Paguthan Power Project Achieves Financial Closure

The Torrent-led 655-mw Paguthan power project in Gujarat has achieved financial closure. A consortium of 17 domestic lenders led by the Industrial Development Bank of India will contribute Rs 3,010 crore of rupee debt. Foreign currency vendor credit worth about Rs 1,440 crore will be sourced from three German banks.

Two smaller tranches of Rs 80 crore and Rs 110 crore will be raised in the form of foreign currency commercial loans. The Rs 5,495 crore project has an equity component of Rs 845 crore. A gas-fired power plant, the Paguthan project christened Gujarat Torrent Energy Corporation (GTEC) does not have a counter guarantee from the Union government for financial obligations of the Gujarat State Electricity Board.

The Paguthan project is the fourth private power project to go in for financial closure. To date, Enron-promoted Dabhol Power Corporation, GVK-led Jegurupadu power project and Spectrum Powers Godavari project have achieved financial closure.

The promoters of GTEC are: Torrent Exports (which holds 30 per cent of the equity), UKs PowerGen International (20 per cent), state-owned Gujarat Power Corporation Ltd (12 per cent) and Siemens AG (the equipment procurement and construction contractor which holds 10 per cent). The financing plan envisages a public offering for the remaining 28 per cent, which is expected before full commissioning next year.

Although the 20-year project does not have a Union government guarantee, it does have a state government guarantee. Under the arrangement, the Gujarat government will stand guarantee for about 12 months revenue due to GTEC from GSEB. In addition, it has also undertaken to increase the guarantee limit if the original guarantee is insufficient to meet revenue or termination payments.

The GTEC financing package involves a limited recourse structure, with sponsor support envisaged in certain events. The Mehtas, Torrent promoters, have offloaded 40 per cent stake of a holding company to US investors. The equity of the holding company will be used to finance their investments in GTEC.

The commercial risk of most of the project debt has been taken by Indian lenders, led by IDBI. German export credit agency Hermes has taken on the political risk of the Rs 1,440 crore foreign currency vendor credit loan raised from KfW, Bayerische Landesbank and Berliner Handelsbank Frankfurt. The commercial risk on the loan is guaranteed by Indian lenders. The loan is tied to the equipment export contract of Siemens AG.

The financing package for the project also includes a Rs 110 crore foreign currency loan (in Deutsche mark) arranged by the State Bank of India, Frankfurt, which was utilised last year to make the down payment for the Siemens AG equipment supply. Apart from the Rs 3,010 crore sourced by the Indian consortium, another Rs 80 crore Deutsche mark tranche has been raised from the foreign lines of credit of domestic lenders.