Torrent Power to ink debt deal today

The Rs 2000-crore Torrent group will formally enter into the power generation business on Wednesday.

Torrent Power Generation Ltd (TPGL), the group's new entity, will sign a debt agreement with a consortium of banks and financial institutions (FIs) for the upcoming 1050 MW power project at Akhakhol near Surat. The project will also achieve its financial closure on Wednesday.

The project, for which the special purpose vehicle (TPGL) was created last year, involves an investment of around Rs 3700 crore. While the group is already in the power distribution business in Ahmedabad and Surat cities through its two separate arms, Ahmedabad Electricity Company (AEC) and Surat Electricity Company (SEC), respectively, it would be Torrent's first initiative in power generation business.

"Though the project is expected to cost around Rs 3700 crore, the actual cost may exceed Rs 4000 crore in view of the surging construction costs. With TPGL signing of debt agreement with a number of banks and FIs, work on the power project will get expedited," said a source close to the company.

"The plant is expected to start functioning in the first phase in next 18 months. This would help the Torrent group's power distribution entities get adequate power from within the group," the source added.

Company officials, however, were not available for comment on the detail of the debt agreement. A spokesperson said: "We will disclose the detail of the agreement only after signing on Wednesday."

TPGL is also scouting for a foreign ally for the project and may offload around 30 per cent stake in the Company to the foreign ally, depending upon the final terms and conditions.

Industry sources said that PowerGen Plc of UK, which has already entered into Gujarat with its power plant near Bharuch, is one of the possible companies to pick up stakes in TPGL.

According to a recent report prepared by the company, TPGL also may offload some portion of the 49 per cent stake of Torrent in the SPV while the report says that TPGL aims to offload its 49 percent share to partners with which it has been looking for strategic alliances.

Torrent currently two power plants in Ahmedabad, at Sabarmati and Vatva which have combined capacity of 490 MW while Torrent urgently requires 200 MW of power which it presently buying from Gujarat Electricity Board (GEB).

"But with the development of Gujarat Government planning to adopt franchisee model in handing over power distribution business also to private parties in various other cities and towns in the state, Torrent has been desperately looking for additional power for which it need not be dependent on GEB.

However, once the Akhakhol plant is commissioned, TPGL will start selling 270 MW of power to state-run Power Trading Corporation (PTC) as interest sale and an agreement has already been signed in this respect, said sources.