A top company official said KPCL may tap the wholesale market by way of this relatively new instrument to raise funds. The company is exploring this option to garner around Rs 100 crore by privately placing long-term tax-free with banks and corporates.

``We are planning to initiate talks with leading financial institutions to secure a guarantee on the repayment of principal amount and interest. KPCL may adopt this route for its forthcoming fund-raising programmes as well. It is also looking at a Rs 250 crore bond issue for part-financing its 500 mw Vijayanagar Thermal Power Station,'' he added.

If it (tax-free bond issue) comes through, this would be a major break through in the history of KPCL. The tax-free bond issue was allowed in the 1997-98 budget by way of an amendment to Section 10 (23) Gof the Income Tax Act. Last year, industrial houses like BPL and Reliance had raised some funds through this route for their telecom ventures.

According to KPCL managing director K Jairaj, the RTPS VII unit with an estimated cost of Rs 520 crore would be completed within 26 months from the date of achieving the financial closure. ``Many financial institutions have already shown interest to fund the project,'' he added.

The company is also looking at a lease finance of Rs 180 crore from its strategic partners, while KPCL would be raising Rs 136 crore as term loans from banks and financial institutions. Equity of project, which would be met by the company's internal accruals, is Rs 104 crore. The cost of energy from this station would be Rs 2.48 per unit.

KPCL's future expansion plans include the development of 1000 mw of new power projects based in Vijayanagar (500 mw/coal-based), Bidadi (200 mw/combined cycle) and Sarapadi (90 mw/hydel). Its investment programme in the next five years is expected to bein the order of Rs 4,000 crore.

Meanwhile, the Karnataka Chief Minister JH Patel on Sunday dedicated the fifth unit of RTPS to the nation. He has also laid foundation stone for the company's seventh RTPS unit in Raichur. KPCL is entering into an alliance with Mahanadi coal fields for sourcing coal for its projects.