India's Reliance Power Secures $3.4 Billion to Finance Ultra-Mega Power Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Reliance Power Limited (BSE:532939) (Mumbai) has secured funds of $2.9 billion from domestic banks and financial institutions for the 3,960-megawatt (MW) Sasan Ultra-Mega Power Project at Singrauli in Madhya Pradesh. An additional amount of $500 million will be provided as debt by foreign institutions.

The $3.9 billion power project has achieved financial closure and will be executed in a debt-to-equity ratio of 75:25, making this the largest debt ever raised by domestic banks for any project in the country. Reliance Power raised the $2.9 billion loan from a consortium of banks led by the State Bank of India (BSE:500112) (Mumbai). Some of the participating banks in the funding include Power Finance Corporation Limited (BSE:532810) (New Delhi), Axis Bank Limited (BSE:532215) (Mumbai), Bank of Baroda (BSE:532134) (Gujarat), IDBI Bank Limited (BSE:500116) (Mumbai), Union Bank of India (BSE:532477) (Mumbai), Andhra Bank (BSE:532418) (Hyderabad), Life Insurance Corporation of India (Mumbai), Punjab National Bank (BSE:532461) (New Delhi), and India Infrastructure Finance Company Limited (IIFCL) (New Delhi).

The average interest rate for the debt is 12-12.5%, and the duration of the loan is 15-20 years. Standard Chartered Bank (LSE:STAN) (London, England) will play the role of lead bank for dollar-based loans, and the State Bank of India will act as the lead bank for rupee-based debt. Power Finance Corporation, a "Navratna" public sector enterprise for financing power sector projects, has offered funding of $361 million for the project.

The engineering, procurement and construction contract for the project, worth $2.4 billion, was awarded in June 2008 to group company Reliance Infrastructure Limited (BSE:500390) (Mumbai), India's largest private firm in the power utility sector. Reliance Infrastructure has committed to completing the first of the six 660-MW units by December 2011. The second unit is slated for completion in March 2012, and the subsequent units will be commissioned at intervals of three months. The plant is scheduled to be fully operational by March 2013, three years ahead of the initial schedule, making this the first of the 13 proposed ultra-mega power projects in India to be commissioned. Reliance Infrastructure is procuring boilers, generators and turbines from Shanghai Electric Group Company Limited (HKG:2727) (Hong Kong).

The ultra-mega power project program is an initiative by the Indian government to generate an additional 50,000 MW of electricity through 13 new projects during the twelfth five-year plan period, 2012-17.

Sasan Power Limited, a wholly owned subsidiary of Reliance Power, has been set up for execution of the project. The power plant will be the country's largest coal-fired thermal power plant upon completion. The project has been allotted three coal blocks with reserves of approximately 750 million tons in Moher, Chhatrasal, and the Moher-Amlohri extension to provide feedstock for the plant. The electricity generated will be supplied to seven states across northern and western India, including Punjab, Haryana, New Delhi, Rajasthan, Uttarakhand, Uttar Pradesh and Madhya Pradesh.

Reliance Power's parent company, Reliance-Anil Dhirubhai Ambani Group (Mumbai) is currently in the process of executing 13 power projects across the country with a combined capacity of 28,200 MW and an investment of $28 billion. These include two 4,000-MW ultra-mega power projects in Tilaiya in Jharkhand and Krishnapatnam in Andhra Pradesh. Financial closure for the $3.2 billion-$3.6 billion Krishnapatnam ultra-mega power project is expected to be attained by June of this year. Reliance Power does not have an operational power plant yet. The 1,200-MW Rosa power plant in Uttar Pradesh will be the firm's first power project to come onine when it is commissioned this September.

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