MUMBAI: The two companies today entered into a memorandum of understanding (MoU) for jointly promoting the 500 mw power project in Savli, a IOC statement said here. While IOC and Mitsubishi would hold 26 per cent stake each in the project the balance 48 per cent would be offered to other public sector undertakings, financial institutions, project associates and others, the statement said.

The project shall have a debt equity ratio of 70:30 and is scheduled for completion in 33 months from the date of financial closure, it said. The power project is based on the vacuum residue fuel (VRF) of IOC's Gujarat refinery. The project incorporates appropriate technology which would enable it to conform to the highest standards in environmental protection, the statement said.

IOC is also planning to set up two more power projects including the 301 mw project in Panipat in collaboration with another Japanese multinational Marubeni Corporation. The 120 mw power project of IOC inBhatinda is a joint venture with Punjab state electricity board, the statement added.

ICRA downgrades Punjab power board

NEW DELHI: Rating agency, ICRA has downgraded ratings of two Rs 25o crore each structured obligation bonds of Punjab state electricity board (PSEB) to "LA(SO)" from "LAA+(SO)" and "LAA(SO)". The revised rating indicates adequate safety.

"Risk factors are more variable and greater in periods of economic stress," ICRA said justifying the downgrade. PSEB had come out with two Rs 250 structured obligation bonds in December 1996 and July 1997.

ICRA said the protective factors were average and any adverse change in circumstances may alter the fundamental strength and affect the timely payment of principal and interest as per terms. It said the downgrade had factored in PSEB's non-compliance with the conditions stipulated for rating the structured obligation.

There has also been a deterioration in the financial health of the state electricity board. ICRA said the structuredpayment mechanisms through separate escrow accounts to route the interest payments and principal repayments as stipulated at the time of the initial rating of the bond issues had not been operative.