupta, joint managing director and chief executive officer, JSW Bengal Steel said, the investment in the first phase of the project was Rs 15,000 crore, but with the power project being transferred to the SPV, it would come down by Rs 3,500 crore.

The electricity generated from the power plant is to be used for the steel plant and surplus power would be supplied to the West Bengal State Electricity Board.

The project—which has all the clearances in place, as well as entire land, coking coal and steam coal mines—is running behind schedule as the company could not achieve the financial closure due to the slowdown.

The first phase of the project was supposed to be commissioned by 2013 and is now likely to be in 2014-15. However, Gupta said that the company was trying to squeeze out the delay.

The financial closure for the power project would be in October 2010 while the steel project would be in April 2011.

Krishna Deshika, joint group chief financial officer said JSW, said, bankers had advised not to pursue two projects simultaneously. The expansion at Vijaynagar from seven to 10 million tonnes would have to be completed by March 2011 after which the Bengal would be taken up.

JSW Steel entered into a development agreement in 2007 with the government of West Bengal government and the West Bengal Minerals Development and Trading Company and West Bengal Industrial Development Corporation for a 10 million tonne integrated steel steel plant and associated power plant at Salboni in the West Midnapore district of West Bengal.