Either in the form of loans or private placement of bonds
Conscious of the precarious financial health of the Tamil Nadu Generation and Distribution Corporation (TANGEDCO), the State government has decided to facilitate provision of Rs.10,000 crore to the power utility either in the form of loans or private placement of bonds.
A month ago, the government allowed the TANGEDCO to raise funds through Life Insurance Corporation of India or other financial institutions, banks or companies for Rs.5,000 crore.
This amount is out of the government guarantee for Rs.6,000 crore issued in December last year to the Tamil Nadu Power Finance and Infrastructure Development Corporation (TNPF&IDC) for bonds. As the non-banking finance company has been left with the government guarantee for Rs.1,000 crore, the government's approval is required for additional funds.
A few days ago, the State Energy Department issued an order, permitting its non-banking finance company to mobilise bonds through private placement to the tune of Rs.5,000 crore.
The government is likely to issue an order separately regarding the guarantee for the proposed bond issue. Making use of the government's nod for fresh loans, the TANGEDCO, a couple of weeks ago, secured Rs.500 crore from the Housing Development Finance Corporation (HDFC) at a rate of 12 per cent interest.
As for tapping the remaining Rs.4,500 crore, the power utility has proposed to obtain it through a consortium of financial institutions. Viability reports have been prepared by Punjab National Bank and SBI Markets to enable the infusion of funds.
During the current financial year, the capital expenditure of TANGEDCO is about Rs.6,227 crore. For the next year, it will be around Rs.7,000 crore. For mopping up more funds, the power utility has planned borrowings. It is for this purpose that the government's latest order on the private placement of bonds has been issued.
These measures are in addition to the government's direct financial contribution to the TANGEDCO to the tune of nearly Rs.7,000 crore this year. This includes tariff subsidy support of about Rs.2,000 crore and share capital assistance and loans of Rs.4,900 crore.