Sterlite Jharsuguda Power Project

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In June 2009, the 2400MW Jharsuguda power plant developed by Sterlite Energy under a BOO format, reached financial closure. In September 2006, the Orissa Government had signed a MoU with Sterlite Energy for development of the 2400 MW coal-fired thermal power plant at Jharsuguda, in the State of Orissa, strategically located near a coal pit-head, approximately 365 km from the state capital, Bhubaneshwar. The project would include 4 units of 600 MW each. Sterlite Energy Limited, a Vedanta Resource group company, was granted the project through MOU route on a negotiated basis. The power generated from the 2,400 MW power plant was expected to be sold to entities including state electricity boards, state owned utility companies, power trading companies and private entities. Jharsuguda Power Plant (JPP) executed a PPA with GRIDCO (Orissa State Distribution Company) in September 2006(amended in August 2009), granting GRIDCO the right to purchase up to 25% of the installed capacity of the power plant after adjustments for auxiliary consumption by JPP, i.e. approximately up to 561 MW from this project. Further, GRIDCO at all times had the right on behalf of the Government of Orissa to receive from JPP, 7% of power generated (after adjustments for auxiliary consumption by JPP - i.e. approximately 157 MW of power) at variable cost, as determined by OERC (State Power Regulator). Further, JPP was required to make available to GRIDCO the entire power generated from the first unit (of 600 MW) of the JPP after meeting JPP's own requirement. GRIDCO had the right to purchase an aggregate 718 MW of power from JPP once in every five years, for 25 years, from the date of commercial operation of the last unit. As per the PPA, the tariffs for this purchase of power would be fixed by Orissa Electricity Regulatory Commission (“OERC”). This right was an option to purchase rather than a binding commitment of GRIDCO. At the time of collection of this information, the PPA was subject to the approval of the OERC. JPP also intended to supply power produced from the project to the sponsor Group Entity, Vedanta Aluminium, to meet the power requirement for its proposed 1.25 mtpa aluminium smelter expansion project at the adjacent site. JPP had obtained in-principle letter from the Chattisgarh State Electricity Board(CSEB) for the purchase of 1,000 MW of power. An MOU had also been signed with PTC India Ltd for the off-take of 600MW of the power produced. The project cost was estimated to be approximately USD 1707 million. Financial close took place on 29 June 2009 at a Debt/Equity ratio of 73/27. JPP financed this project through an equity contribution of USD 423.5 million (INR 20500 at 48.41 INR/USD) and a loan of USD 1290.4 million. Debt was split between a USD 1150.4 million (INR 55690mn) 13.5-year term loan arranged by State Bank of India and IDBI, and a USD 140 million (solely provided by IIFCL-UK) 15.5-year term loan. The project was expected to be progressively commissioned with the first unit expected to be commissioned in the fourth quarter of fiscal 2010 and the project is expected to be fully commissioned in the third quarter of fiscal 2011. The first unit was commissioned in September 2010. In January 2008, the Ministry of Coal (GoI) jointly allocated the coal blocks in the Rampia Coal Blocks to Sterlite Group and five other companies namely, GMR Energy Limited, Arcelormittal India Limited, Lanco Group Limited, Navabharat Power Private Limited and Reliance Energy Limited. The six companies entered into a memorandum of agreement regarding the mining of the Rampia Coal Blocks through a joint venture company, Rampia Coal Mine and Energy Private Limited (“RCMEPL”), which was incorporated in February 2008 to acquire mining rights in the allotted Rampia Coal Blocks. The coal requirement for the Jharsuguda Power Project (JPP) was estimated to be approximately 12.49 mtpa. Proportionate share in these coal blocks was estimated at 112.22 million tons of F/G grade coal, which was expected to meet the coal requirements for only 1,000 MW of the 2,400 MW total planned capacity for approximately 22 years.Pending the development of the Rampia Coal Blocks, JPP had obtained a provisional assurance from the Mahanadi Coal Limited (“MCL”) for the supply of 2.57 mtpa of coal (E/F grade) which was expected to meet a substantial portion of the coal requirements of the first 600 MW unit of the power plant. JPP had applied to the Ministry of coal (MoC) for a coal linkage to meet a substantial portion of the coal requirement for the remaining three units totalling 1,800 MW. The remaining requirement for all the units of the power plant was expected to be met from the open market.EPC contract signed with SEPCO III.