Nagarjuna Power Project

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Nagarjuna Power Corporation Limited (NPCL) was incorporated in 1996 to develop a 1,015 MW (comprising two units of 507.5MW each) greenfield coal-fired power plant in Ududpi district of Karnataka State on BOO (build-own-operate) basis. NPCL committed to supply 90% of the power to the five electricity supply companies (Escoms) in Karnataka and the balance to Punjab State Electricity Board under 25 year power purchase agreements (PPA) signed in December 2005. NPCL was expected to use imported coal from Australia, South Africa and Indonesia as the primary fuel to generate power. Nagarjuna Power Project (NPP) was significantly delayed due to delays in obtaining various government clearances. NPP was a result of Government of India’s (GoI) commitment to its ambitious goal of “Mission 2012: Power for All” that required additional capacity creation of nearly 100,000 MW by 2012. In April 2004, NPP was granted “Mega Power Project Status” by the Ministry of Power (GoI) which allowed certain fiscal benefits to NPCL for undertaking the project, such as exemption from customs duty on imported equipment and sales tax exemption on capital goods supplied to the power plant. NPCL was a joint venture between India’s Lanco Group (74%) and Nagarjuna Group (26%). Since NPP took a long time (almost 10 years) to reach financial closure, information on how this project was awarded originally was not available from public sources. The total cost of NPP was estimated at US$ 958.3 million (Rs 43.42 billion). The project reached financial closure in November 2006 with a debt equity ratio of 4:1. A consortium of 14 banks and financial institutions, led by Power Finance Corporation, financed the project loan of US$ 766.72 million (Rs 34.74 billion). Construction on the project began in full fledge immediately after the financial closure was achieved. NPP was expected to begin commercial operations by the last quarter of 2009.