Link power plans with fuel

NEW DELHI, January 11: The Foreign Investment Promotion Board will not take up power project proposals which have failed to tie up fuel link...

NEW DELHI, January 11: The Foreign Investment Promotion Board will not take up power project proposals which have failed to tie up fuel linkages. The first casualty of this decision is the 520 MW, Rs 2,500 crore project proposed to be set up by Korba West Power Ltd in Madhya Pradesh.

FIPB has asked the power ministry to notify a policy that henceforth applications for power generation would be considered by FIPB only after atie-up has been made for fuel supplies.

The Board has rejected the proposal to induct 100 per cent foreign equity in the 520 MW Korba project in the absence of any coal linkage. The proposal has been turned down on the recommendation of the power ministry.

Official sources said that a number of proposals were being received by the FIPB without any firm fuel linkages for the projects. quot;There is no logic in clearing proposals which are unable to take-off subsequently due to inadequate fuel supply,quot; a senior government official said.

The project has been in the limelight for quite some time as Korba West Power Ltd changed hands twice. Since outright sales of power projects is not allowed by the government, the method adopted to change promoters is to transfer the memorandum of understanding signed for the project in the buyer8217;s name.

The company was first promoted as RPG Korba West Power. The Calcutta-based RPG group sold the company to the Kedias following which the company8217;s name was changed to Korba West Power. However, Kedias also decided to move out of the project.

Electrogen Alpha of USA and Korea Heavy Industries Construction Co. Ltd decided to takeover the company from the Kedias and approached the FIPB last month for its approval. The Korean company had also been engaged as equipment supplier and construction contractor for the project. While Electrogen agreed to put in 74 per cent equity stake, amounting to Rs 551.27 crore, Korea Heavy Industries was to pick up the balance 26 per cent for a consideration of Rs 193.69 crore.

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The project cost for the coal-based 2215;260 MW plant was also revised upwards to Rs 2483.25 crore from Rs 2137.14 crore.

Interestingly, the project has received all statutory approvals from the state government and electricity board. The Madhya Pradesh State Electricity Board MPSEB had recommended the project to Central Electricity Authority CEA for techno-economic clearance.

The project was to have a debt component of Rs 1738.25 crore and an equity base of Rs 745 crore. Of the total debt, Indian financial institutions had agreed to give Rs 630.69 crore while Korea Exim Bank was willing to put in Rs 941.43 crore and another Rs 166.13 crore was to be raised from a consortium of overseas commercial banks. Korba West Power had even engaged SBC Warburg of Germany as financial consultants for the project.