Chennai desalination plant 'will finish in 2009'

The 100,000 m³/d Minjur desalination plant in Chennai, India, will be completed this year, the state government stated on 27 June 2009, despite a warning related to the implementing consortium from the Fitch financial ratings agency.

The Minjur plant is one of two desalination plants (the second is Nemmeli) being constructed to ease Chennai's water problems. Deputy chief minister MK Stalin told the state assembly, "The works for the desalination plant at Minjur are under way. All the works will be completed and the plant will be put into use during the current year".

However, delays in the plant's construction led to Fitch on 24 June 2009 placing Chennai Water Desalination Ltd's (CWDL) long-term project bank loans on "Rating Watch Negative". CWDL was set up to design, construct, operate and maintain the seawater reverse-osmosis plant by India's IVRCL Infrastructures & Projects and Spain's Befesa Construccion y Tecnologia Ambiental, which hold 75% and 25% equity, respectively.

Fitch says that the rating actions follow delays in commissioning the project, which resulted in CWDL being granted two extensions by the lead bank allowing for the postponement of the commencement of principal amortisation, and one extension from Chennai Metropolitan Water Supply & Sewerage Board on the commercial operations date.

The delays have been attributed to various unanticipated technical bottlenecks, mainly pertaining to marine works, which, according to the company, were caused by a storm in November 2008. A € 7.7 million bond in the form of a bank guarantee for timely completion has been lodged by the EPC contractor, Befesa.

Fitch says the negative watch will be "resolved" once CWDL receives confirmation from the water and sewerage board that it will be allowed until 2 October 2009 to achieve the commercial operations date.

"Assuming all else remains equal, the resolution could result in a rating affirmation," says the agency, "while a negative outcome could trigger multiple notch rating downgrades."

Deputy chief minister Stalin told the state assembly that the desalination project at Nemmeli is being set up at an estimated cost of Rs 9082.8 million (US$ 189 million). Tenders have been invited for this project following an international competitive bidding process.

On finalisation of the tenders, work would commence during the current year and be completed within 24 months from the date of commencement.

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