The financial closure is expected soon after the Tamil Nadu government provides a guarantee. Financial Institutions can disburse the term loans only after it receives the guarantee.

The phase-I of the power project, which is of 500 mw, has been granted an escrow which is the third stage in the five-tier cascading payment security package which would ensure payment default mitigation in the power purchase agreement.

The consortium led by RIL is also likely to receive an escrow cover for the phase-II of the project which is coming up in Jaymakondam (Tiruchirapalli) at Tamil Nadu.

According to industry sources, this consortium is the front runner in the race for escrow and the decision made by the Tamil Nadu State Electricity Board (TNEB) will be in favour of the Jaymakondam project as it has one of the lowest average tariffs. TNEB's escrow allocation will be based on the Crisil report which has been submitted to the former.

TNEB had commissioned Crisil to conduct a study of the tariffs of the independent power projects and rank them according to the tariffs. Crisil had studied the tariffs of the projects which were both MoU based and those awarded on an international competitive bid basis. Jaymakondam is one of the projects based on international competitive bids.

The consortium - consisting of Reliance, North American Coal Corporation, FosterWheeler and Consolidated Electric Power Asia - is said to have quoted a real average tariff of Rs 1.06 per unit.

The consortium has already been issued a letter of intent (LoI) for the project. The LoI is for 30 years on build, own, operate and maintain (BOOM) basis. The total cost of the project is expected to be at least Rs 6,000 crore. About 3,000 acres of land has been acquired for the project. A total of 10,000 acres of land is required for the project.

The project involves mining of 3 million tonne per annum lignite and the setting up of an additional 500 mw power plant. The total capacity of the project as envisaged by the Tamil Nadu Industrial Development Corporation (Tidco) is 1,500 mw. For this, an agreement was signed in 1993 between Tidco and McNally Bharat Enterprise and four German companies for implementing the project. The joint venture company had also invested Rs 2,500 crore separately for the development of lignite mines at Jayamakondam.

The co-promoters of the project - Siemens Deutsche Babcock and McNally Bharat - later pulled out. As a result Tidco opted to re-tender the project and reworked it by deciding to mine only 3 million tonne. It, thus, decided to first set up a 500 mw power plant and put the additional two 500 mw modules later. In November 1998, the new promoter RIL, suggested that the capacity of the project be raised to 1,000 mw.