Nagarjuna's power project gets 'mega' status, PFC assistance

The Rs 4,400 crore 1,015 mw thermal powered Nagarjuna Power Project, scheduled to come up near Mangalore in Karnataka, has finalised the funding of its Rs 3,000 crore debt from Power Finance Corporation.

The project has also been accorded the 'mega power project' status from the Union ministry of power.

This status will mean that the Nagarjuna Group will be exempt from excise and related duties relating to imports for the power project.

The company is also finalising the engineering, procurement and construction (EPC) contract worth $700 million shortly and the contractor will either be a Chinese consortium led by Harbin or BHEL.

The power purchase agreement (PPA) with Karnataka Power Transmission Corporation Ltd (KPTCL) may also be sewn up within two months time and the cost of power is expected to be in the range of Rs 2.10 - Rs 2.50 per mw.

Nagarjuna Group is also close to finalising a strategic investor to divest 49 per cent of the project to a south-east Asian company who will also be in charge for the operations & maintenance of the plant.

The plant load factor is expected to be around 80-85 per cent and the debt-equity ratio is to be in the range of 70:30.

The government of Karnataka during February 2004 initiated the payment security mechanism which approved the setting up of an Escrow account covering the debt portion of the Nagarjuna Power project cost.

The revised power policy of Karnataka will also envisage a state government guarantee and an irrevocable revolving letter of credit for an amount equal to at least one month's capacity charge and energy charge on 85 per cent plant load factor (PLF).

The power project will come up 30 km from the coastal town of Udupi near Mangalore, and after all the approvals in place with the promoters, the project will start producing power in 38 months time.

The inflow of power from this power project is expected to aid to a certain extent the chronically power deficit State of Karnataka.

At present the demand gap is 2250 mw and according to a recent load forecast study the deficit is expected to increase top 3,450 mw by end of 2006-07 and to 5,300 mw by 2011-12.

In addition to Nagarjuna power project, the state is actively pushing through four more power projects which will collectively generate around 2,500 mw.