Hyderabad, May 30: The Lanco group has picked up a controlling stake in Nagarjuna Power Company Ltd, which is setting up a power plant near Mangalore.

The Nagarjuna group, which is the promoter of the power company, has been forced to sell the majority stake for lack of funds. The group had suffered a setback after the collapse of Nagarjuna Finance Ltd.

According to Praveer Sinha, who is the chief operating officer of the Nagarjuna group, the Lanco group had picked up a 74 per cent stake in the 1,015-mw coal-fired thermal power plant on the western coast.

Lanco will infuse Rs 962 crore as its share of the equity over a period of time, Sinha said.

“The company has a debt of Rs 3,000 crore and an equity of Rs 1,300 crore,” he said.

The strategic alliance was finalised on Sunday by Lanco chairman L. Madhusudhan Rao and Nagarjuna group chairman K.S. Raju.

Sinha said funds crunch had led the group to hive off a majority stake in the project.

He said the group was implementing a 6-million-tpa refinery project at Cuddalore and, therefore, felt it necessary to offload its stake in the power project. The Cuddalore refinery will cost Rs 4,500 crore.

The Mangalore power project will be jointly completed by the companies, with Nagarjuna, which had promoted the project in 1996, as a minority partner with a 26 per cent stake, the Lanco group said. The financial closure will be achieved by September 2006 and the plant will go on stream by 2009.

It is the first independent power project in the country to operate on imported coal. However, it had faced initial difficulties because of environmental objections from the locals. The power plant will use low ash, low sulphur and high calorific value coal imported from Australia, South Africa and Indonesia.

The project has received all clearances from the Karnataka government and the Central Electricity Authority.

The Lanco group is currently implementing power projects with a total capacity of over 2000 MW in thermal and hydropower sectors.