The ripples of the economic crisis sweeping the South-East Asian region is likely to put a question mark over at least four of the short-gestation liquid fuel-based power projects in Tamil Nadu cleared by the government.
All these power projects are being promoted by companies that have Korean, Malaysian and other South -East Asian firms as partners. It is feared that the partners may now not be able to pump in the promised funds owing to economic hardships being faced by them back home.
However, the state has been awarded fuel linkage for an additional 400 mw. The Centre, convinced of the state's seriousness in going ahead with the projects, yesterday approved the fuel linkages.
Already, some 480 mw of fuel linkage has been cleared for the various liquid-fuel based power projects in the state. The allotment of fuel for an additional 400 mw comes from other states' quota where no satisfactory progress has been made in implementing various projects.
But, unconvinced financial institutions are re-evaluating the funding capabilities of the promoters of these power projects, especially those with Korean and Malaysian and other South-East Asian partners. Fuel linkage is only one aspect of the problem, it is pointed out. In at least three of these projects, the Malaysian power utility has committed to invest 26 per cent equity. However, its ability to bring in the money now, given the problems of the region, is being "re-evaluated."
In another case, Korean major Samsung is a leading consortium partner and with the home country in deep economic trouble, the company has called a halt to all overseas investments.
Thus, according to reliable sources, although the institutions are willing to chip in with the debt component for each power project, the promoters will have to reassure the ten institutions of their ability to raise equity.
The FIs are not willing to take chances. The financiers want to see both bank guarantees and the cash portion of the bank guarantees before committing their own funds as debt for the project.
The short gestation power projects each have a 70 per cent debt component and 30 per cent equity. And, it is with the equity portion that fresh problems have risen.
The additional fuel linkages given to the state will thus not necessarily be given on the basis of "ascending tariff order" implying that the IPP who quotes the lowest tariff will be given first preference for fuel linkage.
Financial ability to bring in equity will now be a key yardstick along with tariff rates.
Where FIs are not convinced of the foreign promoter's funding programme, Indian partners may have to go in for fresh joint ventures.
