Budhil Hydroelectric Project

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In September 2004, Himachal Pradesh State Government (GoHP) awarded the development of a 70 MW hydro electric power project in Chamba district (Himachal Pradesh State) to Lanco Green Power Private Limited (LGPPL) on a 40 year BOOT (build-own-operate-transfer) basis. The term of the BOOT implementation agreement, signed in Novemeber 2005, was 40 years from the date of commercial operation after which the project would be transferred to GoHP. The project was also known as Budhil Hydroelectric project (BHP) as it was located across the Budhil Nallah tributary of the Ravi river. BHP was part of the master plan drawn by GoHP for harnessing the hydroelectric potential of the Ravi River. BHP was expected to generate 313.33 million units of power per annum. Under the implementation agreement, LGPPL had the right to sell the power generated from the facility to any customer outside the State of Himachal Pradesh. However, LGPPL was required to supply 12.0% of the deliverable energy generated to GoHP free of charge as royalty payments for an initial twelve year period commencing from the date of commercial operation, which would be increased to 18.0% for the remaining years. In March 2005, LGPPL entered into a power purchase agreement (PPA) with Power Trading Company (PTC) of India Limited, a power trading firm. The term of the PPA was 35 years from the date of commissioning. LGPPL, a wholly owned subsidiary of India’s Lanco Group, was formed to implement this project. LGPPL won BHP by participating in a competitive bidding process conducted by GoHP. However, there was no further information on the bidding process and the bidding variable. The total cost of BHP was estimated at US$ 92.47 million (Rs 4,190 million). LGPPL achieved financial closure in March 2006 with a debt equity ratio of 4:1. ICICI bank was the term lender for the project. Construction on the project began in immediately after financial closure was obtained. BHP was expected to begin commercial operations by April 2008.