WASHINGTON, D.C., October 27, 1999 —
The International Finance Corporation has signed agreements to invest up to US$9 million in a 28 megawatt co-generation power project being developed by Astha Power Corporation Limited (Astha) in Andhra Pradesh, a state in southeast India. The $25.8 million project—the first private sector owned, co-generation power project in the country—will be located in an industrial park of the Andhra Pradesh Industrial Infrastructure Corporation at Pashamylaram, about 40 km from the state's capital city of Hyderabad.
As Andhra Pradesh is acutely deficient in power, the project will provide a much needed stable source of power to the state's mainly industrial consumers, contributing to overall industrial growth. The project is being set up in the industrial park to ensure that all electrical and thermal energy produced will be utilized locally, leading to better supply, improved stability in the grid system, lower overall energy loss, and higher efficiency.
The project is being developed under a license granted by the state government under its mini power plant policy. The power produced will be wheeled through the grid of the Transmission Corporation of Andhra Pradesh (APTRANSCO) and sold directly to a number of identified consumers on the basis of a long term wheeling agreement with APTRANSCO and short term power purchase agreements with identified consumers. Astha will also sell process steam, de-mineralized water, and possibly other by-products, such as thermal energy for cooling and air-conditioning.
Mr. Vivek Talvadkar, Director of IFC's Power Department said that the project is in line with the country's strategy to promote high efficiency co-generation power projects. It will encourage power sector reforms in Andhra Pradesh as it introduces competition in the state's electricity sector leading to better service for consumers. Most importantly, he added, since the project does not depend on long term power purchase agreements, it will need to price its power competitively.
IFC's financing consists of an equity investment of up to $1.9 million and a loan of $7.1 million for its own account. IFC played a lead role in bringing this project to financial close and assisted Astha in structuring a local currency swap for its loan to reduce foreign currency risk. The other lenders are Indian banks, State Bank of India and Dena Bank.
The project sponsors are the Kundalia family of Hyderabad who will invest directly as well as through three small group companies fully owned by them. Astha has entered into a fixed price, date certain, turnkey contract with ABB Generation of Sweden to develop the project. Bharat Petroleum Corporation Limited will be the project's fuel manager.
An environmental assessment as well as a comprehensive public consultation process were undertaken for the project, which will be constructed and operated in compliance with national environmental laws and World Bank environmental, health and safety guidelines and policies. The project is likely to displace a number of inefficient small diesel generator sets and boilers being used by its proposed consumers to produce electric power and process steam. This displacement of inefficient and polluting facilities will have an overall positive impact on the environment.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
