Coastal Energen Private Ltd (CEPL), which is setting a 1,200 MW coal-based Power project at Tuticorin, is planning to raise $300 million through External Commercial Borrowings to refinance exist loans.
The sharp drop in value of rupee against the dollar may push up costs further for the project, which has been hit by delays in commissioning.
Company officials confirmed plans to raise funds in foreign exchange. Given the volatility in the currency markets, no timeframe has been finalized yet for raising the money.
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CEPL imports boiler, turbine and generator equipment from China. However, this risk is partly mitigated by availing buyer’s credit. Its plan to raise ECB ($300 million) would also postpone the dollar obligations.
Rating agency ICRA has downgraded the long term rating of CEPL from “BB” to “D”. The rating action factors in delays in interest servicing obligations.
The project commissioning has been delayed by 15-16 months because of the time taken by lenders to sanction debt for cost overruns. While delay raises risks, company has fuel supply agreements and power purchase pact in place.
ICRA said the entire land has been acquired and major approvals are in place. The promoters have infused substantial equity to fund project at Tuticorin in Tamilnadu. With Coal Supply Agreement in place, fuel risks are limited. The company has tied up lone term power purchase agreements for 219 MW, ICRA added.
Coastal Energen P Ltd has been promoted by Ahmed Buhari of the Coal & Oil Group. The Coal & Oil Group is a Dubai-based energy conglomerate.
The delay in project commencement may put pressure on the principal repayments starting from December, 2013. It may cause further cost overruns mainly relating to interest expenses which are yet to be tied up.
The total revised project cost for CEPL of Rs 5,189 crore, up from previous estimate of Rs 5,158 crore. This is escalation from earlier Rs 4,297 crore cost estimates.
The revised cost (Rs 5,189 crore) is envisaged to be funded through debt of Rs 4,052.22 crore and equity of Rs 1,137.08 crore. Till end of June 2013, Rs 4,858.87 crore have been spent on project, with debt component of Rs 3,692.56 crore and balance by equity.
