GMR Energy’s Chhattisgarh power project’s funds may be disbursed only when the coal linkage is in place and a certain amount of capacity is tied up
GMR Energy, a subsidiary of Bengaluru-based GMR Infrastructure, is in the advanced stages of financial closure for its Chhattisgarh project. However, sources from one of the main banks funding this project say that funds will be disbursed only when the coal linkage is in place and a certain amount of capacity is tied up.
The infrastructure major plans a 1,200MW power plant in Chhattisgarh. This power plant will be coal-based and the fuel supply is likely to be sourced through coal linkages. While the financial closure for this project may be completed, the funds would be disbursed only when the linkage is in place. The total project cost is quoted at around Rs8,200 crore.
"Even if the financial closure is completed and the related documents are signed, the funds would be disbursed only when the coal linkage is in place," said a source from one of the main banks funding this project.
According to sources, this bank has also insisted on a certain percentage of capacity to be tied up before the funds are availed of. The capacity for this project remains untied.
The coal linkage for the Chhattisgarh project will be tied up when the coal linkage allocation for the 12th Five Year Plan (FY2012-17) projects takes place. "We are positive on the coal-linkage side and the allocation can be expected anytime," said Raaj Kumar, CEO, energy sector, GMR group. He refused to comment any further on either the coal linkage or the untied capacity issues.
While talking to Moneylife last month, Mr Kumar had stated that financial closure for its Chhattisgarh power project and the Vemagiri (Andhra Pradesh) power expansion project is likely in August. "Axis Bank is the lead bank for the Chhattisgarh project and IDBI Bank is likely to fund the Vemagiri expansion project," he had then told us.
The linkage and untied capacities may be an issue with the fund disbursements; however, Axis Bank seems comfortable in signing the financial closure documents without these two requirements in place.
Sources from Axis Bank stated that the signing process for the financial closure is under process. "We have underwritten the debt and now we are in the process of down-selling it. Only when the down-sell happens will we be able to execute the final documents," said the source. Reportedly, the down-selling has received a good response.
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