Tata Power's Maithon project attains financial closure Mumbai-based Tata Power Co Ltd (tpc), India's largest private power utility, edged closer to its revi-talisation targets last fortnight by effecting the financial closure of its joint venture, Maithon Power Ltd. The century-old Tata Power holds 74 per cent equity in the 1,050 mw Maithon Right Bank Mega Thermal Power Project, located in Maithon, in Jharkhand's Dhanbad district, the balance 26 per cent being held by Damodar Valley Corporation (dvc). dvc was jointly set up in July 1948 by the Centre and the states of West Bengal and Jharkhand (previously Bihar) as the first multi-purpose river valley project of independent India. It has, over the years, prioritised generation, transmission and distribution of power not only within its command area across the two states, but also in exporting to other power-deficit states. Having won the tender for the 4,000 mw Mundra project, Tata Power has charted a growth strategy that will more than quadruple its installed generation capacity of 2,368 mw within the next six years. The Rs4,450 crore Maithon project is being funded on a debt-equity ratio of 70:30, with sbi capital Markets Ltd (sbicap) as the sole financial advisor and arranger of the Rs3,115 crore debt for the project. The syndication was oversubscribed by nearly Rsl,050 crore, the State Bank of India Group taking the largest exposure to the tune of Rsl,000 crore. The SBi-led consortium of 17 banks included Allahabad Bank, Bank of Baroda, Canara Bank, Central Bank, Dena Bank, Indian Overseas Bank, j&k Bank, Oriental Bank of Commerce, Punjab & Sind Bank, Tamilnadu Mercantile Bank and uco Bank. Terming this green-field venture as the first public-private initiative in the area of generation, Tata Power managing director Prasad Menon says, "The attractive financing demonstrates the faith of the lenders in the promoters, their execution capabilities and expertise to complete the project in time." Taking cognisance of the huge power deficit in the country, the promoters, namely, tpc and dvc, have infused equity in excess of the upfront equity requirement as stipulated by the lenders. He adds that the promoters have allocated the funds prior to the financial closure to ensure the project is commissioned in time. "The unique terms of debt financing provides us more flexibility in the execution of the project as well as help in controlling costs," he mentions. First hurdle Financial closure is the first hurdle for mega and ultra mega power projects to cross, as bankers have to be convinced of the project economics. Used to fixed returns and secure power purchase agreements, lenders are normally not accustomed to these project models. Promoters hence need to secure their confidence as well as the best rates possible, because more than three-fourths of the project cost is funded by debt. Expressing satisfaction on this 'landmark occasion', dvc chairman Asim K. Barman notes that the agreement marks a successful trend and offers hope for more such joint initiatives for the power sector in future. "This public-private partnership is an important initiative towards meeting the power supply needs of the country," he adds. Maithon Power has received bids for the main plant and equipment and has secured all requisite permits and land and environmental clearances, including open access for evacuation of power to the northern states of Delhi, Rajasthan and Haryana. Site preparatory works are in progress and a significant portion of the 1,120 acres of. land required has been acquired. The project will comprise two generating units of 525 mw each. The first unit will be commissioned by October 2010, in time to meet the 2010 Delhi Commonwealth Games requirements, while the second unit will be commissioned by March 2011. Long-term coal linkage has been allotted from the nearby Bharat Coking Coal Ltd (bccl) mines and water will be drawn from the adjacent Maithon reservoir. Maithon Power has signed power purchase agreements with dvc for 300 mw and is the lowest bidder for 309 mw power requirements for distribution licensees of Delhi. The company has. also obtained open access from Power Grid Corporation of India to transmit power through their infrastructure to the power-deficit Northern states. One Tata Power project closest to being commissioned is the coal-fuelled 250 mw unit eight at Trom-bay, costing Rs990 crore, which will become operational in August. The company has also achieved success in its earlier pioneering initiative in transmission and distribution through Powerlinks (Tala Transmission Project) and North Delhi Power Ltd (ndpl) for distribution in Delhi, marking it out as the only private sector entity to lead the way in public-private joint ventures in all core areas of the power sector.