Balaji Power and SIV Industries propose setting up 100 mw power projects in Tamil Nadu. The independent power producers (IPPs) are confident that the escrow cover will be ready soon and are now heading towards financial closure. Both the companies propose to complete financial closure latest by the end of November.

The Tamil Nadu government had, in September, earmarked a portion of its sales tax revenues to provide an escrow-like facility to power producers in the state so that the absence of a regular escrow account does not hamper their ability to raise finance. The state government's new policy has come in handy for Balaji Power and SIV Industries.

With a number of IPPs in Tamil Nadu seeking the escrow account facility and TNEB being unableto oblige all of them, the state government had come up with this alternative method to enhance the bankability of power projects.

Financial institutions have been refusing to accept that TNEB has the ability to provide escrow account cover for projects up to a total capacity of 4,000 mw. The state electricity board, believing its escrowable capacity to be that much, has committed itself to several projects.

Institutions, however, believe that TNEB's escrowability is only 4,000 mw. This means that only a handful of the power projects being processed can be given this facility. Among those who stand a better chance of getting this facility are Videocon (1,000 mw), Pillaiperumalnallur (300 mw), GMR Vasavi (200 mw) and TriSakthi (525 mw). These projects are already at a relatively advanced stage.

Credit rating agency has been assigned the task of working out the actual escrowable capacity of TNEB in order to solve the dispute with the Industrial Development Bank of India. This move follows the decision ofboth parties to resolve their differences over the number of power projects that can be financed in the state.

The financial closure of all major power projects in the state hinges on settling the dispute on the escrow capacity of TNEB. If the actual escrow capacity of TNEB is found to be in the region of 2,000 mw, which is very likely, a majority of the pending power projects will be unable to take off.

This is because FIs had decided not to extend finance to power projects without them securing escrow cover from their respective state electricity boards. Following this, SEBs issued escrow cover to all the new projects indiscriminately which the FIs are now finding beyond their financial strength to support.

At present, TNEB has over 2,350 mw capacity worth power projects at various final stages of take-off. In addition to this are the 11 short gestation power projects promoted by the Tamil Nadu Industrial Development Corporation, out of which five have managed to get fuel linkages despite numerousodds.