ST-CMS to refinance Rs 1000 cr debt

ST-CMS, promoted by the US-based CMS Energy and ABB, has decided to refinance Rs 1,000 crore loan as part of its debt refinancing exercise. The Chennai-based ST-CMS is into power and automation technologies.

The company has set up the 250 mw power project at a cost of Rs 1,300-1400 crore. Initially, the company had a debt of Rs 110 crore. The loan which was drawn in 1998 had a tenure of 13-14 years.

According to sources "a major part of the earlier loan was in Deutche Marks accounting to 70 per cent of the debt component. The remaining was in dollar and rupee terms". The DM component was later changed to euros.

With the refinancing exercise, the company is expecting a savings on interest outgo between 4 per cent and 5 per cent. Earlier, the loan was given by 6-7 foreign lenders along with ICICI and SBI. The new lenders more than a dozen Indian lenders and it is understood that they would appoint Punjab National Bank to lead the consortium.

The proposed move is to mitigate the forex risk so that tariffs do not increase on account of the Euro-Rupee parity, sources said.

Besides mitigating the forex risk, the company is keen to be in step with the Tamil Nadu State Electricity Board decision to reduce the cost of power produced by Independent power producer. Now with lower debt cost the company will be able to accordingly lower its tariff.

Besides, the company also wants to bring down the component of foreign exchange loans. The plan is to convert a part of the rupee loan into a forex loan. This will also eliminate foreign exchange risk which is good for the company as it is not a net foreign exchange earner. Company officials were unavailable for comment.

Sources from banking community have indicated that the refinancing is being done by bringing in new lenders, replacing the existing ones. In this case the Indian lenders have bought out the existing lenders, both domestic as well as foreign.

Sources explain that the new lenders view this project as viable. The company currently has a 250 mw plant running on lignite at Neyveli, Tamil Nadu. The project was commissioned in December, 2002.

CMS Energy Corporation is an energy holding company operating through subsidiaries in the United States and in selected markets around the world.

ABB a player in power and automation technologies enable utility and industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 102,000 people.