Essar Power, a subsidiary of the UK-incorporated Essar Energy, has entered into binding agreements to acquire Navabharat Power, a special purpose vehicle formed to build a 2,250MW coal-fired power project in the Indian state of Orissa.

Essar Power will initially acquire 76% of the existing equity with balance 24% being acquired upon completion of certain project milestones, the company said.

The coal-fired project is being implemented in two phases: the first phase of 1,050MW and phase two of 1,200MW at a total estimated capital cost of $2bn.

It will include the allocation of the Rampia coal block of 112 million metric tons and a 4.7 million metric tons per annum tapering coal linkage with Coal India.

According to the company, phase 1 of the project already has a number of approvals in place, including environmental clearances.

All other approvals, which include land acquisition, are being progressed. Phase 1 is expected to achieve financial closure by end of 2010.