Rating firms won't assess mega plans

The power ministry has shelved plans to engage rating agencies for undertaking credit risk assessment of the ambitious 4,000 Mw ultra mega power plants, each of which would entail an investment of Rs 16,000 crore.

"The plan (to hire rating agencies) has been dropped as it was not considered necessary at this stage... Nor was it workable," said official sources.

Sources said Power Finance Corporation had invited four rating agencies "" ICRA, Crisil, Fitch and Care "" for discussions.

However, the fees these agencies had sought was "very high and unreasonable", sources said, but asserted that the decision would not affect the viability of these projects.

The power ministry earlier wanted to engage rating agencies with a view to providing a level of comfort to banks and financial institutions lending to these projects. The measure was aimed at improving the bankability of these projects, facilitate financial closure and activate the bond market as a source of long-term funding.

These seven projects "" to be set up in Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Andhra Pradesh, Orissa and Chattisgarh "" would be funded in a debt-equity ratio of 70:30 and hence would require massive borrowings to the tune of about Rs 12,000 crore each.

It was also thought that if PFC conducts rating of these projects, prospective developers would include it in their tariff bids. This might also have impacted the final cost of generation of electricity, sources said.

Moreover, the funds for executing the projects have to be raised by developers (the winning consortia in the tariff-based bidding), sources said, adding they could themselves engage rating agencies after the award of the project.

PFC has already invited expressions of interest for the projects at Sasan (Madhya Pradesh), Mundra (Gujarat), Girye (Maharashtra) and Tadri (Karnataka). It has formed shell companies for each of these projects to get all necessary clearances before transferring to developers for execution.

The Sasan and Mundra projects are expected to be transferred to developers by the end of this year, while the other projects would be transferred in subsequent months.

Meanwhile, the board of directors of PFC has cleared formation of shell companies for Krishnapatnam in Andhra Pradesh and at Bhasma in Orissa.

The two projects would be put on the fast track but would be behind the other projects by about six months. The seventh project "" at Akaltara in Chattisgarh "" has been put on hold due to lack of cooperation from the state government.