2,160-cr Additional Loan for Teesta III Project

REC-led Consortium Approves 2,160-cr Additional Loan for Teesta III Project


A consortium of lenders led by Rural Electrification Corp (REC) has approved an additional loan of.2,160 crore for Sikkim's 1,200-MW Teesta III hydropower project,which has been delayed due to the 2011 earthquake and issues over shareholding.The development comes at a time when the state government has cancelled four hydropower projects,including the 280 MW Teesta I,due to local opposition and environmental issues."The project is almost 75-80 % complete,which is a big positive and which is why we have approved the additional loan," said REC ED Puneet Kumar Goel.The state-run infrastructure finance company's share of the additional loan is.995 crore.Hydropower capacity addition in India is plagued by delays in environment clearances and protests over rehabilitation,which often lead to cost escalation.The cost of the Teesta III project has risen to.8,581 crore from the initial estimate of.5,700 crore.The revised cost is to be funded through.1,860 crore of equity and.6,720 crore of debt.Besides environmental issues,Teesta III's progress was affected by the earthquake that hit northeastern India in September 2011.It was also at the centre of a dispute between Teesta Urja,the special purpose vehicle executing the project,and the state government over allocation of shares.The matter was resolved recently."The project cost has escalated due to delays in execution.But now that our lenders have sanctioned the loan,and the Sikkim government is also supporting us,we hope to accelerate execution," said a senior executive of Teesta Urja.Teesta III in Mangan district of north Sikkim is the largest of the six hydel projects on the Teesta river.The state government holds a 26% stake in Teesta Urja while Singapore based-Asian Genco holds 50.1%.Asian Genco is jointly controlled by promoter Vijaykumar TV and a consortium of investors,which includes Morgan Stanley,General Atlantic,Goldman Sachs,Everstone Capital,PTC India Financial Services and Norwest Venture Partners.With the lenders approving the additional loan,the company has tied up the entire debt portion.Its investors are in the process of infusing the additional equity investment that stands at.720 crore."All the investors would be investing for the additional equity in proportion to their current holding in the company," said an executive of one of the private equity investors.Almost 85% of the power generated by the project will be supplied to the northeastern states,with Sikkim being the biggest beneficiary.The first unit of the project is scheduled to be commissioned in July 2013,and the entire project is to become operational five months

later.rachita.prasad@timesgroup.com

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NEW DELHI: Rural Electrification Corporation will extend an additional loan of Rs 995 crore to the 1,200-MW Teesta III hydro project in Sikkim whose overall cost has escalated to more than Rs 8,500 crore.

With the additional amount, state-run REC's total lending to the project would be Rs 3,095 crore, sources said.

Teesta III project has seen substantial cost overruns due to delays on account of natural calamities as well as legal hurdles.

Sources said the cost overrun is about Rs 2,700 crore. The additional term loan of Rs 995 crore would include Rs 851 crore senior debt. Originally, REC was to lend Rs 2,100 crore for the project, they added.

The fresh amount has been sanctioned since the project cost has jumped to Rs 8,581 crore from Rs 5,700 crore estimated earlier.

Earlier this week, REC communicated to project developer Teesta Urja about its decision to sanction the additional loan, sources said.

As per the original schedule, the project was to come up in September 2012. Now, it is anticipated to be fully operational by December next year. About 70 per cent of work has been completed.

The run of the river project was awarded by the Sikkim government to Teesta Urja Ltd on BOOT (build-own-operate- transfer) basis.

An earthquake last year and differences between Teesta Urja Ltd and Sikkim government have also led to delays in implementation of Teesta III.

Last month, power trading solutions provider PTC India, that holds 11 per cent stake, had said the project is expected to be commissioned in December 2013.

Singapore-based Asian Genco Pte holds 50.1 per cent stake in Teesta III while Sikkim government and Athena Projects has 26 per cent and 11 per cent shareholding, respectively.

The plant, which would supply power to Sikkim and Haryana, among others, would have six units of 200 MW each.