Teesta VI Hydro Electric Project

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The Teesta VI Hydro Electric Project was a 500 MW project located across the Teesta River in the state of Sikkim. The project was designed to generate 2441 million units per annum (about 500 MW – 4 units of 125 MW each). The project was developed by LANCO Energy Pvt Ltd (LEPL), a special purpose vehicle established to implement the project on a Build-Own-Operate-Transfer (BOOT) basis for a period of 35 years. LANCO Infratech Ltd (LITL) held 74% stake in LANCO Energy Pvt Ltd (LEPL) while Government of Sikkim (GoS) held the remaining 26%. The equity participation of GoS did not involve any actual upfront payment by the Government. Instead, the payment of upfront equity was to be adjusted against the proceeds from sale of free power from the project to the GoS. The project was required to provide royalty to the GoS in the form of free power to the extent of 12% of the energy generated from the project for the first 12 years, 18% of the energy generated for the for 12-30 years and 30% of the energy generated for beyond 30 years. LEPL signed a power purchase agreement (PPA) for the sale of remaining power from this project for a period of 25 years with Maharashtra State Electricity Distribution Company Limited (MSEDCL), the electricity distribution licensee in the state of Maharashtra. The project was awarded by the Government of Sikkim by way of competitive bidding on the basis of the highest upfront premium paid to the Government of Sikkim. The project was expected to cost US$ 750 million and achieved financial closure in July 2007. The project was financed through a mix of debt (80%) and equity (20%). Consortiums of nine banks and financial institutions, with ICICI Bank in the lead, have provided the debt required for the project.