Daewoo Power, which is promoting the $1.3 billion, 1,070 mw Korba power project in Madhya Pradesh, plans to replace proposed loans from the US Exim Bank with loans from the Italian exim bank, SACE.
Daewoo Power had earlier planned to source around $130 million from the US Exim bank for the Korba project. However, all fresh loans from the bank for funding projects in India have been put on hold following the imposition of sanctions on India by the US last month.
The move will also entail a change in the equipment suppliers for the project. Confirming this move, senior Daewoo Power executives said they had planned to source equipment from US-based Combustion Engineering. Daewoo may now tap Italian equipment manufacturer Ansaldo.
According to company sources, another reason behind the move to replace US-Exim with SACE is that the project should achieve financial closure within a month of the financial institutions and the state government resolving pending issues related to the escrow arrangement.
The Korba project is a 50:50 joint venture between Daewoo and Asea Brown Boveri (ABB), which will be making equal equity investment totalling around Rs 1,300 crore ($325 million).
The project has a debt component of $1 billion. Of this, foreign currency loans amount to $667 million, while domestic financial institutions have tied up rupee loans worth about $297 million.
Out of the total foreign currency loan component, around $350 million will be sourced from export credit agencies, of which, $220 million will be from German Exim bank Hermes and the balance from SACE.
Another $175 million will be raised from the Korean Export Insurance Corporation.
The balance $150 million will be raised from commercial banks and will be backed by deferred payment guarantees.
The Madhya Pradesh government had earlier raised doubts over as to who would retain controlling interest in the project after Daewoo divested 50 per cent equity in favour of ABB.
The state government wants Daewoo to retain control as it was selected through the memorandum of understanding (MoU) route.
In response to this, company sources pointed out that both Daewoo and ABB have arrived at an arrangement whereby the chairman of the company will be a nominee of Daewoo and will have a right to make a casting vote in the event of a tie.
The day-to-day operations will be overseen by a managing director who will also be a Daewoo nominee.
