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Vandana Saxena
The Maharashtra State Electricity Board (MSEB) expects to raise over Rs 300 crore from the current Rs 150 crore bond issue which has an option to retain the oversubscription. The corpus will be used to pick up a 30 per cent stake in the Dabhol Power Company (DPC).
The issue which opened recently will close on October 7. This is the third time MSEB has entered the bond market to raise money for this purpose. The outgo is expected to be heavy with the rupee depreciating against the dollar. The board has already raised Rs 631 crore from the earlier two bond issues, which included a Rs 150 crore tax-free and Rs 100 crore taxable bond issues. The lead arranger for all three have been JM Financial & Investment Consultancy Services, which was also advisor to the board for the purchase of equity in DPC.
The ongoing issue is a mix of taxable and tax-free bonds. Under the taxable category, there are four options of different maturity, ranging from four years, 11 months to 10 years with a coupon rate of 14.50 percent per annum on all except 10-year maturity bonds.
The second and fourth of 10-year tenure will have put and call option, but the put and call value and redemption norms vary. Like previous issues, the present one is also non-convertible and is guaranteed by the state government. Priced at Rs 1 lakh per bond, the issue bears a credit rating of LAA (SO) by ICRA.
The tax-free regular income bonds have two options of five and 10-year tenures and the latter will have the call and put option. The proceeds from the privately-placed issue will be used by the Maharashtra Power Development Corporation Ltd (MPCL), the newly-formed company to pick up a stake in DPC.
The board is targeting banks, including co-operative banks and other financial institutions, charitable and religious trusts, non-banking finance companies and insurance companies for its investment in DPC.
Initially, MSEB also planned to generate $50 million through a overseas syndicate loan. This had to be shelved as the international borrowingbecame expensive. It had also hoped to meet the entire requirement for the purchase through the two issues.
The 2184 mw power project, being developed by DPC in Maharashtra, was planned with a debt equity ratio of 70:30 of which the equity for phase 1 of 740 MW was around $275 million. Eighty per cent of DPC's equity is held by Enron and the balance equally shared by Bechtel and General Electric.
MSEB's 30 per cent stake will be purchased from Enron Mauritius Company, the investment company of Enron International. The board also has to share the burden of project cost escalations due to delay in the finalisation of the project.
Phase 1 has reached near completion and is likely to be commissioned by December this year and MSEB plans to sign the agreement before December.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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