Mumbai, Jan 24: Hinduja National Power Co has offered to renegotiate the power purchase agreement (PPA) with the Andhra Pradesh government, following the steep Rs 1,574-crore rise in the project cost. The independent power producer (IPP) has intimated the state government and AP Transco, the transmission subsidiary of the state electricity board, in this regard.The offer from the promoters comes in the wake of a storm raised by the opposition Congress (I) in the state, urging the Centre to force a reduction in the project cost and, consequently, lowering of the tariff.
The project, in the process, will become the second fast-track power project after the Enron-promoted Dabhol Power Corporation where the PPA will be reopened in the final stages of financial closure.
Power generated from the project at Visakhapatnam was to cost Rs 2.71 per unit during the first year of operation, and it was to come down to Rs 1.6 per unit by the 13th year. The PPA was signed in August 1998.
Against the earlierprovisional cost of Rs 4,628 crore, the total cost now has increased to Rs 6,202 crore ($1.4 billion). The Central Electricity Authority (CEA) is yet to clear the revised cost of the 2x520mw project, which faces the final hurdle before the financial closure.
The increase in the project cost in rupee terms is primarily due to depreciation of the rupee vis-a-vis the dollar and the change in the import-duty structure, the company has informed the state government. There have been some other increases as well-in land costs, as has been determined by the state government, and in interest costs. The promoters have been constrained to reduce their originally envisaged return by the Centre's decision to restrict fuel consumption on an actual basis and to allow tax rebates only up to 68.49 per cent plant load factor (PLF).
The Industrial Development Bank of India (IDBI), the lead financial institution, has cleared in principle a crucial Rs 200 crore of additional assistance, pushing the project a step towards thefinancial closure.
The IPP has tied up its entire overseas debt portion of $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 in early 1999, when J-Exim, which was to extend $818 million of forex debt, walked out of the 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.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.