Maytas out of 1,050-Mw power project in Orissa

Hyderabad-based KVK Energy and Infrastructure has parted ways with its beleaguered joint venture partner, Maytas Infra, in setting up a 1,050-Mw thermal power plant in Orissa under the banner of KVK Nilachal Power Pvt Ltd.

KVK Energy and Maytas had 25.5 per cent stake each in the project, with the remaining 49 per cent proposed to be vested with a strategic partner. The Rs 5,000-crore (Rs 50 billion) project, coming up at Kandarei in Cuttack district, had a debt equity ratio of 4:1.

KVK Energy has decided to acquire the 25.5 per cent stake of Maytas, raising its stake in the project to 51 per cent.

Maytas Infra is the infrastructure arm of troubled IT giant Satyam.

In another significant development, KVK Nilachal Power has cancelled the EPC (engineering, procurement and construction) contract awarded to Maytas, and is in the process of roping in another company for the job.

Around two weeks back, the Orissa government had sought details from KVK Energy relating to Maytas' involvement in the project. Meanwhile, the company has submitted relevant documents and communicated to the government about the exit of Maytas and its willingness to pick up the latter's stake in the project.

As a result, KVK Energy will invest Rs 510 crore (Rs 5.10 billion) in the equity of the project, instead of Rs 255 crore (Rs 2.55 billion) earlier. The state government is examining the documents submitted by KVK Nilachal Power.

Sources said the company has placed equipment order for the boiler, turbine and generator package and is in the process of finalising another EPC contractor in place of Maytas.

The company has also achieved financial closure for the first 350 Mw unit of the project. A group of four lenders, including Power Finance Corporation and Punjab National Bank, has agreed to lend Rs 1,080 crore (Rs 10.8 billion). The company is also in discussion with lenders for mobilisation of the remaining funds for the project.

As a sequel to the recent Satyam scam involving Ramalinga Raju and Maytas being linked to it, there were apprehensions about the fate of the project implemented by KVK Nilachal Power. Accordingly, the state government had asked the company to submit all project-related documents as well as firm commitment from the lenders.

The company has achieved milestones like water permission and environmental clearance from the state pollution control board.