AT a time when most Indian companies are being forced to rework their funding plans given the global liquidity crunch, Reliance Power has managed to tie up a $2-billion financial package for the Sasan power project from the domestic debt market.
While it has secured a long-term loan of almost Rs 3,500 crore from State Bank of India, its lead manager, another Rs 7,000 crore is expected to be committed by Power Finance Corporation, Rural Electrification Corporation, India Infrastructure Finance Company and Hudco as long-term debt for the project. What’s more, the company has managed to get the long-term debt from domestic institutions and banks with an understanding that the debt could be replaced with foreign funding at an opportune time. The company is in talks with Chinese financial institutions like China Development Bank to secure long-term loans for the project.
The company is hoping for financial closure in a month. Given the current scenario in the global market where long-term financing has become tough, Sasan Power has decided to change its line of funding and go in for domestic debt instead of external borrowings. Reliance Power had been permitted to raise up to $2 billion as external commercial borrowings for its 4,000 mw ultra mega power project (UMPP).
Some part of these funds from domestic financial institutions and banks will also be dollar-denominated. Sasan Power is the special purpose vehicle, developing the integrated mining-cumpower plant in Madhya Pradesh.
The Rs 19,500-crore project has a debt equity ratio of 75:25. This requires the company to mobilise around Rs 14,000 crore as debt. Interests rates for the long-term debt that Sasan Power has bagged range between 12% and 13%. Sources indicate that long-term project financing is currently available at rates ranging about 400 points above Libor for dollar-denominated loans. Add to that the hedging cost; the interest spread for the debt would be comparable if not more.
The financial closure for Sasan project is expected to be followed by similar arrangement being worked for Reliance Power’s another UMPP at Krishnapatnam in Andhra Pradesh. The package for Sasan has been finalised close on the heels of SPL signing revised power purchase agreements with beneficiary states and utilities to formalise advanced completion schedule of the project. Two 660-mw units of the power project would now be commissioned in the 11th Plan period itself (by March 31, 2012) as the final project commissioning has been advanced by 36 months.
The Sasan project has received all government clearances. It would soon get environmental clearance for the captive coal mine. The company is also in possession of large tracts of land and has finalised equipment suppliers.
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