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Financial closure of 12 IPPs a distant dream

Anil Sasi

The financial closure of the 12 independent power projects shortlisted by the power ministry for special focus is proving to be a long haul.

The stumbling blocks include the absence of a payment security mechanism, inability of states to extend escrow cover, promoters' financial troubles and fuel supply glitches.

Six of the 12 projects coming up in Andhra Pradesh face the absence of a payment security mechanism.

APTransco, the state-owned transmission company, does not have money to buy power from these projects, leading to financial institutions dragging their feet on financing.

To tide over the problem, the power ministry has persuaded the Andhra Pradesh government to sign an agreement with the Centre to strengthen its payment situation.

The state government has also been advised to present a business plan indicating measures through which payments will be ensured by the state electricity board for the power bought from these projects.

The division of Uttar Pradesh has created problems for two independent power projects coming up in Uttaranchal.

For the Vishnuprayag and Srinagar projects, the Uttaranchal government has asked for 12 per cent of the generated power free of cost. However, Uttar Pradesh, which was expected to buy the biggest chunk of power from these projects, is not agreeable to the conditions now, and has refused to oblige.

The S Kumar's-promoted Maheshwar hydel project is in trouble on account of the financial problems faced by the group.

The promoters have expressed their inability to bring in their equity portion of Rs 250 crore (Rs 2.5 billion) and financial institutions are looking at the possibility of inducting a new partner.

The Bina project in Madhya Pradesh is again faced with the problem of absence of a payment security and lack of escrow cover.

Also, the state government has not yet decided to explore the possibility of firming up a business plan to negotiate with the financial institutions.

The power ministry has advised the state government to firm up a business plan on the lines suggested for Andhra Pradesh.

The Reliance group, the promoter of the Jamnagar project, is going slow on the project. The Gujarat government's paying capacity for the power is uncertain and Reliance is looking for other possible buyers of power from the plant.

In the case of the Rosa project in Uttar Pradesh, the issue of fuel supply has held up the project.

The promoters (Indo Gulf Fertilisers) and fuel supplier (Coal India Ltd) have not been able to reach an agreement on the commercial terms of supply of coal to the project.

While Coal India wants to supply coal on a "take-it-or-leave it basis", both the promoters and financial institutions want a penalty clause inserted into the agreement.

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