Chennai Desalination Ltd.

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In August 2005, the Chennai Metro Water Supply and Sewerage Board (CMWSS) awarded IVRCL Infrastructures & Projects to design, build, own, operate and transfer of a seawater desalination plant in Minjur, Chennai, India. They won it through a competitive bidding which was arranged by the government. IVRCL implemented the project with its technical partner Befesa Construccion y Tecnologia Ambiental, S.A.U. (Befesa CTA)through a special purpose vehicle (SPV) incorporated as Chennai Water Desalination Ltd (CWD). In September 2005, the bulk water supply agreement was signed between CMWSS and IRVCL. Under the agreement, CMWSS provided 60 acres of land to the IVRCL. IVRCL gave Befesa CTA the engineering, procurement, and construction of the plant, and also maintained it for the first three years. Afterwards, CWD took over the operation. The financial closure was reached in January 2007 after CWD secured funding from local private banks (Canara Bank, IOB and United Bank of India), and International Finance Corporation (IFC). Initially, the project was estimated to cost Rs 475 crore or USD 108 million with secured funding of Rs 375 crore in debt from three local private banks, and a USD 17 million loan from IFC. However, due to the time taken to obtain clearances and the appreciation of the euro vis-à-vis the rupee between September 2005 and December 2006, the cost escalated to Rs. 520 crore or USD 115 million on December 2006. IVRCL and Befesa CTA financed the extra cost through their equity. The project had a three-tiered payment security mechanism, including an escrow account and a State support agreement from the Tamil Nadu government. CWD needed to repay the loans in 10 years, excluding the construction period. Interest for the loans form the three banks was reset every three years, while the IFC loan had a fixed rate (LIBOR plus 170 basis points). The overall interest rate worked out to be 9.8 percent. The project ownership shares were 75 percent belonged to IVRCL Infrastructures & Projects, while Befesa CTA had 25 percent stake. Nearly 65 percent of the equipment in the plant was to be imported from Europe. Befesa Construccion y Tecnologia Ambiental, S.A.U. (Befesa CTA) was a part of Abengo group in Spain.