Maithon Right Bank Power Project

active

In 2005, Damodar Valley Corporation (DVC) and Tata Power Co (TPC) jointly signed a shareholders’ agreement to execute Maithon Right Bank Thermal Power project. DVC was a public entity formed by the national government and the state governments of West Bengal and Bihar (now Jharkhand) to control and manage the wild and erratic Damodar river. The project involved the construction of a 1,050MW (2X 525 MW) coal-based powerplant at Maithon in the state of Jharkhand. The project was expected to be executed in two phases of 525 MW each. To implement the project, Maithon Power (MPL) was created as a joint venture between Tata Power (74%) and Damodar Valley Corporation (26%). The consortium bagged the tender on a negotiated basis. Both Damodar Valley and Tata Power Trading signed offtake agreements. The consortium agreed that Maithon Project would sell 300MW of power to DVC and the remaining 750MW would be routed through Tata Power Trading for sale to major power deficient Northern States to the tune of 500MW and for sale through merchant power route to the tune of 250MW. Maithon Power (MPL) achieved its financial closure in February 2008 with a debt equity ratio of 70:30. The project was expected to cost approximately USD 1042 million. MPL financed this project through an equity contribution of USD 313 million and a loan of USD 729 million. SBI Capital Markets is the sole financial advisor and arranger of debt for the project. A consortium of 17 banks, led by SBI include Allahabad Bank, Bank of Baroda, Canara Bank, Central Bank, Dena Bank, Indian Overseas Bank, J&K Bank, Oriental Bank of Commerce, Punjab & Sind Bank, Tamilnadu Mercantile Bank, UCO bank etc financed the project. The base interest rate was 10.75%, which fixed the margin for each lender at signing as each bank had its own lending base rate. This was, however, reset at the end of each year from the date of disbursement. The front-end fee was 10bp. Repayment was in 40 quarterly installments of1.25% of the amount each, starting from the operation of each respective unit. Upon maturity, there was to be a balloon repayment equivalent to 50%of the debt amount. Construction began in Oct 2007 and commissioning was expected to begin by Oct 2010. The first unit of 525 MW was expected to be commissioned by October 2010 and the second unit by March 2011.