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Tata Power signs up joint venture with DVC

By Our Special Correspondent

KOLKATA, MARCH 29. Ending a prolonged tussle over equity share, Tata Power Company Ltd. (TPCL) today announced the signing of a majority joint venture with the Damodar Valley Corporation (DVC) for setting up a coal-based 1,000 MW thermal power plant in Jharkhand.

The agreement signed on March 18 in New Delhi is being billed as the first public-private partnership in power generation under the Electricity Act of 2003.

The deal paves way for handing over a 74 per cent stake to TPCL, with the Union Power Ministry-controlled DVC holding the remaining equity. TPCL Managing Director, F. A. Vandrevala, said: "This venture marks Tata Power's initiative towards marking a national footprint."

The foundation for the Rs. 4,000 crore project was laid by the then Union Home Minister, L. K. Advani, in January 2000, when it was slated to be promoted as a 50:50 joint venture with BSES. With Reliance taking over BSES, DVC was left without a partner as BSES withdrew, leaving the project in the lurch. TPCL entered the scene in March 2003 and then it was decided to hand over 51 per cent control to them with DVC having the rest. However later TPCL insisted on having a majority of 74 per cent which was resisted by DVC uptil now as negotiations continued.

DVC sources told The Hindu that no amendment of the DVC Act seemed necessary since the act itself had no pronouncement on joint ventures. While TPCL will be entitled to appoint both the Chairman and Managing Director taking up to seven seats on the board, DVC can appoint up to three directors only.

As of now the project has a equity component of Rs. 1,200 crores with a debt component of Rs. 2,800 crores. DVC had already spent about Rs. 35 croers on this project of which about Rs. 30 crores had been spent on acquiring about 550 acres (meeting about 50 per cent of the requirement). The project has all the clearances.

A DVC source said lawyers on both sides had now begun getting together for crafting the shareholders agreement which would be executed only after the satisfactory completion, within six months, of a due diligence of the expenditure so far.

TPCL which informed the stock markets today said in a release that prior to the financial closure, DVC might enter into power purchase agreement with the new company, Maithon Power Ltd.

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