Major financial institutions and private equity firms such as Cornell Capital
and Actis are likely to join hands with leading domestic power sector financing
company Power Finance Corporation (PFC) to set up an equity consortia for
funding power projects in the country.
The state-owned institution would identify power projects needing equity
support and provide lucrative investment opportunity to consortia partners. The
new initiative would be run by the newly set up arm of PFC, Power Equity
Capital Advisors Pvt Ltd (PE-CAP).
Other institutions and PE firms that may become part of the consortia include
Sansar Capital Asia, Nexent Ventures, Capital Management Advisors and Highfield
Capital Management.
"This equity consortium will have both international and domestic financial
institutions. While PFC will develop the standard appraisal criteria, the other
members will infuse capital in the domestic power projects. This is a major
step towards securing a safe and permanent line of equity for the fund-starved
power projects in the country," a senior PFC official told ET.
As per government estimates, an investment of over Rs 10.5 lakh crore is
expected in the 11th Plan in the power sector. After exploring all possible
avenues of funding, there is still a huge gap of over Rs 4 lakh crore. While
PFC would meet debt requirement, the new initiative would strive to meet the
equity shortfall. It would also provide avenues to PE firms to get a foothold
in the Indian power market.
To get the equity consortia running, PFC is also in talks with a list of
heavyweights in the domestic financial sector, which include banks and
insurance majors such as State Bank of India, Axis Bank, Bank Of India, LIC,
HDFC, ICICI, Bajaj Allianz, Tata AIG and Oriental Insurance.
"We are close to reaching an agreement with a number of these players and other
global investment companies," said the official. "The plans of having a private
equity fund were shelved because there are tax implications both at the fund
level and at the investor end," he added.
The advantage with the consortium is that there will be no cap on the
investment amount that can be generated. After the assessment done by PFC, the
members of the consortium may even finance the whole project depending on their
financial strength," he added.
Apart from others, the new initiative would also provide avenues to PFC to make
its own equity investments in power projects. This is an area that is being
actively pursued by the company.
According to PFC, the equity consortia would be a big boon for the domestic
power sector as it would help to bring down the overall cost of funds and
subsequently result in lower tariff for consumers.
The average cost of debt varies between 12% to 15% based on the project
feasibility. A mix of equity and debt support is considered ideal for making
projects viable on a longer term.
Source: Economic Times
Writing is good, thinking is better. Cleverness is good, patience is better.
Herman Hesse
--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google Groups
"Kences1" group.
To post to this group, send email to [email protected]
To unsubscribe from this group, send email to [EMAIL PROTECTED]
For more options, visit this group at
http://groups.google.com/group/kences1?hl=en
-~----------~----~----~----~------~----~------~--~---
