‘Land, asset ownership’ issues delay bidding for mega power projects
Himanshu Arora
March 8th, 2013
0

The bidding for 4,000 MW each Ultra Mega Power Projects (UMPPs) in Bedabahal (Odisha), Cheyyur (Tamil Nadu) and Sarguja (Chhattisgarh) could get further delayed because of differences over ‘land and asset ownership’ norm.

The Power Ministry has proposed changing the Standard Bidding Document (SBD) for these power plants from a build-own-operate (BOO) model to design, build, finance, operate, and transfer (DBFOT) structure.

In a DBFOT model, the project developer will not have ownership of the land and the plants. This also means that lenders will not get security on the land or the project assets.

According to power developers, the new model would mean the lenders are not allowed to create security on the land assets lending to unsecured loans.

Banks such as ICICI Bank and State Bank of India have also agreed that ‘absence of security over project assets and mortgage of land, the financing essentially equal to unsecured lending.’

But, the Power Ministry defends its new bidding norms.

“It is balanced document. There are lot of provisions to cover the developers’ risk. Moreover, the tariffs are also linked to inflation index,” said a senior Power Ministry official, who is working on finalisation of the SBD.

 

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