The Hindu : Kerala News : `Power sector development absorbing more funds'

Online edition of India's National Newspaper
Saturday, Nov 27, 2004

Kerala

Kerala

`Power sector development absorbing more funds'

By Our Special Correspondent

KOCHI, NOV. 26. The growth momentum in the power sector is picking up in the country, judging by the rising trend in funds sanctioned by the Power Finance Corporation (PFC), a development financial institution dedicated exclusively to the sector.

According to the Chairman and Managing Director of PFC, R. Krishnamoorthy, the Corporation helped 11 independent power projects (IPPs) to achieve financial closure this year. Together, these IPPs will have an installed capacity of 4,000 Mw.

Last year the PFC had sanctioned Rs. 8,975 crores to the sector. The sanctions so far this year comes to Rs. 5,200 crores and the PFC is targeting to take the figure to Rs. 10,500 crores by the end of the year. The total sanctions since the incorporation of PFC 18 years ago has by now reached Rs. 70,000 crores.

Debt-equity level

Addressing a press conference, Mr. Krishnamoorthy said the present stipulation of 70-30 debt-equity level for financial closure of a project was posing difficulties to many IPPs. Raising 30 per cent of the investment as equity is a hard order for most of the promoters since the total investment required for projects of more than 1,000 Mw is colossal. The PFC has come up with a new special purpose vehicle, the India Power Fund, to contribute up to 10 per cent of the cost of such projects as equity. "Our equity participation will be significant not only due to the financial support it affords, but also because of the increased confidence it will instil among the financial institutions providing loans to such IPPs. It will certainly help the IPPS achieve fina ncial closure with less difficulty," Mr. Krishnamoorthy said.

Proposal cleared

He said the Union Ministry of Power had, this week, cleared the proposal to set up the fund. The fund will have a corpus of Rs. 7,000 crores, with contributions from the Union Government, Central Public Sector Undertakings, financial institutions and private companies, in addition to a substantial contribution from the PFC.

He said the formalities connected with the setting up of the fund would be completed soon to enable it to become operational by March 2005.

He said that the PFC was also considering the acquisition of a bank or turning itself into a banking entity. This idea was mooted within the PFC as a strategy to help it access cheaper funds so that its lending rates could be brought down from the present levels. However, the pros and cons have to be evaluated minutely before a decision on this can be taken, he said.

See also Page 19

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