The Hindu Business Line : PSU group to provide power sector funding

IF funding constraints have held up investments into the beleaguered power sector, a `Power Lenders' Club' formed by a group of PSUs promises to leverage collective financial muscle and change the way financing of power projects in the country is happening currently.

With the aim of streamlining the funding of large-scale power projects and to effectively take on competition, the state-owned Power Finance Corporation (PFC), Life Insurance Corporation (LIC) and a clutch of ten banks, including public sector biggies such as Punjab National Bank and Oriental Bank of Commerce, are joining hands to form a consortium for financing power projects, officials involved in the exercise said.

Calling themselves the `Power Lenders Club', the consortium promises a one-stop shop for all funding requirements of the power sector, including for reform projects across States.

The move also comes in the wake of the recent announcement by the Prime Minister in Hyderabad that getting the power sector back on track would be among the Government's foremost priorities.

"The consortium would be operationalised shortly. Since financing of power sector projects generally happens through syndicates formed by a number of lenders, the consortium approach offered by the `Club' would provide a comprehensive solution to the debt requirement of these projects without the developer having to queue up before a number of lenders to arrange for the funds. Also the scale of funding possible through the consortium is much higher," a Government official involved in the exercise said.

PFC, which is gearing up for a stock exchange listing in the first quarter of the next fiscal, would be taking the lead in the initiative, the official said. The coming together of the lending institutions is also significant since the Government's ambitious `ultra-mega power projects', involving construction of five power projects with capacities of upwards of 4,000 MW, is slated to take off shortly.

With overall projected investments of around Rs 75,000 crore, of which the debt component is expected to be around 70 per cent, the Club stands in good stead to tap the funding opportunities coming up, officials said.

Besides the private power developers, the consortium is eyeing business from Central power utilities and State Electricity Boards, as well as from various Government Departments, Co-operative Societies and Municipal Bodies.

Besides rupee term loans, the consortium also plans to broadbase its product portfolio to offer foreign currency term loan, working capital loans to equipment manufacturers, debt refinancing, `take-out' financing and bridge loans.

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PSU group to provide power sector funding — LIC, PFC, 10 banks form consortium