Odisha lays down conditions to guarantee Rs 1,000 cr Gridco bond

The Odisha government has come up with a payment mechanism for Grid Corporation of Odisha’s (Gridco) Rs 1,000 crore bond to be issued shortly, on condition of giving its guarantee for the long-term loan paper.

According to the guidelines, the state-run bulk power purchaser will have to deposit the interest amount 15 days ahead of the payment date at a designated bank account, which must be opened in a nationalised bank.

If it fails to deposit the entire amount, then the shortfall amount must be provided by the revenue account of Gridco through an escrow arrangement 10 days before the due date, it said.

 

In case of Gridco’s revenue amount falling short of due payments, then it will have to ask the state finance department for the payments seven days ahead of the due date and the government will take steps to release payments three days before the date of payment.

"If the state government does not transfer required funds to the designated account, the trustee (of Gridco bond account) shall have the right to invoke government guarantee at the close of the business on or after due date,” the government informed Gridco while intimating its recommendation for the bond.

The bulk power purchaser has plans to raise funds by issuing bonds as a measure to check its swelling debt burden and to meet other expenses amid bankers’ refusal to lend.

Senior officials of Gridco are already in discussion with several rating agencies such as SME Rating Agency (SMERA) and Fitch since June this year, to fetch best possible rating for the bond, which may be issued for a period of seven years.

It has plans to pay only interest for the first four years, and will pay the principal amount in next three years with 30:30:40 ratio. The cash-strapped power trader hopes to gather revenue from 2014-15 onwards betting on upcoming private power plants.

As per an agreement with Gridco, these companies will have to sell 12-14 per cent of their power to the state-run entity at a fixed cost once they start generation. Gridco hopes to make money by selling power in domestic markets or in power exchanges.