The 525mw coal-based power project promoted by Tamil Nadu Petroproducts Ltd, a Spic group company, has been facing a lot of hurdles in getting clearances and for finding suitable equity partners.

In fact the project has been stalled after original US equity partners Sithe and Raytheon pulled out owing to sanctions imposed in the wake of the Pokhran nuclear explosions by government of India in May 1998.

Also SEPC, the company which is implementing the project, had troubles with the ministry of surface transport to get clearance for the land for the project at Tuticorin.

Meanwhile, FIs are fighting shy of chipping in funds for the project which has an estimated outlay of Rs 2,813 crore with a debt-equity ratio of 70:30.

FIs also refused to oblige SEPCwith funds unless a foreign partner was given majority stake. Under pressure from FIs, SEPC hiked the stake of its O & M (operations and maintenance) contractor PowerGen plc of the UK to 74 per cent. The balance equity of 26 per cent is shared between TPL and Spic associate companies.

Although SEPC has tied up with FIs and banks to fund the debt component of Rs 2000 crore, it is unable to proceed with financial closure of the project without an escrow cover from TNEB.

Long after the 37 acres of land has been allotted to SEPC by Tuticorin Port Trust, TNEB is still playing hide and seek with SEPC on the escrow issue. The electricity board is reportedly waiting for a study on its escrowable capacity to be assessed by CRISIL.

IDBI has agreed to bring in Rs 630 crore covering a guarantee of Rs 500 crore and a term loan of Rs 130 crore. It is also taking a 15 per cent stake in the project along with other FIs like IFCI, GIC, LIC & UTI. ICICI is giving Rs 300 crore, IFCI Rs 200 crore and other institutionslike IDFC, LIC. GIC, UTI and IIBI will be giving loans as well as guarantees for foreign currency loans amounting to Rs 1500 crore. SEPC is to approach the State Bank of India for a foreign line of credit, a source said.

PowerGen Plc of the UK which will be contributing Rs 625 crore towards equity has brought in Rs 10 crore for meeting running expenses. TPL and Spic associate companies have pumped in Rs 28 crore as part of their share of equity of Rs 219 crore. The engineering, procurement and construction contract awared to ABB is worth $400 million.

TNEB will be reimbursing annually 2.5 per cent of the O & M costs as per the tariff agreement, fetching in about Rs 60 crore annually.

But SEPC cannot proceed with the project construction without FIs releasing the funds for which TNEB escrow cover is a must.