Ispat Appoints 3 Banks For $850m Bhadravati Debt

The Mittals-promoted Ispat Industries has appointed West Merchant Bank, Hong Kong and Shanghai Banking Corporation and Bank Paribas as arrangers for the $850 million foreign debt component for the 1000 mw Bhadravati power project in Maharashtra. The project is being set up by the Ispat group subsidiary Central India Power Company.

The total project cost which has been pegged at $1.09 billion. The debt component of the project will be $469 million which will be shared between Ispat Industries, GEC, and EDF of France.

While the Ispat group will hold 53 per cent of the equity, GEC will hold 31.8 per cent of the stake, and EDF will hold the remaining 15.2 per cent stake in the venture.

The domestic debt which will be shared between domestic institutions will be to the tune of $244 million, sources said. The project is expected to reach financial closure by December this year the sources said.

The Mittals signed the power purchase agreement for the project earlier this month, following the central governe clearance of the counter guarantee for the project. The counter guarantee will cover the foreign debt on termination of the contract with the state government. ECGD of UK and Coface of France will provide guarantees for the foreign loans.

It may be mentioned that the Mittals had decided to pare the project cost by $20 million for the Bhadravati project.

Besides the Bhadravati project in Maharashtra the group is also setting up another plant at Vemagiri in Andhra Pradesh. In Telecom, the group had Letter of Intent (LoI) in basic telecom circles in Maharashtra and Karnataka.

Ispat is also entering the LNG business and the Cabinet Committee on Foreign Investment has recently approved a proposal by Ispat Industries to form Ispat Energy with 100 per cent foreign investment. The new company would set up a liquefied natural gas terminal in Andhra Pradesh.

Ispat Industries has also decided to spin off its 354-mw captive power plant at its integrated steel plant at Dolvi near Mumbai into a separate company called Ispat Energy Ltd. The captive unit was part of Ispat's hot rolled coil project.

The captive power plant will be supplying its excess power to Maharashtra State Electricity Board.