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Kannur Power Project to tie up funds by June
Our Bureau
Kochi, Dec 29: The promoters of the 513mw combined-cycle Kannur Power Project plan to tie up funds by June next year. The project is jointly promoted by Enron International, a wholly-owned subsidiary of Enron Corporation, and the KPP Nambiar group.The modalities of the fuel-supply arrangement are to be finalised by the January 15 deadline set by the centre, according to project chairman KPP Nambiar.Enron International has also entered into a separate agreement with the Nambiar group for setting up a Rs 5,000-crore LNG project in Kannur.A techno-economic study to develop the port will be undertaken soon. The project is scheduled for completion four years after it receives clearances.The proposed LNG project will have a capacity of 5 million cubic feet. The venture would help nearly half a dozen IPPs to shift their fuel base to LNG from the more costly naphtha. With full capacity, the project could provide fuel for the generation of nearly 2,000 mw of power in the state.However, he said the project would
focus not only on the IPPs, but also on a series of other industries, including the public-sector fertiliser major FACT. Kannur Power is already in touch with the state government and will initiate a final round of talks with the state electricity board to make the power purchase agreement bankable. The company says it has already furnished details on the financial structure of the project to the government. The state electricity board, which has to accord its final clearance to the project, will also have to open an escrow account to pave the way for a financial closure. The state will also have to provide a guarantee that promises to compensate the company should the power board default on its payments, sources said. Nambiar said Kannur Power would offer a levelled tariff of less than Rs 2.25 a unit, the lowest offered by an independent power producer. The company plans to finalise the arrangements for supply of naphtha before the January 15 deadline. Though Kannur Power has already signed an
agreement with Bharat Petroleum for supply of fuel, the company is now re-considering the move following the centre's notification on the cost and ownership of the infrastructure developed for fuel supply. "This is not acceptable to several of our directors, and we are, therefore, considering the other option," Nambar said. The centre had, in a recent order, directed the oil companies to pass on the cost of putting up infrastructure facilities developed for the purpose on IPPs. The government has also directed power producers to either sign the fuel supply agreement with any of the oil companies or show an alternative source of fuel supply. Nambiar said the company was now considering the option of importing the fuel directly. If that happens, the company may also have to take up the responsibility for distribution of fuel. However, as the company is developing the Azhikal port, the second option might turn out to be cheaper. "The company is appraising the situation and will opt for the more economical
source," Nambiar said. He said the cost of the project had not escalated from its estimated level in 1995. The company does not expect any overrun on variable costs despite the rupee fall as international naphtha prices are projected to decline further. The Rs 1,467-crore project got a leg-up recently following the entry of Enron International into the venture. According to a memorandum of understanding signed by KPP Nambiar, Enron principal country manager Sanjay Bhatnagar and Enron International vice-president Gregory Blair in London on December 23, Enron International will hold 74 per cent of the $120-million equity, leaving the rest to the Nambiar group. While Nambiar will remain the chairman of the company, the day-to-day management will be looked after by a management committee with equal representation for Enron International and the local group. The project will have a debt-equity ratio of 70:30. Nambiar said two international banks had extended a letter of commitment for credit arrangement.
Nambiar, however, refused to name the banks. The project has received about 28 clearances from the state and central governments, including an environment approval. The project, which is slated to go on stream by 2000, will have three gas turbines of 112mw each and one steam turbine of 177mw.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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