Genco may rope in IL&FS for mega power projects

The state-owned Andhra Pradesh Power Generation Corporation (APGenco) is likely to rope in IL&FS as developer for the proposed two mega power projects, one at Krishnapatnam and the other to be located somewhere between Hyderabad and Karimnagar.

A proposal to this effect has been sent by the power utility to the state government for approval, sources told Business Standard.

APGenco wants the developer to get all the formalities, including necessary clearances and land acquisition, completed within six months from the date of awarding the work to facilitate the execution of both the projects at the earliest.

The role of the developer will lapse one the project commences.

The proposed super critical thermal power project at the port town of Krishnapatnam would be of 2,400 megawatt capacity comprising three units of 800 mw each and the second mega project, which is a gas-based project, is of 2,100 mw capacity.

According to D Prabhakar Rao, director of APGenco, the approximate cost of these projects would be around Rs 4.5 crore per megawatt for the thermal project and around Rs 3.5 crore for the gas project.

APGenco proposes to create these two projects as separate profit centres by entering into separate power purchase agreements (PPAs) with Discoms. The power utility plans to float separate SPVs for the two projects, he said.

It is the idea of the Andhra Pradesh Electricity Regulatory Commission (Aperc) to make each project of APGenco to be individually accountable through signing separate PPAs in place of a single PPA.

But the power utility has expressed its inability to do so immediately, citing issues involving liabilities of the corporation.

The power utility has also sought the permission of Aperc to allow the mandatory 14 per cent rate of return on the notional equity, which would be 20 per cent of the project cost to be borne by APGenco on these projects.

Though, the Japan Bank for International Co-operation (JBIC) and the KfW of Germany are willing to fund the Krishnapatnam project, which may cost around Rs 11,000 crore, the Government of India's Rural Electrification Corporation and Power Finance Corporation have also agreed to provide loan to these projects, Prabhakar Rao said.

Whether a single agency will come forward to fund the entire cost of the project or loan from multiple agencies will be combined to achieve the financial closure for the projects is yet to be known.

It is also not clear whether these funding agencies are willing to accept the notional equity proposed to be extended by the power utility.

As regards the gas power project, the state government has decided to move the location of the unit from Shankarpally in Ranga Reddy district on account of non-availability of water to some other place between Hyderabad and Karimnagar through which the proposed gas trunk line from Kakinada to Gujarat passes.

"We have identified 3-4 sites on the stretch between Hyderabad and Karimnagar but a final location is yet to be identified," an APGenco official said.