NTPC goes to govt over rate for DPC

National Thermal Power Corporation has asked the Centre to ensure that Indian lenders reduce the interest rate they are charging on the Rs 5,000 crore (Rs 50 billion) they will be providing for the revival of the Dabhol Power Company.

IDBI led-Indian lenders are demanding a 9 per cent interest on the Rs 4,500-crore (Rs 45 billion) they have used to buy out debt and on the additional Rs 500 crore they will be providing to the project special purpose vehicle.

"All other parties involved in the project have taken a hit on interest rates as well as on the principal amount. Indian lenders, however, have not taken a hit on the principal and are charging an interest rate of 9 per cent against the prevailing market rate of around 7 per cent," said a company executive, adding that Indian lenders were attempting to recover even the interest they had forgone.

NTPC has estimated that the cost of revival of the plant will be a little over Rs 10,000 crore (Rs 100 billion), of which Rs 7,500 crore (Rs 75 billion) will be for the power plant and Rs 2,500 crore (Rs 25 billion) for the gas plant.

With MSEB not willing to pay more than Rs 2.30 a unit and a fixed cost of 90 paise per unit, the fuel cost will have to be limited to less than Rs 3.68 per mmbtu, which will translate into a variable cost of Rs 1.30 per unit.

"If gas is sourced at a higher price, the feasibility of the project will be in question. Therefore it is imperative to try and reduce the fixed cost," said a company executive.

He added that the high interest rate, as well as the fact that Indian lenders had not taken a hit meant that fixed costs were inflated.

Meanwhile, the Centre has asked the project special purpose vehicle, Ratnagiri Gas and Power Pvt Ltd, to finalise the shareholders agreement and the power purchase agreement within a week's time.

NTPC, GAIL and IDBI-led Indian lenders hold 28.5 per cent each in the SPV, while Maharashtra State Electricity Board has 15 per cent stake in the company.

All cases relating to the beleaguered Dabhol power project have now been settled and electricity generation from the 2,184 MW gas-based plant would begin by July 2006.

"We have settled all cases relating to Dabhol power project out of court," law minister HR Bhardwaj told reporters on the sidelines of a seminar here.

The Centre's assertion came days before the July 18 date set at the London arbitration panel to hear the cases filed by US promoters to Dabhol Power Company -- GE and Bechtel.