Hindujas To Negotiate $800m Loan

The Hinduja group will shortly begin negotiations with foreign lending agencies for credit of over $800 million to part finance its $1.2 billion thermal power project in Vishakhapatnam.

Having clinched the coal supply agreement with Mahanadi Coal Ltd for supply of 4.8 million tonne washed coal, chief of the group's Indian operations, Ashok Hinduja said counter guarantee for the project will be cleared by February 20.

He said that the inter-ministerial high power board on power sector, chaired by the cabinet secretary, had decided in January to clear the counter guarantee for the project by February 20 and the finance ministry would take a final view on the basis of the revised power purchase agreement.

 

"After getting the counter guarantee, we will negotiate for finances, which have been more or less agreed to," he added. Asked about the financial closure for the project with a debt-equity ratio of 70:30, Hinduja said, "it may take about four months."

Vishakhapatnam Thermal Power Project (VTPP), one of the eight fast track projects sought to be covered under the centre's counter guarantee, was hanging fire for years due to absence of coal linkages, with the government telling the promoters at one time to explore import of fuel.

Hinduja Power Company, which is promoting VTPP, had sought a $650 million loan from the Japanese Export and Import (J-Exim) Bank mainly to procure machinery, besides a credit of $150 million from UK-based ECGC, company sources said.

However, the loan applications could not be considered by the lending agencies in the absence of counter-guarantee and final fuel supply agreement for the project.

Company sources said that Mahanadi Coal Ltd (MCL), a subsidiary of Coal India (CIL), communicated its agreement on Sunday to supply and transport 4.8 million tonne coal for which CIL would set up a washery.

The agreement has punitive clauses against any delay or interruption in fuel supply, whereby MCL would have to bear the full capital cost (FCC) for any break in supply, to keep the generation at 68.5 per cent of 1040 mw capacity of VTPP, company sources said.

Asked about the agreement with transporting agencies, they said it would be between MCL and railways to ensure the supply of coal and the agreement is also for some penalty clauses in case of supply disruptions for generation beyond 68.5 per cent of capacity.

The company is working on the final details with the Andhra Pradesh authorities for a revised power purchase agreement, to incorporate the supply arrangements.

J-Exim sources said that the $650 million loan application could be considered only after the necessary papers were submitted by the promoters.

The Hindujas had applied for the loan in 1996 and counter guarantee, PPA and fuel supply agreement was considered necessary as a 'security package' for the loan as financial institutions would not stand guarantee for such a loan, they added.

The loan is sought to procure machinery from Japanese companies Sumitomo Corporation and Hitachi for the power project, bank sources said.

Hindujas had also sought tie-ups with domestic financial institutions for some rupee loans and corporation sources said that bulk of the financing would come from foreign loans.