Germany sanctions Rs 1,600-crore loan to Andhra for power project

First installment of loan proposed to be drawn in May 2005

The German government has sanctioned the much-awaited loan of Rs 1,600 crore to Andhra Pradesh for the construction of the 660-mega watt supercritical thermal power plant at the Vijayawada Thermal Power Station (VTPS).

This plant is the fifth stage expansion of VTPS and the loan amount in terms of unified currency is pegged at around 281.05 million Euros.

A loan agreement to this effect was signed between Kreditanstalt fur Wiederaufbau (KfW) of Germany and the Union government in Delhi on Friday. Ajay Jain, managing director of APGenco, and Andrea Jhonston, director of KfW, signed the agreement in the presence of the union government ministry officials.

About 30 per cent of the loan, ie, close to Rs 480 crore (84.3 million Euros), would be made available as a grant to the state government, as it happens in case of all external aid, by the Government of India. The state government in turn will pass the entire grant amount to APGenco as equity for the project.

In fact, this portion of loan is being offered by a German bank as a soft loan at 0.6 per cent rate of interest. The commercial loan component will attract an interest rate of over 5.5 per cent, according to officials.

"The German loan, which was pending since 1997, was finally made it through following the direct intervention of chief minister Y S Rajasekhara Reddy," D K Panwar, principal secretary (energy) and chairman of APGenco, said here today.

The first installment of the loan is proposed to be drawn in May 2005 by which time the project works are expected to commence, according to a press release issued here.

The total project cost is estimated at Rs 2,706 crore by the Central Electricity Authority (CEA) which has proposed a debt equity ratio of 80:20 for the project. The Rural Electrification Corporation (REC) has already sanctioned a loan of Rs 800 crore for the project while the remaining amount would be mobilised through other financial institutions.

The new thermal unit, which is the first of its kind in terms of supercritical technology and size (as of now the NTPC's 500-mega watt units at Simhadri project is the biggest in capacity) in the country, is scheduled to be completed by March 2008. The installed capacity at VTPS will touch 1,920 MW with the addition of the new unit in three years from now.

Among the other projects in the pipeline, the 420-mega watt Rayalaseema Thermal Power Project (RTPP) stage-2 is expected to be completed by July 2006. The financial closure for the 500-mega watt Bhupalpally Power Plant, which is proposed to be completed in June 2008, is yet to be achieved.

Power pact

• Close to Rs 480 crore would be made available as a grant to state government
• The total project cost is estimated at Rs 2,706 crore by CEA
• The thermal unit, touted as the first of its kind in the country, is scheduled to be completed by March 2008.