The Gujarat State Petroleum Corporation (GSPC) has mooted a limited Gujarat government guarantee and escrow cover for its proposed Rs 574 crore power project at Hazira. This has been suggested because of the poor financial health of Gujarat Electricity Board (GEB) which will purchase the power.
Gujarat State Energy Generation (GSEGL), the GSPC-promoted company, is setting up the 160 mw liquefied natural gas-based project. The power purchase agreement is being worked out with the board.
GSPC has suggested that the guarantee cover only the lenders' liabilities. Similarly, in the case of the escrow account, money which covers only the lenders dues will be credited. This is in sharp contrast to the usual practice of the state government guarantee and the escrow account covering the entire dues of a power project.
The corporation has, however, made it clear that a limited cover and guarantee have been suggested only as an alternative. Financial institution sources said GSPC was currently negotiating with the state government for a three-tier security package. First, a letter of credit that will cover 1.5 times the monthly billing. Second, an escrow account that will cover 1.5 times the monthly tariff and third, a state government guarantee for the entire dues of the independent power project.
GEB posted losses of about Rs 1,200 crore in 1998. Therefore, the state government may be reluctant to extend a complete guarantee. Besides, the poor financial health of GEB may not permit it to extend an escrow cover for 1.5 time
