The Tamil Nadu State Electricity Board (TNEB) has agreed to keep an additional buffer amount equal to 37 days accruals to Videocon Power, promoters of the 1000 mw North Madras power project in Tamil Nadu.
The agreement means the board will have to keep an amount of Rs 100 crore along with the escrow account.
The promoters of the project have recently agreed to sign a power purchase agreement (PPA) with the board.
The agreement, which means an in principle clearance from the promoters, comes after the chairman of the board Om Kumar raised some objections on the heat rate that was quoted in the PPA.
An escrow arrangement between the promoters of a project and the board is made to cover the risks involved in ensuring a regular cash flow towards the project for the sale of power.
Based on a study by Crisil, the state government had earlier indicated that it would only form a pooled escrow for all the private power projects in the state.
Under this arrangement, the board found that it could not support more than 4,000 mw worth of private power projects in the state. The board's move to provide a buffer to Videocon Power indicates that the board seems to have ignored the recommendations made by Crisil and is now in favour of direct escrow arrangements. Under this, the creditors have the first charge on this account.
Videocon has a 55 per cent equity stake in the project with ABB holding the remaining 45 per cent.
The promoters have decided to peg the debt-equity ratio for the project at 70:30.
Videocon Power will fund 70 per cent of the project through loans while the balance would be funded through equity. The equity base of the company is about $400 million.
The project is expected to come on stream by the year 2000 once the PPA is formally signed with the board.
The company will have to get its project costs vetted by the CEA once the project comes on stream.
