ADB plans equity in Gujarat power project

Friday, 24 December 2004, 08:00 Hrs
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NEW DELHI: The Asian Development Bank (ADB) is proposing to take 10 percent equity and also provide a loan for helping set up a 1,095 MW power plant in Gujarat.

The project, being implemented by Torrent Power Generation Limited (TPGL), involves the construction and operation of a 1,095-megawatt gas-fired combined-cycle power plant in Surat district.

TPGL is a special purpose company established by the Gujarat-based Torrent Group.

"ADB will help meet the growing demand for clean energy in Gujarat and other states of India, through an equity and loan package totalling up to 3.38 billion ($75 million)," the multilateral agency said in a statement Friday.

"The assistance, which is currently being negotiated, comprises an equity share of up to 10 percent or 929 million ($20.6 million) in the project and an Indian rupee-denominated loan of up to 2.45 billion ($54.4 million) without government guarantee," Manila-based ADB said.

The project's total cost is estimated at 30.96 billion ($688 million). To be fuelled by natural gas supplies under a long-term gas supply agreement, the power plant is expected to begin commercial operations in November 2006 and achieve full completion in November 2007.

The Torrent Group, whose main business is power distribution and healthcare, will hold a 60 percent share in TPGL through three of its group companies. For the remaining 40 percent equity, TPGL is exploring the participation of strategic and financial investors.

"ADB's equity investment in TPGL is expected to catalyse other investors, while the rupee loan will mitigate the foreign exchange change risk to the project," said Kurumi Fukaya, a senior ADB structured finance specialist.

ADB's equity and loan come from its ordinary capital resources. The loan will have a term of up to 15.5 years, including a grace period of 3.5 years.

The Torrent Group will sell power to its power distribution arm Surat Electricity Company Limited (SEC) and Ahmedabad Electricity Company Limited (AEC), and the state-owned Power Trading Corporation of India Limited (PTC) under long-term power purchase agreements.

PTC on its part will supply the power purchased from the project to other states in the western region.

India as a whole suffers from a power shortage, which is more severe in the western region compared to the eastern region, where a surplus exists. In Gujarat, which contains one of the most industrialised stretches in India, shortages in energy have reached 15 percent at peak times.

"The project will provide additional electricity to India at a competitive price and in an environmentally and financially sustainable manner," said Fukaya.

"It aims to promote economic growth by boosting the supply of electricity at a lower cost. The power generated by the project will replace power currently generated by state electricity boards and will allow the diversion of power for supply to other consumers."

Source: IANS
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