Coastal Energen Private Limited

active

In July 2009, the 1200 MW merchant coal power plant developed by Coastal Energen Private Limited at Tuticorin in Tamil Nadu, reached financial closure. The project was being constructed under a BOO format. The project had two units of 600 MW each designed to use high quality imported coal. In January 2008, a consortium of Coal & Oil Company DMCC (70%) and Dubai based Al-Rostamani Group (30%) established Coastal Energen Private Limited, a special purpose vehicle, to implement the project. The company was granted the project through MOU route on a negotiated basis. Coastal Energen had entered into a 12-year Power Purchase Agreement (PPA) with Tata Power Trading for the sale of up to 700 MW of power at a minimum guaranteed capacity of 85% of the contracted capacity less auxiliary consumption. The minimum guaranteed tariff through the term of the PPA was INR 3.52/kWh with any tariff in excess of INR 3.52/kWh being shared by Coastal Energen and Tata Power Trading in the proportion of 80:20. In case Tata Power Trading failed to offtake the guaranteed capacity, it was required to compensate Coastal Energen at the rate of INR 1.25/kWh. Coastal Energen also had the option of third party sale in such a case. Coastal Energen was exploring various alternatives for the sale of the balance 500 MW of capacity including competitive bidding through the Case 1 bidding route and/or direct sale on merchant basis. The project cost was estimated to be approximately USD 887.6 million (INR 42970 million at 48.41 INR/USD). The project achieved financial closure in July 2009. The project was expected to be funded through equity of USD 177.4 million (INR 8590 mn) and debt of USD 710.2 million (INR 34380 million) at a debt/equity ratio of 80/20. The project had been funded by a consortium of 16 banks and financial institutions led by the State Bank of India. The 15-year term loan carried an interest of 12 per cent. Unit I of the power plant was scheduled to be commissioned by February 2012 (30 months from the Notice to proceed date to the EPC contractor - August 2009) and Unit 2 was scheduled to be commissioned in May 2012. The Boiler-Turbine-Generator (BTG) supply and civil erection contracts had been awarded through fixed-price-fixed-time contracts to Harbin Power Engineering Company (Harbin) and Gammon India Limited (Gammon) respectively with in-built clauses for liquidated damages in case of delay and under-performance on key parameters. Coastal Energen had entered into a 12-year Coal Supply Agreement (CSA) with its Group company, Coal & Oil Company DMCC, for the supply of approx. 4 million MT of coal, as against a total requirement of approx 5.23 million MT of coal per annum. Coal & Oil Company DMCC had in turn entered into back-to-back arrangements with PT Kideco Jaya Agung (of Indonesia) for the supply of the contracted capacity. Coastal Energen had also applied for domestic coal linkage to the extent of 2 million MT per annum. As per the CSA, there were adequate penal provisions in place for non-supply for up to 70% of the contracted quantity, leaving Coastal Energen exposed to the risk of shortfall for up to 30%. While the CSA provided for supply of coal at a CIF price of USD 60.77 per MT, this base price was subject to escalation in line with the monthly CERC (Central Regulator) Index for payment.