The only hurdle that remains in the financial closure of the 2x520 mw project now is the approval of the Central Electricity Authority (CEA) on the cost overrun.

A company official, confirming the development, said: ``We have received a letter from IDBI agreeing to sanction fresh assistance in principle. This will go a long way in securing the final clearance from CEA.''

The company has also tied up its entire overseas debt portion $350 million, fully underwritten by ANZ Investment Bank and HSBC Investment Bank, and ECGD of the UK ($150 million). The project had received a jolt earlier in the year when J-Exim, which was to extend $818 million of forex debt, walked out of the financial consortium. As the project cost is in dollar terms, loans from domestic financial institutions now total $750 million, with ICICI sanctioning $300 million and IDBI the balance $450 million under the revised financing plan.

The revised equity base of the project stands at $300 million, with the Hindujas holding 51 per cent and the UK-based power utility National Power the balance. The debt-equity of the project remains at 73:27. The increase in the project cost, in rupee terms, is primarily due to depreciation of the rupee vis-a-vis dollar and change in the import duty structure.

Entire power generated from the project at Visakhapatnam is to be absorbed by AP Transco, the new transmission company following the three-way split of APSEB. It would cost Rs 2.71 per unit during the first year of operation. Later, this would come down to Rs 1.6 per unit by the 13th year.

The Union Government's counter-guarantee only on the forex debt, which was extended in August last year, will hold for a maximum period of 12 years.Civil construction work at the project site has already begun from April this year. The company has also inked the crucial coal supply transport agreement (CSTA) with Western Coalfields and South Eastern Railways. Both the coal and railways ministries have agreed to share the risk of transporting coal to the project site.

Japanese majors Sumitomo and Hitachi have appointed the engineering, procurement and construction (EPC) contractors for the project.

The first phase of the 2x520 mw project is to be commissioned within 38 months from the date of financial closure while the second phase would take another six months thereafter.