Nagai Power Private Limited

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In 2009, the Tamilnadu Government, signed a MoU with Nagai Power Private Limited (NPPL),a Special Purpose Vehicle (SPV) of KVK Energy & Infrastructure Private Limited, for development of a 300 MW (2x150 MW) coal based thermal power station in Okur and Venkidanthagal Villages at Nagapattinam, in the state of Tamilnadu. The project had been structured into a group captive unit. Equity was sponsored by KVK group (74.01%), IFCI (24.4%) and captive owners (1.59%). The project was planned to be executed in two phases of 150 MW each, based on sub critical technology. The land required for the project was 250 acres which had been acquired. Water requirement, estimated at 4,100 m3/hr, would be met from state water utility as well as sea water. NPPL had received all major clearances like environment clearance, coastal clearance, chimney clearance etc. NPPL would be responsible for any transmission infrastructure to connect the power project to the designated state grid substation. The primary fuel for the project was domestic coal. NPPL had executed a fuel supply agreement (FSA) with Mahanadi Coal Field (MCL) for 0.9566mtpa coal. The annual requirement of coal for phase I was estimated to be 0.69mtpa, of which 0.55mtpa was to be met through MCL. The balance requirement was to be met through imports. However, FSA was loaded in the favour of MCL with no commitment on the grade of coal. Also, penalty for shortfalls below 50% of the annual contracted quantity was 0.1% of the value of the shortfall. Considering the supply commitments of MCL beyond its actual production, supply rationing was expected. However, the project benefits from its proximity (12km) to the Karaikal port, improving synchronisation of logistics and leading to potential cost savings on inland coal transportation, incase of use of imported coal. The company had awarded EPC contracts to Nagarjuna Constructions Company Limited. The steam turbine and boiler for Phase-I (150MW) had been designed and manufactured by Franco Tosi Meccanica Spa and Ansaldo Caldaie Boilers India (subsidiaries of Gammon India). NPPL had executed a 15-year power purchase agreement (PPA) for a gross capacity of 105 MW with six group captive owners which were involved in cotton yarn manufacturing. The project would generate 114.75MW at 85% plant load factor PLF after accounting for auxiliary power consumption of 10%. PPA had a payment security mechanism in form of an 18-day revolving letter of credit. NPPL planned to sell power to group captive consumers at a discount to the tariff charged by Tamil Nadu Generation and Distribution Corporation Ltd (TANGEDCO). PPA mentioned the commencement date for power sales as 1 April 2013. Tangedco expected PPA to be rescheduled in line with the revised commercial operations date as the NPPL plans to sell power at a discounted tariff to TANGEDCO’s applicable tariff for industrial consumers. This provided an economic incentive to the buyers. Alternatively,the project could find off-takers given Tamil Nadu’s power deficit (2012-13: base deficit-17.5%; peak deficit-13.2%), although it could consume some time. There was strong industrial demand for power in the region from a wide variety of industries including textiles, auto components and foundries. The cost of the Phase I of the Project (150MW) was estimated to be approximately US$ 143.7mn (INR 7679.7mn @53.44 INR/USD). Financial closure took place on 16th July 2012 at a Debt/Equity ratio of 75/25. NPPL financed this project through sponsor equity contribution of US$ 35.174mn (INR 1879.7mn) and a debt of USD 108.5mn (INR 5800mn). The debt, arranged by Capital Fortune, had a door-to-door tenor of 15 years. The loan would be repaid in 48 quarterly installments and was priced at 13.50%. The participating banks were Rural Electrification Corp Ltd (3000mn), Srei Infrastructure Finance Ltd (1260mn), IIFCL(1540mn). Additional cost overruns (due to project delay) were funded through a term loan on 18th April 2013. Fina