Cash-strapped Maheshwar hydel project in doldrums as impasse continues

Efforts to carry out financial restructuring of Shree Maheshwar Hydel Power Corporation's (SMHPC) much-delayed 400 MW hydel power project on Narmada have received a setback, with the promoters failing to infuse fresh funds and the main lender Power Finance Corporation (PFC) hardening its stance.

A committee headed by state additional chief secretary (finance) Ajay Nath formed to find a solution to the impasse met recently to discuss the future course of action as the three-month deadline to bring in funds to the tune of Rs 1,700 crore expired on August 2.

The minutes of the meeting, to which HT has access, reveals that the two sides failed to reach common ground. "The gist of the meeting was that the promoter has failed to get the funds so far but stated that it could arrange US $150 million (Rs 980.7 crore) from international investors. However, the main lender PFC has said that it will not give any concession on the principal and interest," an official of SMHPC said.

According to the minutes, the worst case scenario is that the government will cancel the power purchase agreement (PPA) if the promoters fail to infuse funds and no public sector unit shows interest in taking over the project.

Prolonged delay in commissioning of the project has led to steep cost escalation, raising questions over its viability as the projected power tariff has crossed Rs 10 per unit. However, SMHPC has said if the project goes for financial restructuring, the power tariff will come down.

According to the Central Electricity Authority (CEA), the Maheshwar hydel project has been delayed by 14 years due to cash-flow issues and the inability to pay for the rehabilitation of affected people.

The project, originally estimated to cost Rs 1,569 crore, is now estimated to cost Rs 4,700 crore - a 200% cost overrun. However, company officials say the actual project cost has already touched Rs Rs 6,000 crore. The lenders led by PFC have a total credit exposure of more than Rs 2,500 crore in the project.

Meanwhile, the state government has made its position amply clear. "We have agreed to buy the power at Rs 5.32 per unit for the term of 25 years, (and) will not renegotiate a higher rate," MP Power Management Company chief general manager RD Saxena said.

Further, as stipulated by the courts, the promoter will have to complete relief and rehabilitation work, which has been stuck since 2012 due to lack of funds, before power generation can begin.