Vemagiri Power is setting up a 542 mw naphtha based combined cycle power plant in east Godavari district of Andhra Pradesh. IDBI will also grant a Rs 9 crore rupee term loan for the project.

The project was originally promoted by Ispat group which subsequently inducted SP Lohia group when financial institutions stipulated that promoters of ongoing steel projects should not undertake any other project till stabilisation of the steel projects.

It may be recalled that IDBI along with other leading financial institutions had refused fresh line of credit to all other major steel companies including Essar steel and the Ispat group for their ongoing and new projects and had asked them to concentrate on their core business. It was following this that Ispat group decided to dilute its stake in power ventures, promoted by them.

Besides,the Lohia group, the the Mittals are also in talks with the global power major China Light and Power and have even offered a major equity stake in Vemagiri power project. Mittals plan to float a new financial holding company with China Light and Power which will then invest in all the existing and new power ventures planned by the Ispat group in India and abroad.

However, since Ispat group has to hold some stake in the project in its capacity as the original bidder, it would continue to have 10 per cent equity in Vemagiri Power but the money for the same would be provided by SP Lohia group.

IDBI sources said that the track record of SPL group and the bankers' reports thereon were satisfactory. The rate of interest on the foreign currency loan of $46.51 million (Rs 200 crore) has not been decided upon and will be decided by IDBI at a later stage depending upon the line of credit for setting up this project. The rupee loan will however carry a interest at minimum term lending rate (MTLR) plus 3.5 per centper annum plus interest tax.

Institutional sources said that IDBI has also sanctioned one rupee and foreign currency loans of over Rs 230 crore to two more power companies - NCC Power Corporation and Atria Power Corporation.

NCC Power, which is setting up a 232 mw naphtha based combined cycle power project also in east Godavari district of Andhra Pradesh, will be granted a rupee term loan not exceeding Rs 53 crore and a foreign currency loan of $34.19 million (about Rs 147 crore) carrying interest at the rate of Libor plus five per cent per annum.

Atria Power Corporation will get IDBI assistance to the tune of Rs 30 crore by way of rupee term loans and deferred payment guarantee of $20.93 million (about Rs 90 crore) on a guarantee commission of 1.6 per cent per annum for setting up a 106.61 mw naphtha based power plant in Haveri district of Karnataka.