Highly placed official sources told The Financial Express that the consultant, besides drafting the tripartite agreement to be signed between the Reserve Bank of India (RBI), PTC and the state governments, will also be asked to develop a broad security mechanism which would be applicable to all mega power projects based on the `perceived acceptability' to lenders and investors.

The name of the consultant would be finalised in the first meeting of the stakeholders of PTC, comprising of Power Grid, NTPC and Power Finance Corporation, to be held shortly. The meeting would be attended by the top brass from these corporations.

Officials said that after developing an appropriate security arrangement, the financial consultant would be required to analyse the effectiveness of the proposed security arrangement for two to three specificmega power projects.

This, officials said, would include assessing the ability of the SEBs to offer credit enhancement and estimating the annual Central plan allocations (CPAs) and other devolutions to the states along with assessing the extent of the CPA and other devolutions which can be escrowed for the mega power project (including assessing whether the state has given any other charges on these funds).

In addition to this, the consultant will also be asked to work out details as regards the creation of a reserve fund from the government to support the security package.

Officials said that the capital structure of PTC would be governed by the extent of resources required for functioning of the PTC. This would involve assessment of the working capital requirements, margins to be maintained by PTC on a prudent basis for the obligations being undertaken by it and to identify any mismatch that may arise between the payment obligations of PTC and the receipts of payments from SEBs. The consultant will doa detailed review of all these aspects.

The consultant would review the need, availability and costs of a suitable insurance covers to reduce the risks borne by PTC and advise on the extent of insurance to be considered for PTC.

Officials said that based on the broad capital structure evolved and the extent of resources likely to be required, the financial consultant would need to develop a business plan for the next ten years including the projections of cost estimates for PTC, impact of recommended financial structure on costs and estimate of incremental tariff to be charged from SEBs over and above the likely tariff from mega power projects and the likely wheeling charges based on a cost plus return mechanism for PTC.

It may be mentioned here that three international consultants to advise on the setting up of mega power projects have been appointed. These consultants namely Dresdner Kleinwart Benson, Lehmeyer and Feshfields will work out the financial technical and legal details related with thesetting up of mega power projects.