Hindujas To Seek $800m Loan For Vizag Project

The Hinduja group will shortly negotiate 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, Ashok Hinduja, chief of the groups Indian operations, said that the counter-guarantee for the project will be cleared by February 20. The inter-ministerial high power board on power sector, chaired by the cabinet secretary, had in january decided to clear the counter guarantee and a decision by the finance ministry on the basis of the revised power purchase agreement is expected, he said.

 

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

The Vishakhapatnam thermal power project, one of the eight fast track projects sought to be covered under the centres counter guarantee, has been hanging fire for years due to the absence of coal linkages, with the government telling the promoters at one time to explore import of fuel.

Hinduja Power Co, which is promoting the project, had sought a $650 million loan from the Japanese Exim Bank mainly to procure machinery, besides a credit of $150 million from a UK-based financial company, company sources said. However, the loan applications could not be considered by the lending agencies in the absence of the counter-guarantee and the final fuel supply agreement for the project.

Company sources said that MCL, a Coal India subsidiary, 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 needed to maintain the generation at 68.5 per cent of the 1040 mw capacity. Under them, MCL would have to bear the full capital cost, 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 8.5 per cent of capacity.

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

When contacted, the Japanese Exim bank officials said that the $650 million loan application could be considered only after the necessary papers were submitted by the promoters. Hindujas had applied for the loan in 1996 and the counter-guarantee, PPA and fuel supply agreement was considered necessary as a security package . The loan is sought to procure machinery from Japanese companies - Sumitomo Corporation and Hitachi - for the power project, bank sources said.