Essar Power to get Rs 1200 cr from US Exim

1500 mw Hazira project

Essar Power Ltd has signed a debt syndication agreement with US Exim Bank for Rs 1,200 crore to part-finance its proposed 1500 mw power plant at Hazira in Surat district.

The Power Finance Corporation (PFC) has already sanctioned Rs 550 crore towards the project cost.

Essar Power has also entered into a power sales agreement with state-run PTC Ltd, which would pick up the entire generation from the plant, expected to be commissioned within two years from the date of financial closure.

Arun K Srivastava, managing director of Essar Power, said on Monday, "The project will cost us Rs 4,050 crore of which Rs 800 crore will be equity funds and Rs 3,250 crore will be raised through debt. With the US Exim Bank sanctioning Rs 1,200 crore and PFC's debt of Rs 550 crore, we are in a comfortable position as far project finance is concerned."

SBI Capital Markets and PFC are tying up the balance funding of Rs 1,400 crore required for the project. The project is expected to achieve financial closure by September 2005.

"We have already acquired land for the plant, which has been given a mega power plant status by the Government of India, while environmental clearances also are with us. We have signed the water supply with the Government of Gujarat and we hope to sign a gas purchase agreement with state enterprise Gujarat State Petroleum Corporation Ltd (GSPCL) shortly," Srivastava said.

Primary discussions for the gas-based plant has been completed. According to sources in GSPCL, the corporation is at present working out the gas price for the power plant following which during second half of the year a gas sales agreement would be signed with Essar Power.

"We are aiming to produce power at Rs 2.35 per unit, which will be a very cost-effective proposition for the buyers," Srivastava said. This plant comes in addition to Essar's existing 515 mw unit located at Hazira.

The Essar group is also looking at opportunities in eastern India for a steel plant and power plant.

According to Srivastava, Essar Steel is planning to set up a steel plant at Orissa and Jharkhand and has started negotiations with respective state governments for regular supply of coal for this..

"The steel plant part is being taken care of by the team in Essar Steel and the moment any of these state governments gives a nod for regular supply of fuel, we would set up the power plants too," he added.