REC powers Teesta-III with fresh funding of Rs 995 crores

GANGTOK: In a significant development that may see the power woes of Northern states easing from July next, REC has set the motion in rolling for early completion of the 1200 MW Teesta Hydel project in Sikkim by increasing its loan sanction to the project to Rs 3,095 crores.

Sikkim Government on its part has appointed a high powered committee to expedite the completion of the State’s hydro power projects, including Teesta-III, and has committed to fund its share of the equity for Teesta-III in an expedited manner.

About 12% of the power produced by Teesta-III will go to Sikkim (as free power per the contract) while the rest 85% supplied to four northern States – Delhi, UP, Haryana and Rajasthan - which recently witnessed serious power crisis due to overdraw from the grid by some states.

Teesta-III, the largest of the six hydel projects on the Teesta river, is being executed by an SPV called Teesta Urja in which the Sikkim Government has a 26% stake.

REC has approved the fresh lending of Rs 995 crores to the project on account of cost over-run. The original estimated cost of the project was pegged at Rs 5,700 crores but lenders like REC and PTC have agreed to increase infuse Rs 8,500 crores to meet cost over runs on account of a massive earth quake, which Teesta-III survived, and so on.

As per revised commercial operation dates, the first unit of Teesta-III will go on stream in July 2013 for Unit-1, thereafter all the six units will become operational one after the other with the sixth and final unit becoming functional by December 2013.

The Sikkim state government has also agreed to bring in its equity share of equity. It is significant that Sikkim Power Secretary Mr A K Giri attended a recent meeting convened by REC.

In a latest development Sikkim Government appointed a high powerered committee under the chairmanship of Chief Secretary Karma Gyatso. State Power Secretary Mr A K Giri is the member secretary of the panel. The government has issued a gazette notification to this effect stating that the committee report is to be submitted by August 10, 2012.

Sikkim government has also signed the share holder agreement with Teesta Urja Limited acquiring 26% stake in the SPV executing the project, apart from agreeing to contribute its share to the base cost as well as the cost overrun.

What comes a major relief to all stake holders is the fact that the State government has decided to end its legal dispute with Teesta Urja on share holding issue and accelerating the project execution.

All equity investors, including a group of six private equity partners, have also expressed their full support and commitment to bring in equity for the revised costs. REC and PTC are among the big lenders to the project.

Six PE players led by Morgan Stanley, who have already pumped in Rs 750 crore into the project through Asian Genco, will also raise their commitment, a source familiar with the development said. “They may have to chip in another Rs 400 crores or so, to proportionately match the cost increase,” the source said.

Besides Morgan Stanley, the group of investors includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners.