Maheshwar hydel project hits hurdle

The Rs 2,233-crore (Rs 22.33 billion) Maheshwar hydel project, which is being promoted by S Kumars, has suffered yet another setback. Lenders to the 400 mega-watt project have asked the promoters to clear their mounting interest defaults and infuse the promised equity capital into the project, prior to any move towards financial closure.

The lenders to the project, including IFCI, IDBI, Power Finance Corporation and the State Bank of India, have also asked for a cost revision exercise before finances for the much-delayed project can be tied up, institutional sources said.

S Kumars' equity contribution for the project was still short of its commitments by around Rs 82 crore (Rs 820 million), the sources said. The project has been hanging fire since the exit of the 49 per cent equity stakeholder, US-based Ogden Energy. S Kumars has been scouting for a strategic partner or for a domestic financial institution to plug the Rs 350 crore (Rs 3.5 billion) equity gap.

To expedite the financial closure of the project, the lenders had earlier decided on the issue of fully convertible debentures of around Rs 350 crore.

The Madhya Pradesh government has already extended a guarantee for the proposed convertible debentures issue, which can be converted to equity at a later date, the sources said.

The project, which was initially supposed to have a debt-equity ratio of 70:30, would now have a higher debt component of around 85 per cent, following the issue of debentures to cover up the equity gap.

The initial equity portion of Rs 750 crore (Rs 7.5 billion) would come down to Rs 350 crore. This comprises Rs 103 crore (Rs 1.03 billion) already brought in by the S Kumars group, which is much lower than the Rs 185 crore (Rs 1.85 billion) equity it was actually supposed to bring in.

Apart from S Kumars, equity contributions of around Rs 165 crore (Rs 1.65 billion) have been leveraged from the Bharat Heavy Electricals Ltd, IDBI, the Life Insurance Corporation and General Insurance Corporation, while another Rs 41 crore (Rs 410 million) has had been brought in by contractors. The Rs 1,883-crore (Rs 18.83 billion) debt component was to be financed by a consortium of 14 banks and financial institutions through a mix of rupee-term loans and the proposed debenture issue.

S Kumars had replaced Siemens with Bhel for the supply of equipment to the project. The hydel project is a run-of-the river project and, therefore, involves minimum submergence.

The probable tariff from the project, as per estimates made earlier, was expected to be around Rs 3.67 per unit in 2005-06. In the same year, the cost of supply of the Madhya Pradesh State Electricity Board was estimated at around Rs 4.25 per unit.