A top source in BSES Kerala said that the company had got the Reserve Bank of India's (RBI's) clearance to raise $10 million through ECBs. The ECB will be routed through Canara Bank, which heads the three-member banking consortium that has committed to meet the power venture's debt portion. According to the deal, Canara Bank will raise the $10-million loan at an interest rate of 170 basis points over Libor, the sources said.

The independent power producer (IPP) is raising the $6.25-million FCNR(B) loan from Indian Overseas Bank (IOB) to part-fund the first two units of the venture. Together the loans will be sufficient tomeet the foreign-currency obligation of the project's first phase, the sources added.

The state government had cleared the transfer of another five acres of land for the project adjacent to the 15 acres allotted. With this, the IPP has crossed a major hurdle for achieving financial closure of the venture. The company expects cabinet clearance for the power-purchase agreement (PPA) for its combined cycle unit soon. Once the PPA is cleared, financial closure is a formality, the source added.

BSES Kerala, a joint venture promoted by the Mumbai-based power major BSES and the Kerala State Industrial Development Corporation (KSIDC), is the first fast-track power project to come up in the state.

The project is structured on a debt-equity ratio of 2:1. BSES, the venture's original promoter, holds 60 per cent equity, and KSIDC 20 per cent. The remaining is earmarked for financial institutions and the public. BSES has pumped in over Rs 150 crore into the venture as part of its equity, while KSIDC has released Rs7.5 crore for it.

For financing the debt component, the IPP has also lined-up funds worth Rs 315 crore from a Canara Bank-led consortium--Rs 155 crore rupee-denominated loan, and the rest in hard currency subject to statutory clearances. According to the deal, the consortium had released to the company the first tranche of Rs 116 crore, which would cover the two 43.5mw units of the open-cycle project. The Rs 200-crore second tranche of funds would take care of the third 43.5mw plant in the open-cycle and the combined-cycle plant.