Power Min asks AP govt to look into stalled Krishnapatnam UMPP

Concerned over the refusal of banks to provide loans for Reliance Power's 4,000-MW ultra- mega power project at Krishnapatnam, as spiralling coal prices have impacted feasibility, the Power Ministry has asked the Andhra Pradesh government to intervene in the matter.

With work on the Reliance Power project stalled due to unavailability of funds, the Power Ministry has asked the Andhra Pradesh government to meet the procurer of power (primarily the home state) and developer of the project (Reliance Power) to further discuss the issue.

Reliance Power, which is developing this 4,000 MW ultra mega power project through a special purpose vehicle -- Coastal Andhra Power Ltd -- is believed to have stated that since coal prices shot up, banks have been shying away from providing funds for the project.If the price of coal rises, it would increase the input cost of the power project and investors may not find it feasible to put money in such projects.

"The developer has said that due to higher coal prices, it (the company) is finding it difficult to raise loans from banks," sources in the Power Ministry said.

This project is based on imported coal and the raw would be sourced from the overseas market like Indonesia and Australia. Indonesia has said it would not allow exporting companies to sell coal at prices below notified rates after September 23, 2011.Previously, there were no restrictions imposed by the Indonesian government on coal pricing. Another major coal exporting country, Australia, has issued a draft mining law to impose tax on coal and iron ore projects from next year (2012).

Earlier, the Andhra Pradesh government had communicated to the Power Ministry that work has stopped at the Krishnapatnam project, following which a team comprising officials from the Central Electricity Authority was sent to investigate the matter.The CEA report has confirmed that work has "stopped" at the Krishnapatnam project site, sources said. Subsequently, the Power Ministry asked the Andhra government to intervene in the matter and work out a solution.

Krishnapatnam is one of the three UMPPs being executed by Reliance Power. The others are Sasan (Madhya Pradesh) and Tilaiya (Jharkhand). The project achieved financial closure in July, 2009.The lenders for the project are a consortium of almost 12 banks, led by IDBI, and the lending was done on a project finance basis for an estimated project cost of around Rs 17,450 crore (USD 4 bn) with a debt-equity ratio of 75:25.

The government has so far allotted four UMPPs -- Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh), Tilaiya (Jharkhand) and Mundra (Gujarat).The Mundra UMPP is being developed by Tata Power, while the remaining projects are being constructed by Reliance Power.