Foreign banks keen to fund APGenco

International banks are keen to extend close to Rs 10,000 crore assistance to the huge capacity addition plans proposed with an estimated cost of Rs 35,010 crore by Andhra power utility, APGenco, up to the year 2012.

Of this external loan, the German bank, KFW, has already tied up with APGenco to provide close to Rs 2,700 crore as part-funding for the 1,600-mega watt Krishnapatnam super critical thermal power project.

The first 800 Mw unit of it is scheduled for commissioning in the year 2010-11. Another Rs 7,000 crore assistance has been indicated to the power utility by the Japan Bank of International Cooperation (JBIC) and the Asian Development Bank, according to Ajay Jain, managing director of APGenco.

The ADB officials are scheduled to hold discussions on the funding issue with APGenco on April 23, 2007. The multi-lateral lending agency is keen to fund hydel projects besides a gas-based project, he told the media here on Sunday.

The state power utility, which occupies the third position in terms of installed capacity with 6,760 Mw after NTPC and Maharashtra power utility, proposes to more than double the size to 15,724 Mw by the end of the 11th Plan period. Of the 8,963-Mw newly proposed projects, thermal accounts for 4,730-Mw and hydro and gas-based projects about 2,100 Mw each.

The power utility turned positive with a net profit of Rs 145 crore for the year 2006-07. It has to pump in Rs 1,155 crore equity for the projects (debt-equity ratio of 80:20) with a capacity of 4,483 Mw scheduled to be commissioned by the year 2009-10.

The Andhra Pradesh government is providing Rs 400 crore while the APGenco is hopeful of mobilising the remaining funds through internal resources, which include payment of old dues from APTransco, according to Jain.

While the two national power sector funding agencies, PFC and REC, have committed to support most the projects, including part-funding of Krishnapatnam along with KFW, the positive response from international agencies comes as a shot in the arm as the cost of overseas funds is much lower than the domestic loans.

With rupee firming up against the dollar, the cost of external borrowings would not go beyond 6-7 per cent while the rate of interest being charged by PFC and REC is 9-10 per cent, said D Prabhakar Rao, director (finance), APGenco.

"On the one hand, the APGenco is among the very few power utilities in the country having a clean track record in terms of repayment of loans and cost management. On the other, international agencies looking at investing in the power sector have invariably turned their focus on Indian plans as the Chinese power sector has almost reached a saturation point," Rao told Business Standard.

The power utility has also tied up with the State Bank of Hyderabad and Vijaya Bank for a loan of Rs 350 crore and Rs 200 crore respectively to fund its ongoing projects.

The state-owned company would require 22 million tonne of coal annually for its capacity addition plans while its current consumption stands at 15.8 million tonne, of which 7.8 million tonne is being supplied from the Mahanadi coalfields and the remaining 8 million tonne comes from the Singareni coalfields.

"Coal linkage for all the new projects, barring a few, which got captive coal block support, has already been obtained from the Mahanadi coalfields in Orissa," Jain said.

According the Genco MD, the power company is also planning to venture into operation and maintenance (O&M) and consultancy services for projects managed by other players to put its expertise into commercial use.

Genco has already won an O&M contract from the Andhra Pradesh Gas Power Corporation Limited, a company run by a consortium of public sector undertakings, including BHEL, for captive usage of power from its 272-Mw Vijjeswaram project through international competitive bidding.