PFC's funding will have a tenure of 12 years and carry an interest rate of 7.25 per cent. “We are in the process of issuing the sanction letter for financial assistance to Nagarjuna Power,” a PFC official said.

The debt-financing package, approved by the lead arranger PFC, will pave the way for the Rs.4,400 crore project to achieve financial closure by May this year. The other members of the lending consortium – Rural Electrification Corporation, Hudco, Life Insurance Corporation, State Bank of Mysore, State Bank of Travancore and Canara Bank – are expected to chip in with the balance debt component for the project.

On a debt-equity ratio of 70:30, the debt requirement for the project is estimated at Rs.3,080 crores.

The project equity worth Rs.1,320 crores would be part funded by the Nagarjuna Fertilizer group, which would a majority 51 per cent stake in the project. The balance 49 per cent would be brought in by foreign investors who would be finalised shortly, company sources said.

The project funding of Rs.750 crores was cleared by the PFC board after the promoters re-worked the power purchase agreement (PPA) with the State Government-owned Karnataka Power Transmission Corporation in January wherein the rate of return had been fixed at 14 per cent on the basis of a plant load factor of 80 per cent.

The power tariff during the first year of operations is estimated at Rs.2 per unit. The first phase of the project with a capacity of 507.5 MW is expected to be commissioned within 38 months of financial closure and the second phase after 42 months.

Once the project is fully commissioned by end 2007, it is expected to add about 7,600 million units to the State grid. The State-run BHEL has been appointed the procurement and construction (EPC) contractor for the project while the civil engineering component is being executed by Simplex Constructions.

A clutch of foreign companies have begun offering fixed price supplies of coal to domestic power projects.

Sources said that among the international companies which had pitched for tying up long-term, fixed-price, coal-supply contracts included Indonesia's P T Adaro, South Africa's Xtrata and Rio Tinto which operates coal mines in Australia. The sources said that some of these companies were prepared to enter into five-year fuel-supply arrangements. The generating companies to whom such offers have been made included Nagarjuna Power Corporation Ltd (NPCL), which is promoting a 1015 MW interstate power project near Mangalore.

The coal available from these sources has low ash content, though the sulphur content was much higher. Consequently, the older thermal power stations would not be able to use it without installation of expensive flue gas desulphurisation plants, for containing sulphur-di-oxide emissions. Only some of the new thermal would be able to use imported coal, since such emission control plants are part of their capital costs.

State-owned power generation stations in the country use coal supplied by the public sector CIL which has a high ash content and calorific value of 3200 kilo calories (Kcals) per kg. Currently international coal prices with a calorific value of about 6000 kcals, costs about $59 per tonne.

So far all the imports of coal by domestic thermal stations or trading companies have been on a spot basis. The imported coal was used mostly for blending with domestic thermal, though imports are expected to rise in the coming months for power generation purposes.

NPCL 's coal requirement alone was estimated at 3 million tonnes per annum. Almost the entire coal requirement for the project would be imported, making it the first thermal project to be entirely dependent on imports.

NPCL when contacted said that some offers had indeed been made, though they were looking at a much lower price than the current international prices. NPCL, the sources said, was looking for CIF (cost insurance and freight) prices less than $35 a tonne for long-term fixed-price contracts. Inclusive of customs duty the price was likely to be about $39. Long-term supply contract for buyers of coal, especially power utilities, would ensure stability in the variable component of power tariffs.

The offer from international companies comes at a time when domestic thermal stations are facing supply bottlenecks leading to shortfalls in generation. The sources said foreign companies' eagerness to supply coal at fixed prices, stemmed from the fall in international prices since the last six months. International coal prices last year had topped $75 a tonne. But prices are expected to drop further, as China begins to ramp up domestic production. Moreover, with Western Europe and the US increasingly shifting to gas for power generation, coal demand has dropped considerably. As a result, most of the large companies have shifted focus to India.

Foreign cos offer to supply coal on fixed-price basis
(Hindu Business Line - 15.3.05) Bangalore.

A clutch of foreign companies have begun offering fixed price supplies of coal to domestic power projects.

Sources said that among the international companies which had pitched for tying up long-term, fixed-price, coal-supply contracts included Indonesia's P T Adaro, South Africa's Xtrata and Rio Tinto which operates coal mines in Australia. The sources said that some of these companies were prepared to enter into five-year fuel-supply arrangements. The generating companies to whom such offers have been made included Nagarjuna Power Corporation Ltd (NPCL), which is promoting a 1015 MW interstate power project near Mangalore.

The coal available from these sources has low ash content, though the sulphur content was much higher. Consequently, the older thermal power stations would not be able to use it without installation of expensive flue gas desulphurisation plants, for containing sulphur-di-oxide emissions. Only some of the new thermal would be able to use imported coal, since such emission control plants are part of their capital costs.

State-owned power generation stations in the country use coal supplied by the public sector CIL which has a high ash content and calorific value of 3200 kilo calories (Kcals) per kg. Currently international coal prices with a calorific value of about 6000 kcals, costs about $59 per tonne.

So far all the imports of coal by domestic thermal stations or trading companies have been on a spot basis. The imported coal was used mostly for blending with domestic thermal, though imports are expected to rise in the coming months for power generation purposes.

NPCL 's coal requirement alone was estimated at 3 million tonnes per annum. Almost the entire coal requirement for the project would be imported, making it the first thermal project to be entirely dependent on imports.

NPCL when contacted said that some offers had indeed been made, though they were looking at a much lower price than the current international prices. NPCL, the sources said, was looking for CIF (cost insurance and freight) prices less than $35 a tonne for long-term fixed-price contracts. Inclusive of customs duty the price was likely to be about $39. Long-term supply contract for buyers of coal, especially power utilities, would ensure stability in the variable component of power tariffs.

The offer from international companies comes at a time when domestic thermal stations are facing supply bottlenecks leading to shortfalls in generation. The sources said foreign companies' eagerness to supply coal at fixed prices, stemmed from the fall in international prices since the last six months. International coal prices last year had topped $75 a tonne. But prices are expected to drop further, as China begins to ramp up domestic production. Moreover, with Western Europe and the US increasingly shifting to gas for power generation, coal demand has dropped considerably. As a result, most of the large companies have shifted focus to India.