Having already burnt their fingers by funding crores of rupees for the stalled Spic Petrochemical Company (SPC) project, which is still awaiting the centre nod for a final settlement in its dispute with Madras Refineries Ltd (MRL), financial institutions (FIs) are reluctant to come to the aid of Spic Electric Power Corporation (SEPC), which is implementing the power project. SEPC is promoted by Spic group company Tamilnadu Petroproducts Ltd (TPL).

Sources say FIs are unwilling to provide assistance unless SEPC gets escrow cover from Tamil Nadu Electricity Board (TNEB) which is fighting its own battle with FIs to establish its escrowability for power projects promoted by independent power producers (IPPs). While TNEB claims it has escrowability for 4000 mw, FIs like IDBI argue that its capacity is only for 2500 mw. Under advice from FIs, TNEB has referred the matter to an independent rating agency to assess the escrowability.

Meanwhile, SEPC is also said to be facing a stumbling block in getting its power project off the ground. It has not yet got 110 acres of the land allotted for the project transferred to its name. Two years ago land allotment for the Spic power project was cleared by the Tuticorin Port Trust. But the land comes under the ministry of surface transport (MoST), the ministerial portfolio of which is held by Thambi Durai who belongs to AIADMK. Spic vice-chairman and president AC Muthiah was at one time perceived to be close to AIADMK supremo J Jayalalitha.

However, SEPC now seems to have been caught in the ongoing tussle for political supremacy in Tamil Nadu between chief minister M Karunanidhi and the AIADMK leader Jayalalitha. While the ruling DMK government wants to clear quickly as many power projects as possible to overcome annual power shortages of around 500 mw and meet the escalating demand for power which is growing at the rate of 10 per cent annually, Thambi Durai in charge of the MoST seems to be dragging his feet.

Industry sources say while the battle for political supremacy in Tamil Nadu rages on, SEPC is stuck for getting the land for its project. Without the land legally transferred to it, SEPC has little chance of getting the escrow cover and without escrow FIs will come nowhere near funding the project which has an estimated outlay of Rs 2300 crore with a equity to debt ratio of 30:70.

Of the equity amounting to Rs 690 crore in the SEPC project, 26 per cent is held by promoters TPL and 25 per cent each by EPC contractor ABB and O & M contractor PowerGen. The balance 24 per cent is to be offloaded to institutions including foreign and domestic.

SEPC is also said to have lined up some banks and overseas funding agencies like Hermes of Germany, an export credit agency, to provide financial assistance to cover the debt portion of the project.