Rolls Royce will pick up 49 per cent stake in a captive power plant being set up by the STI group and is looking at various other joint ventures in the country.
This is the first time that a foreign company is picking up equity stake in a captive power plant. Since the power policy stipulates that foreign equity component must be restricted 49 per cent, international players are not comfortable entering into joint ventures.
However, the interest shown by Rolls Royce indicates an increase in comfort levels.
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Rolls Royce had recently picked up 31 per cent stake in Spectrum Power, an independent power producer. STI India Vidyut Private Ltd is implementing a 25 mega watt captive power plant within the premises of the STI textile plant in Indore.
Industrial Development Bank of India (IDBI) has appraised the cost of the project at Rs 89.4 crore with a debt-equity ratio of 70:30, according to Ramesh B Baheti, executive chairman of the STI group companies.
IDBI has sanctioned a foreign currency loan of $5.86 million (Rs 25 crore), repayable in 32 quarterly instalments from October 1, 2000.
The equity component of Rs 25 crore is divided into pure equity and preference shares of Rs 10 crore and Rs 15 crore, respectively. Out of the Rs 10 crore pure equity 49 per cent will be brought in by Rolls Royce and the balance by the STI group. The Rs 15 crore preference shares will be picked up by Rolls Royce.
The project will be implemented in two phases of 12 mw each. STI group of companies will consume 12 mw power generated from this project and remaining 12 mw will be sold on a commercial basis.
The design and construction work of the plant will be initiated in July 99 and commercial production will commence by August 2000. STI has already finalised the EPC contract with Rolls-Royce Power Ventures.
It is pointed out that foreign capital is not flowing into captive power plants due to the 49 per