2nd September 2004, New Delhi

Jindal Power Ltd (JPL) - promoted by Jindal Steel & Power Ltd (JSPL), is setting up 1000 MW thermal power plant at Raigarh in the State of Chhattisgarh. JPL is pleased to announce the financial closure of its 1st Phase 500 MW power plant. This is the first Mega Power Project in Private Sector to have achieved financial closure for its 1st Phase. A consortium of 12 banks & financial institutions have signed the financing documents for loan aggregating to Rs.1500 Cr at the loan document signing ceremony held at New Delhi today.

This financial closure has been possible because of forward looking and dynamic policies of Ministry of Power (MoP). MoP has formed an Inter Institutional Group (IIG) which continuously monitors the progress of short-listed power projects for achieving expeditious financial closure. This project is one of the fast track power projects which is being monitored by MoP and Prime Minister's Office (PMO).

The project cost of first phase 500 MW is estimated to be Rs.2142 Cr and is being financed in the ratio of 70% debt and 30% equity. The total debt of around Rs.1500 Cr has been raised at 13 year rupee term loan at an extremely competitive rate of interest of about 8% p.a. The company has received overwhelming support from banking industry by way of total sanctions crossing over Rs.2300 Cr against the debt requirement of Rs.1500 Cr.

JSPL has committed the entire 30% equity requirement that works out to be Rs.642 Cr. The project will be completed in 36 months.

JPL also heralds a new era in the development of power generation projects, in as much as JPL is the first large merchant power plant in the country to achieve financial closure. JPL will be selling its entire power of Phase I to private distribution licensees and end consumers, without presently having any off-take arrangements with the state utility. This has been possible due to strength of the project structure and its capability to generate power at low cost and also on account of the forward looking attitude of the State of Chhattisgarh, which is on its way to becoming the power hub of the country.

The deal has been structured and syndicated by SBI Capital Markets Limited (SBICAP), the sole Financial Advisors & Arrangers to JPL for this transaction. While JSPL currently has captive power generation capacity of about 250 MW, the financial closure for JPL marks the foray of the group into independent power projects.

The total requirement of debt has been financed by: Power Finance Corporation: Rs.525 Cr., State Bank of India: Rs.275 Cr., Punjab National Bank: Rs.169.10 Cr., Bank of Baroda: Rs.100 Cr., Indian Overseas Bank: Rs.70 Cr., Oriental Bank of Commerce: Rs.70 Cr., Central Bank of India: Rs.70 Cr., Indian Bank: Rs.50 Cr., The Jammu & Kashmir Bank: Rs.50 Cr., United Bank of India: Rs.40 Cr., State Bank of Hyderabad: Rs.40 Cr and State Bank of Patiala: Rs.40 Cr.

In order to reduce the project cost, JPL has decided not to appoint any EPC (Engineering, Procurement and Construction) Contractor. Instead, it will place individual orders on various suppliers for major packages. JPL has also decided not to appoint any O&M (Operations & Maintenance) Contractor to reduce running cost of the plant, instead, it will deploy its own team to operate the plant. JPL will draw upon the experience of JSPL in setting up and running the power plant

Power from this project will be available at a fixed all-inclusive non-escalable tariff of around Rs.2/kWh at its bus-bar. Thus, the project would stand JPL in good stead enabling it to be fiercely competitive in the power sector of the country and contribute towards achievement of the Government of India's goal of 'Power for All by 2012' at affordable prices.

Work on financial closure of 2nd phase of the project, ie., 500 MW will start soon, taking the total capacity of the project to 1000 MW.