Swiss bank shows interest in power project

CHENNAI, May 27: Union Bank of Switzerland has expressed its keenness to lead-arrange foreign exchange loan for the two-phase Vypeen power p...

CHENNAI, May 27: Union Bank of Switzerland has expressed its keenness to lead-arrange foreign exchange loan for the two-phase Vypeen power project in Kerala. The promoters, led by Pembinaan Redzai SDN BHD of Malaysia, the majority stake-holder, however, are keeping their options open to secure the best terms possible.

The promoters have commissioned the services of well-known consultant Price Waterhouse to do the structuring of finance.

The Union Bank of Switzerland’s offer comes in the wake of reported commitment by Swiss Export Credit Agency to provide the local companies risk cover for equipment supplies to the Vypeen power project.

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For the Vypeen project, ABB of Switzerland will be the EPC contractor.

In the meanwhile, the promoters are hopeful of obtaining a techno-economic clearance from the Central Electricity Authority (CEA) for the Vypeen project, latest by July. Once the CEA nod is received, they are hopeful of achieving financial closure within six months.

The Malaysian company,originally, held nearly the entire stake in the Rs 2,200-crore project. It, subsequently, roped in Energy Equity of Australia by offering 40 per cent stake. Energy Equity, in turn, hived of 10 per cent stake to Woodside Petroleum of Australia which will supply liquid fuel for the project.

The Vypeen project promoters have already penned a pact with Petronet which is putting up an LNG terminal in Kerala for fuel linkage. The LNG terminal’s viability appears to have been linked to the Vypeen power project.

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By the time the terminal is commissioned in 2002 AD, the Vypeen project will be there to consume LNG. The Vypeen power promoters have, in the interim, signed an agreement with Woodside Petroleum for supply of `bridge fuel’ and alternate fuel until it gets LNG through Petronet’s proposed LNG terminal.

The Vypeen power project assumes considerable significance in the wake of widening demand-supply gap in Kerala and following the decision of the government to reject K P P Nambiar’s courtship with EnronInternational Ltd for the Kannur Power Project.

“Logistically, politically and conceptually, the Kannur project will have lot of problems,” aver highly-placed power industry sources. For one, the state government-appointed Balanandan Committee has raised its own doubts about the viability of naphtha-based power projects. For another, the very economics of wheeling power to the state grid and movement of naphtha to the project site will prove disadvantageous, cost-wise. Doubts also seem to persist over the viability of the proposal made by Cochin Refineries to put up a power project using vacuum residue.Nonetheless,the state government is keen on encouraging IIPs. It has also announced its intention to convert all loans to equity.