Korba West Power Company Limited (Phase I)

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In June 2009, the 1200MW Korba West Power Company Limited - Phase I Coal power plant developed by Avantha Power Ltd reached financial closure. On July 28, 2008, Avantha Power had entered into an Implementation Agreement (IA) with Government of Chattisgarh (GoCG) and Chhattisgarh State Electricity Board(CSEB),for implementation of a 600-MW thermal power project in Raigarh district in Chhattisgarh State. However the plant capacity was subsequently increased to 1200 MW when Avantha Power entered into a MoU with the GoCG and Chhattisgarh State Power Holding Company Limited (CSPHCL) on November 17, 2009 for an additional phase-II of 600 MW. As per the terms of the implementation agreement, KWPCL was required to sell 5% of the power produced at the Chhattisgarh Power Project Phase-I to GoCH or its nominated agency at energy cost (variable cost) determined as per the guidelines of CSERC (State Electricity Regulator) for a period of 20 years from commencement of supply of power. GoCH or its nominated agency also had the right of first purchase on an additional 30% of the power generated at regulated tariffs approved by the CSERC. Chhattisgarh State Power Trading Company Limited (a GoCH undertaking) had exercised this right in October 2009. A PPA was expected to be entered into between KWPCL and the purchasing entity to set out the detailed provisions and procedure for supply and evacuation of such power, payment of tariff, acceptable payment security mechanism and other terms. In addition, on March 2010, KWPCL had also contracted for the sale of 210 MW of power per annum with Reliance Energy Trading Limited,for 15 years, subject to the negotiation and execution of a PPA. Also KWPCL was negotiating with entities for entering into long-term contract for sale of 35% of power. KWPCL was expected to sell the balance of power generated on a merchant basis. The estimated project cost of Chattisgarh Power Project Phase-I was USD 593.3 million (INR 28720mn @ 48.41 INR/USD). Financial close took place on 24 Jun 2009. Financing comprised a USD 444.1 mn (INR 21500mn) 14-year term loan and USD 149.1 mn (INR 7220 mn) Equity. Axis Bank was the lead arranger. KWPCL expected Chhattisgarh Power Project Phase I to be commissioned by the second quarter of fiscal 2013. As on August 31,2009, KWPCL had in place approvals/schedule of obtaining clearance for majority factors like water & coal linkage etc. KWPCL had also acquired a large part of the project land which constituted private land and for the remaining land, GoCG was in the process of granting possession to KWPCL. The company had placed orders for Boiler Turbine Generator Contract to BHEL. The clearance by Ministry of Environment & Forest (MoEF) for the project was also in process. A Bulk Power Transmission Agreement (BPTA)with PGCIL had been executed for the transmission of power generated from the Chhattisgarh Power Project Phase I in Feb 2010. The term of the BPTA is 25 years from November 2012. Approximately 2.87 million tonnes per annum of coal for Phase-I was to be procured through long term coal linkages from SECL. SECL had issued LoAs to KWPCL dated July 25, 2008 and June 6, 2009, for supply of an aggregate of 2.74 MTPA of coal. The balance of the coal requirement for the Phase I was expected to be procured from the open market as and when required. Each LoA was valid for a term of 24 months from the date of issue.