The finance ministry yesterday signed the counter-guarantee for the ST-CMS Electric Power Company promoted 250 mw Neyveli power project in Tamil Nadu, paving the way for its financial closure.
The counter-guarantee for the lignite-based power project will, however, come into effect only after the state government reviews and certifies the project cost and incorporates some changes in the power purchase agreement.
Once these issues are sorted out, the power company is expected to go into financial closure. At present, counter-guarantees for fast-track projects cover only on the foreign debt on the termination of the contract.
Mohan Gurunath, managing director of ST-CMS Electric Power Company, said it was planning to raise the debt funds for the project without Hermes Bank (the German Exim Bank) guarantees.
This will be the first time a power company will be raising funds on a project recourse basis. Funds will be raised on the basis of the counter-guarantee and the escrow cover to be given by the state government.
The project, which is being funded on a 70:30 debt-equity ratio, will have a debt component of around $219 million, of which $45 million will be the rupee loan and the balance $184 million will be in the form of foreign currency loans.
Of the rupee loan component, $98 million will be raised from overseas _ $52 million will be dollar loans and the balance will be in marks _ while the balance will be raised by ICICI. Foreign currency loans for the project will be raised by Bank of America.
The joint venture partners of the power company, US-based utility group CMS Energy Corporation and equipment major Asea Brown Boveri (ABB), will hold 50 per cent stake each in the project.
Although the counter-guarantee was signed yesterday, the Tamil Nadu government and the state electricity board will be reviewing the project cost and will make some changes in the power purchase agreement. Under the existing agreement, the state government will be buying power at Rs 2.5 per unit.
