Setting the ball rolling for the financial closure of six private projects, the Andhra Pradesh government has agreed to operationalising escrow cover for the projects prior to their commencing commercial operations.

The projects have not been able to tie-up funds, since the state administration had so far been reluctant to provide upfront escrow, a precondition put forth by financial institutions for funding the projects.

According to institutional sources, the state government has agreed to operationalise the escrow cover 30-60 days prior to a project's starting commercial operations.

The Centre has been trying to expedite the financial closures of these independent power projects (IPPs), which are expected to be very cost competitive.

Four of the six projects are gas-based, and have a fixed cost of only around 90 paise per unit.

Financial institutions had been reluctant to provide money unless the state agreed to providing upfront escrow cover, leading to delays in the financial closure of the projects.

The state government had also agreed to honouring the escrow cover extended earlier to the Jegurupadu and Spectrum projects.

Financial institutions had earlier said funding for the six new projects would depend on the state providing escrow to the Jegurupadu and Spectrum projects.

The projects, including the 520 MW Ramagundam project of the BPL group (entailing investments of about Rs 2,776 crore (Rs 27.76 billion), the 468 MW Vemagiri project of the Ispat Power group [Rs 1,700 crore (Rs 17 billion)] and the 210 MW BSES-promoted power project, institutional sources said.

The other two projects include the 350 MW Kondapally project [Rs 1,100 crore (Rs 11 billion)] promoted by Lanco Industries and the 464 MW NCC/Gautami project.