New Delhi, June 15: The Bhilai Power Company has engaged Citibank and the Industrial Development Bank of India (IDBI) to raise funds for its Rs 2,100 crore thermal power plant in Madhya Pradesh.

The merchant bankers will have to raise roughly Rs 1,470 crore from the domestic and foreign markets for the project, envisaged on a debt to equity ratio of 7:3. The appointment of the merchant bankers seems to suggest that the 500 MW power project, being jointly promoted by SAIL, Larsen & Toubro (L & T) and CEA of the US is at last close to financial closure.

The project has faced much rough weather, including reappraisal by the Union ministry of steel and an environmental scrutiny, ever since the two power consumers and the US energy producer first signed a memorandum of understanding (MOU) in 1994. According to SAIL sources, the project should be able to reach financial closure by the end of the year.

The Madhya Pradesh State Electricity Board (SEB) has already finalised a power purchase agreement with the Bhilai Power Company in March and is expected to sign on the dotted line soon. The SEB also approved and forwarded the detailed project report to the Central Electricity Authority in that month.

Larsen & Toubro will have a 50 per cent equity stake in the company. The US power producer CEA has opted for 45 per cent, which works out to Rs 630 crore on the 30 per cent share of the project cost. SAIL will hold a token share of five per cent of the Bhilai Power Company, limiting its commitment to barely Rs 31.5 crore.

The equity pattern of the company is expected to undergo a change when a portion of the share capital will be offered to financial institutions and the public. The debt component of the project cost may then decrease proportionately.

The SAIL stake in the Bhilai Power Company is in effect much greater, since the expansion of its Bhilai Steel Plant will depend considerably on the availability of power from the joint venture. The Bhilai Steel plant will be among the thermal power project's key customers, with an average offtake of 170 MW of electricity.

The Hirmi Cement Plant of Larsen & Toubro will be another bulk consumer of the Bhilai Power Company. The surplus electricity generated at the plant in Raipur, where the concentration of high-tension power consumers is the thickest, will be fed into the state grid.

The engineering project and construction (EPC) contract and agreements for operating and maintaining the plant are also being negotiated and are expected to be signed shortly. Sources in SAIL pointed out that the Bhilai power project already had the approval of the Cabinet Committee on Foreign Investment (CCFI), the Cabinet Committee on Economic Affairs (CCEA) and the state government on environment norms. The coal and water linkages have also been approved.

The Central Electricity Authority is expected to complete the techo-economic assessment of the power plant in a couple of months. The project report has been approved by the Madhya Pradesh government as well.

The state has allotted 541 acres of land for the project in the vicinity of SAIL's Bhilai plant, which is the single largest consumer of electricity in Madhya Pradesh. It also generates a substantial portion of its energy requirements at its captive plant.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.