The finance ministry yesterday signed the counter-guarantee for the Hinduja National Power Company Ltd (HNPCL)-promoted 1040-mw Visakhapatnam power project.
This guarantee will, however, come into effect once the coal supply and transport agreement (CSTA) between the promoters and the ministry of coal is signed and the company achieves financial closure.
Speaking to the media after signing the counter-guarantee, Ashok P Hinduja said the company would not rework its CSTA as they had got an assurance from the Centre that the inter-ministerial issues related to the agreement will be resolved.
Ganjendra Haldea, joint secretary in the ministry of finance, said the counter-guarantee was an indicator to the fact that there were no problems related to the CSTA.
Among the CSTA issues, those related to railway liability are still not resolved. The ministry of coal has refused to sign the agreement until the finance ministry gives them an assurance that the entire railway liability will not fall upon them in the event of a default.
Before signing the counter-guarantee, the state government signed a tripartite agreement with the Reserve Bank of India and the Centre for ensuring timely payments towards the central power undertakings such as NTPC and NHPC. Under the tripartite agreement, the Centre has the power to deduct the outstanding dues towards the central PSUs from the state's RBI account in the event of a default by the state electricity board.
The power company which is supplying power to the Andhra Pradesh State Electricity Board (APSEB) will be charging a tariff of Rs 2.71 per unit during the first year of operation which will come down to Rs 1.6 per unit by the 13th year. These tariffs have, however, been arrived at $1=Rs 35.
The 1040-mw power project is being set up through a joint venture company HNPCL in which the Hinduja group holds 51 per cent of the equity and National Power Corporation of UK holds the remaining 49 per cent.
The project, which is expected to cost around Rs 6,000 crore, will have a total debt component of around Rs 4,275 crore. The project has a foreign debt component of $818 million of which the central guarantee will cover $464 million. This counter-guarantee can be invoked only in the event of a termination of the contract and an eventual buy-out of the power station.
The counter-guarantee, which has been given for a maximum time period of 12 years, will be based on a 1.2 per cent guarantee fee per annum (levied on $ 464 million). The government has not covered foreign debt to the tune of $ 354 million __ equivalent to the foreign equity.
IDBI has given a commitment of Rs 600 crore for the domestic debt, while State Bank of India is appraising a proposal to lend Rs 500 crore towards the project. The rest of the domestic debt will be raised as syndicated loans from Canbank, Bank of India, Punjab National Bank and Bank of Baroda.
The group has appointed Chase Manhattan as advisors for the foreign debt component, which is to be finalised following the signing of the counter guarantee to the project. A large part of the foreign debt will be sourced from the Japanese Exim Bank.
