Power Finance Corporation (PFC) and Damodar Valley Corporation (DVC) will sign a R6,300-crore debt agreement on July 7 as financial closure for the 2×660 MW Raghunathpur phase-2 thermal power project, estimated to cost R9,000 crore.
DVC’s director finance TK Gupta told FE that the R6,300-crore loan would make the entire debt funding, but the company was looking at opportunities for external commercial borrowing (ECB), which would help it to divert part of the agreed PFC loan towards the ECB. ?If we get R1,300 crore ECB, then our R6,300 crore PFC loan will get reduced to R5,000 crore. We are going to sign the agreement with PFC in such condition. But the ECB amount has not yet been decided and the final PFC loan will depend on the amount of ECB we get,? Gupta said, adding that though July 7 would be Sunday, DVC would sign the loan agreement since it was entering its 65 th year on that day.
DVC, the three-way venture of the Union, West Bengal and Jharkhand governments, would take some more time in deciding about the ECB since much would depend on the whom the contracts were awarded.
DVC chairman RN Sen said the company as a matter of principle wants to make foreign currency payments to all foreign suppliers to avoid the risk of foreign exchange fluctuation. ECB would be a good option since the company would gain in rupee terms.
Gupta, however, said that the present time was not very appopiate for ECB since there were problems in the spread of European Overnight Rate Index (the standard rate for Euro currency deposits) and European Central Bank’s Policy Rate, which has happened for a liquidity deficit in the Euro zone. ?But we would tap ECB as soon as the spread settles,? Gupta said. A DVC official felt tapping ECB would be easier for the company since the RBI has recently relaxed ECB norms, despite a declining rupee, to use foreign debt to pay for import of capital goods, services, technical know-how and license fee as well.