REC to give additional Rs 995 cr loan for Teesta III hydel project

GANGTOK, 13 Aug: With the Teesta Stage III hydroelectric power project at Chungthang being developed by Teesta Urja now facing uncertain delays and suspension in construction activities over a variety of reasons, the cost of the project is informed to have escalated to more than Rs. 8,500 crore. Not only has the cost escalated, but seeing the progress of works at the project site especially after being hit with the earthquake of 18 September during which a number of workers lost their lives, it is unlikely that the project will be commissioned next year as scheduled.
However, now it is informed that the project will be infused with fresh funds by Rural Electrification Corporation of India. The REC, it is learnt, will extend an additional loan of Rs 995 crore to the 1,200-MW Teesta III project. This will take the REC’s total lending to the project to Rs 3,095 crore.
REC is a leading public infrastructure finance company in the power sector under the Ministry of Power; it promotes and finances rural electrification projects across India. The company provides loans to central and state sector power utilities, state electricity boards, rural electric cooperatives, NGOs and private power developers.
Teesta III project has seen substantial cost overruns due to delays on account of natural calamities as well as legal hurdles. With the roadway connecting to North Sikkim often blocked by landslides, construction activity has been affected. A major factor in the suspension of activity at the project site has been the disallowance in the traffic of heavy vehicles along the north Sikkim roads since the collapse of the Rangchang bridge. However project officials still maintain that the project will be complete by December next year with 70% of the works completed.
It is informed that the cost overrun is about Rs 2,700 crore. The additional term loan of Rs 995 crore will include Rs 851 crore senior debt as well. Initially REC was to lend Rs 2,100 crore for the project. The fresh amount has been sanctioned since the project cost has jumped to Rs 8,581 crore from Rs 5,700 crore which was the initial estimate. It is informed that REC communicated to project developer Teesta Urja about its decision to sanction the additional loan sometime last week.
Only a few weeks ago, the State government had infused its part share of equity into the project amounting to about Rs. 162 crore out of a total of Rs. 292 crore which allows it 15% stake in the project. The state government is awaiting further sanction of funds by the Power Finance Corporation to infuse its full share of 26% equity in to the project. Singapore-based Asian Genco Pte holds 50.1 per cent stake in Teesta III project.