The Rs 3,200 crore BPL group has replaced a Hanjung-led Korean consortium with a Japanese group of equipment vendors led by Marubeni to set up its 520 mw Ramagundam power plant. The contract switch has come as a big blow to the Korean consortium since the contract is worth over Rs 1,850 crore ($430 million).
A BPL executive said the decision to award the engineering, procurement and construction (EPC) contract to the Japanese consortium was taken after the Southeast Asian currency crisis which depreciated the Korean won significantly. "It was felt that financing would be difficult if the deal was backed by the Korean Exim bank. It would be easier with the Japan Exim bank," he said. The BPL group has concluded a power purchase agreement with the Andhra Pradesh government for the Ramagundam plant. The government has assigned escrow cover for the plant's revenues.
In power, an escrow cover is essentially a credit-enhancement mechanism evolved to reduce risk of lenders. It involves the state electricity board earmarking a certain portion of its revenues for payment to the power producer. The BPL plant will be the second coal pithead plant in Andhra Pradesh. The National Thermal Power Corporation already has a super thermal power station with capacity exceeding 2,000 mw.
The Ramagundam power project, expected to cost over Rs 2,100 crore, will be funded on an equity of Rs 550 crore. BPL is banking on its telecom and power businesses to catapult its revenues to Rs 5,200 crore by the year 2000 from the current Rs 3,200 crore. It has set itself a target of 29 per cent of gross revenues coming from its telecom and power projects by the turn of the century, up from the current 8 per cent.
On a projected group turnover of Rs 5,200 crore by March 2000, telecom and power will account for over Rs 1,500 crore, more than six times the current Rs 250 crore contribution of the two businesses.
BPL has a presence in the cellular telecom and paging service businesses besides telecom manufacturing. It has cellular operating licences in Mumbai, Maharashtra, Tamil Nadu and Kerala. Another group company, BPL Wireless Telecommunication Services, is the paging licensee in Karnataka, Kerala and Tamil Nadu.
The group's telecom manufacturing company, BPL Telecom, produces transmission and business communication equipment, consumer telecom and advanced systems, besides having a presence in telecom software.
