ABB Structure Finance will lead arrange the funds along with ABN Amro and CSFB while ING of Netherlands will be the senior co-arranger for the issue, Videocon Power director Kuldeep Drabu said.

"The lead arrangers will be responsible for the entire due diligence of the fund raising exercise and finalise the syndication strategy. They have also agreed to fully underwrite the syndication," Drabu said.

The foreign loan component constitutes about 38 per cent of the total project cost of Rs 4600 crore, he said. Videocon received the nod for the external commercial borrowings (ECBs) in July, he added.

"The arrangers will focus on American and European markets and are expected to be through with the exercise by end of October," Drabu said.

Jointly promoted by Videocon and the Swiss-Swedishengineering major Asea Brown Boveri (ABB), the Indian company holds a controlling stake of 74 per cent in the venture with the rest going to ABB after a recent restructuring of equity.

Earlier, Videocon had a 55 per cent stake and ABB 45 per cent.

Export credit agencies, Hermes of Germany and ERG of Switzerland, will provide guarantee for a $415-million component of the power project's total foreign debt.

While Hermes will stand guarantee for $300 million for a 10 per cent premium, ERG will offer guarantee for $115 million at 6.5 per cent, Drabu said. The company has a 70:30 debt-equity ratio.

On whether economic sanctions imposed by the US would make foreign funds more expensive, Drabu said, "Although no American company or bank is directly involved in our project, we expect the sanctions to have a certain effect on our fund raising overseas."

The arrangers are, at present, negotiating the interest rates. The effect on interest rates is going to be clear only towards the finalisation of thesyndication," he said.

The depreciation of the rupee against the dollar could also increase the project costs, Drabu said.

ABB has bagged the engineering procurement and construction (EPC) contract as well as the Operation & Maintenance (O&M) contract for the project.

The project will have two coal-fired units of 525mw each. Although Videocon has been allotted a coal mine at Talcher in Orissa, it will be sometime before coal from this mine can feed the plant due to transportation problems.

The company expects to achieve financial closure for the project by the end of the year. The power purchase agreement (PPA) has already been signed with the Tamil Nadu Electricity Board (TNEB) in March this year.

"There are a few more mandatory agreements to be signed with the Tamil Nadu government which will be done before we achieve financial closure," Drabu said.

All the major clearances including techno-economic clearance (TEC) from the Central Electricity Authority (CEA) and the environmental clearanceshave been procured for the project. The TEC was issued in April 1996.

"Construction on the project will start within 30 days from the date of financial closure and is expected to be completed in 42 months," he said.

The transmission facility has already been set up by TNEB which will be shared by a 630mw state power plant at the same location.