The Karnataka Electricity Board is set to embark on a joint venture with private participation to transmit power from the IPPs coming up in the Mangalore region.
The proposal for a joint venture between the state electricity board and private companies to set up a transmission system for 2,500 mw of power from the Mangalore region will be cleared by the government soon, a Karnataka Electricity Board source told Business Standard yesterday.
The joint venture has been planned to facilitate power transmission from the controversial 1,000 mw Cogentrix project, the neighbouring Nagarjuna power project and the novel barge-mounted power projects coming up in the area.
Government clearances for the joint venture proposal are being speeded up to expedite the financial closure of the Mangalore Power companys Cogentrix project. The financial closure of the Cogentrix project is still hanging fire because of the questions over the funding of the power transmission from the plant.
Unless there is a good viable transmission evacuation the Cogentrix financial closure will not take place, the source stated. The cash-strapped Karnataka Electricity Board will also not be able to fund on its own a huge project costing around Rs 730 crore.
The equity holding of the joint venture will be worked out so that the state electricity board will hold only 26 per cent while the private companies will be the managing partners with a 30-50 per cent stake. The financial institutions will hold the rest either through equity or debt finance. The joint venture will function on a debt equity ratio of 2:1.
A Karnataka Electricity Board source claimed the board will put up an equity of Rs 250 crore in the venture through internal resources etc. Following the nod from the state cabinet on this proposal, the state electricity board will invite bids for private participation in the venture. The Centre, however, is yet to clear the proposal to allow private parties in this sector.
The companies will be selected on the basis of their experience, financial ability and capability to complete the elaborate transmission system linking Mangalore to Hassan, Bangalore and Mysore on time. The project has to be ready before the Cogentrix project units become functional. Cogentrix has to complete the project 36 months after the financial closure.
The companies will be promised an inducement of a 16 per cent assured return and a two part tariff as in the generation sector. A 95 per cent working line during the year will also net a 1 per cent assured return in addition to the 16 per cent.
However, the agreement will also carry a rider about the rules being bound by the Union governments yet to be announced new transmission policy.
