A final draft agreement on the cover to be provided by TNEB to IPPs has been sent to IDBI for its concurrence, it is learnt.

Financial institutions (FIs) had questioned TNEB's ability to provide an escrow cover of 4,000mw. After a recent meeting in Mumbai between state electricity boards (SEBs) and FIs including IDBI, it was decided that an independent rating agency should be commissioned to assess SEBs'escrow capacity, including TNEB's.

While TNEB has claimed an escrow capacity of 4,000mw, IDBI as the lead institution on behalf of the other FIs insists the board does not have capacity to provide an escrow cover of more than 2,500mw.

TNEB sources say IDBI has cleared the board's escrow capacity for seven power projects to the extentof 2,172mw. These include, among others, Videocon (1,050mw), ST-CMS (250mw), 330mw at Pillaiperumalnallur, and 106mw of Balaji Power at Samayanallur.

The draft final escrow agreement after IDBI's concurrence, expected within a week, is to be cleared by the TNEB board, which meets later this month. Meanwhile, identification of bank branches that will collect TNEB's receivables towards an escrow account and final documentation work for the agreement with IPPs is underway.

TNEB has, however, warned IPPs that if they fail to reach financial closures within six months of getting the escrow cover, it will be cancelled, and the facility will be extended to the IPP next in line.

TNEB has also put a series of conditions for IPPs before agreeing to sign the escrow-cover agreement with them, a source said. As per these conditions, IPPs are required to:

* Have techno-economic clearance (TEC) by the Central Electricity Authority in place;

* Have completed land acquisitions;

* Ensure adequate water supplies forthe projects;

* Get all environment clearances;

* Get TNEB's approval for the fuel supply agreement (FSA);

* Get TNEB's approval for both the engineering procurement & construction (EPC) and operation & maintenance (O&M) contracts;

* Get a letter from FIs that they are willing to extend financial assistance to the project on the basis of the escrow cover.

According to the source, the IPPs have been given indications on the principle of the escrow-account cover and are aware of the draft agreement on the escrow arrangement being finalised with IDBI. Now, TNEB is putting pressure on IPPs to get their concurrence also.