IDFC to sell Dheeru project ‘in few weeks’

IDFC Projects will finalise sale of its 1050 mw project in Korba, Chhattisgarh, called Dheeru Powergen Ltd, “in the next few weeks”, two people close to the development said.

The Rs5,776 crore project was being set up with a debt-equity ratio of 3:1.

A senior official at IDFC confirmed to DNA, “the project is on the block”, but declined to give more details.

The transaction will take a few weeks to close, this person said.

It is not yet clear whether IDFC Project’s Malaysian partner in the Dheeru project — Ranhill Berhad, a construction and power generation firm —  will continue to be committed to the project, as its majority partner looks to take the exit.

IDFC’s move to divest stake is mainly spurred by the fact that its core competence is to evaluate and fund infrastructure projects and not own them.

A six-page document issued this month by IDFC Capital Ltd’s investment banking division and reviewed by DNA says that most of the land acquisition for the power project are at an advanced stage.

The investment highlights in the document mentions that the project has secured commitments for “low cost fuel” to provide “competitive advantage” and that it has made significant progress on ground.

The total land required by the project is about 938 acres and the acquisition is expected to completed by June 2011.

Recent reports suggested that the two partners have reached financial closure to fund the 1050 mw coal-fired power project at Korba in Chhattisgarh.

The cost of the project is slated to be Rs4,350 crore and its equity component about Rs1,450 crore.

Several firms in the power sector are eyeing the proposal. They include the Andhra-based groups such as GVK, Lanco Infratech and GMR Infrastructure.

Suresh Kumar, Group CFO of Lanco, said, “We have spoken with IDFC earlier, but there is no progress on this, to my knowledge.”

The main feedstock for the project is coal, which is accessible from the South Eastern Coalfields pithead 30 kilometre from the plant at Korba.

The Grade F coal has a landed cost of Rs950 per tonne, the IDFC note said.
The Dheeru project has signed a power-purchase agreement with Power Trading Corporation for 600 mw, or 57% of the maximum generation.

The Chhattisgarh State Electricity Board will get 5% power at energy charges. The utility also has a right of first refusal on an additional 30% at Central Electricity Regulatory Commission-set tariff. The balance 8% power can be sold on merchant basis.